Ballooning circular debt haunting govt

ISLAMABAD: The ballooning power sector circular debt is haunting the government and has become a headache for the power sector policymakers, as in one year, it has increased by a third to Rs 2.1 trillion till June 2020, the National Electric Power Regulatory Authority (Nepra) has reported in its latest report.

According to the Nepra State of the Industry Report 2020, the circular debt stood at Rs 1.6 trillion in June 2019 that jumped to Rs 2.1 trillion in June 2020, registering an increase of 32 per cent. The reasons for the increase in the debt were higher losses, power theft, inefficiencies and low recovery of bills from consumers by power distribution companies (Discos).

The regulator noted that the high cost of electricity, inefficient distribution services and load-shedding policy on high loss-making feeders is pushing consumers away from the Discos. It is high cost of electricity due to which theft of electricity and non-payment of electricity bill is high.

The installed power generation capacity of Pakistan as on June 30, 2020 stands at 38,719 MW as compared to 38,995 MW on June 30, 2019, showing a net decrease of 276 MW. During the year, the transmission and distribution (T&D) losses of Tesco, Qesco and Pesco increased in comparison with the last year. Whereas the T&D losses of Iesco, Gepco, Lesco, Fesco, Mepco, Hesco and Sepco decreased in comparison with FY 2018-19. The combined recovery of all Discos during FY 2019-20 remained 88.77% as compared to 90.25% during FY 2018-19 showing an overall decrease of 1.48% in recoveries in comparison with the last year.

The receivables from public and private consumers as well as the delayed payments of subsidies are causing increase in circular debt. Discos are required not only to improve recovery from public and private consumers but also to actively follow up with the relevant governments for timely recovery of subsidy amounts.

The load-shedding policy is compelling the consumers for use of smaller inefficient gas or diesel generators as well as Un-interrupted Power Supply (UPS) which has disrupted the efficient allocation of valuable resources in the economy.

The high cost of electricity, inefficient distribution services and load-shedding policy on high loss feeders is pushing consumers away from Discos. The distributed generation through solar power solutions has made a significant ingress in the domestic consumer base of Discos which are losing consumers with high consumption and paying capacity. Similarly, the commercial, educational and industrial outfits are also inclined to drift away from Discos and opt for self-generation through solar power. So far, nearly 5,000 Net-Metering Licences with around 86 MW electric power generation capacity have been issued by the Nepra. Apart from the distributed generation, various industrial and commercial consumers of Discos, dissatisfied with the higher cost and poor quality of services, tend to directly purchase electricity from generation companies for reliable and cheaper electricity supply through wheeling arrangements.

The power sector reforms envisaged a transition from monopoly structure to a competitive market; an objective which has not been achieved yet. Discos, which were supposed to be independent commercial entities, are instead tied centrally, having the least say in their own commercial decisions. Similarly, the Public Sector Generation Companies (Gencos) have also been centrally tied by the creation of Genco Holding Company Limited (GHCL). Any attempt to further protect the monopolistic and oligopolistic status quo may not only hurt the power sector but also the overall economic growth of the country, the report warned.

The statistics show that during FY 2019-20, the total electricity generation in the country was 134,745.70 GWh compared to 136,532 GWh electricity generation during FY 2018-19 showing a decrease of 1,786.30 GWh. Further, 513.74 GWh has also been imported from Iran during FY 2019-20 as compared to 486.80 GWh imports during FY 2018-19 showing an increase of 26.94 GWh.

During FY 2019-20, Wapda hydel generated 37,425.41 GWh electricity compared to 31,167.85 GWh last year, showing an increase of 6,257.56 GWh. During the same period, the hydel IPPs generated 1,562.55 GWh electricity as compared to 1,928.04 GWh during FY 2018-19, showing a decrease of 365.49 GWh. The share of hydel generation in the generation basket of CPPA-G during FY 2019-20 remained 30.77% while this share was 25.35% during FY 2018-19.

The total electricity generation of Gencos during FY 2019-20 remained 7,907.91 GWh as compared to 13,016.93 GWh during FY 2018-19, showing a decrease of 5,109.02 GWh.

During FY 2019-20, the length of transmission lines of NTDC at 500 kV increased from 6,417 km to 7,238 km while the length of transmission line at 220 kV increased from 11,219 km to 11,281 km. Similarly during FY 2019- 20, one (01) Power Transformer has been added at 500/220 kV level while 03 (three) Nos of power transformers have been added at 220/132 kV level in NTDC system.

It is noted that gas allocation and its supply to the power plants is not well coordinated between the relevant entities. At various occasions, gas was being supplied to less efficient power plants while under-utilizing or non-utilizing efficient power plants due to non-availability of gas. Further, the operation of steam turbine power plant of Gencos and KE using pipeline quality gas is inefficient burning of gas. Similarly, the use of gas for power generation by CPPs, having much lower efficiencies as compared to the efficient gas based power plants available in CPPA-G and KE systems, is also inefficient burning of gas. The supply of pipeline quality gas, having low price as compared to RLNG, to less efficient power plants also adversely affected the cost of electricity generation. Therefore, while allocating and supplying the pipeline quality gas, its burning in the most efficient power plants should be ensured.

Despite availability of sufficient generation capacity to meet the demand, Discos have adopted a policy of load-shedding on feeder level. Resultantly, despite having surplus power generation capacity, long hours of load-shedding still persist in several areas of Distribution Companies. This policy of load-shedding on feeder level at the pretext of high losses and low recovery is penalizing the genuinely law-abiding consumers.

It is noted that one of the main causes of theft of electricity and non-payment of electricity bill is higher electricity tariff. This load-shedding policy is causing decrease in sale of electricity from the available ‘Take or Pay’ power plants and thus causing higher per unit cost of electricity. Distribution Companies, therefore, need to improve governance and disconnect the individual consumers who are either defaulters or involved in electricity theft, rather than observing load-shedding on feeder having high T&D losses and low recovery.

The report said that the NTDC shows 35% and KE shows 20% reduction in forced outages on entire transmission network. XWDiscos 11 kV network was 23% overloaded as compared to KE 11kV distribution network which is only 2.8% overloaded. Similarly, in 5 years, Discos have improved T&D loss by .2% while KE has improved by 2.5% which is ten times more.