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Last update: Tue, 09 Feb 2016 02am

Annual Nepra report: power sector marred by major irritants

National Electric Power Regulatory Authority (Nepra) in its annual report 2013- 14 has said that power sector is marred by circular debt, expensive energy mix, inefficient power plants, high transmission and distribution losses and bad management. Habib Ullah Khilji, Vice Chairman, in his observations said that failure to provide adequate gas to the power sector has resulted in a huge idle and unutilised gas-based capacity which adds to the cost of power.

The gas available for the power sector is not even being currently utilised in the most efficient manner. Apart from the expensive generation mix, another major reason behind soaring electricity costs has been the excessive losses in the transmission and distribution system, he added.

According to him, financial health of many electric power distribution companies is also adversely affected due to litigation and cases pending in different courts of law. Khilji proposed that there is a need to control the cost of power generation and distribution through drastic measures to plug the leakages caused through electricity theft, fuel pilferage and non-payment of dues in order to get out of the disastrous mess of circular debt.

Bringing down the cost of generation is only possible if dependency on furnace oil is curtailed by switching over to cheap alternative sources of generation. All-out efforts are needed to remove bottlenecks in the way of exploring new gas reserves to increase the supply of indigenous natural gas.

The report further added that rehabilitation of public sector power plants and improving their efficiency on a war footing should be an important element of the strategy to restore the ailing health of public sector plants. Repair, renovation and replacement of obsolete and inefficient units with modern and cost efficient units are long overdue. Pilferage of oil in public sector generation companies needs to be checked and strict control on the logistical network needs to be enforced to ensure that no oil or gas is pilfered on its way to the plants of Gencos and that the quality of fuel meets the required specifications as per the contracts. No improvement in public sector operations can be expected unless drastic improvements are made in the management and institutional set-up of these entities.

The regulator which is being criticised for following government directives with respect to tariff increase maintains that it should be ensured that the right mix of renewable energy based projects on wind, solar and biomass are a part of the energy mix and nuclear energy should be gradually ramped up. Any future incentive for investment in the power sector should be restricted to schemes based on indigenous resources which are available in abundant supply like coal, wind, water and solar resources.

Commenting on recovery, Nepra said that power sector cannot be sustainable unless the cost of service is fully recovered. It is imperative that the tariff structure reflects the actual cost of generation and service delivery. However, it is unfair to burden the consumers with cost escalations due to policies that are not pragmatic, poor operational efficiency, theft and losses.

"Different tariffs need to be introduced for different Discos as per Nepra''s determination. The poor performing Discos need to be given a strict time-frame to improve their performance and come at par with the better performers. Efforts should be made to keep the tariff in line with the cost of generation and, in turn, not allow circular debt to resurface time and again," the regulator added.

Apart from supply side management, Nepra said that there is a need to streamline the demand side management to control electricity prices. Time of Use Metering is already being implemented gradually. Various other measures like ensuring energy efficient use of machinery, equipment and appliances in the households and industry, subsidising and promoting the use of energy savers and placing of sensors and motivating people to avoid wastage of electricity need to be a part of a national energy conservation campaign.

Strict measures with a stringent legal framework and ruthless implementation carried out with the support of provincial governments and law enforcement agencies will be a prerequisite to check electricity theft.

Unless the available hydel, coal and gas resources are properly utilised in the larger national interest, we will not be able to overcome the energy shortage which has become an impediment towards the revival of the economy of the country, the report said.

Copyright Business Recorder, 2015