The ‘real’ improvement in generation

According to the government, the sector that witnessed the greatest improvement during its tenure has been power generation. It has repeatedly given itself a pat on the back for the numerous mega-watts added to the grid during the past year. There were also claims of the public generation companies (GENCOs) turning profitable and their efficiency increasing manifold.

However, in its recently published State of Industry Report 2016, the National Electric Power and Regulatory Authority (NEPRA) casts doubt on the government’s tall claims. It notes “performance of public sector generation, transmission and distribution companies remained unsatisfactory as their efficiency levels either did not show any improvement or went further down relative to previously reported results.”

This observation is in line with this column’s coverage of the power sector in the previous year which highlighted the continued poor state of generation, transmission as well as distribution. The regulator notes that persistent capacity issues, lack of financial support due to centralized control, procedural delays and setting of wrong priorities are the major factors which have resulted in such continued subpar performance.

Before delving into the details it needs to be highlighted that the information contained in the SOI 2016 is dated. The Ministry of Water & Power (MoWP) has been the key reason for this delay, since it did not release the data to the regulator in a timely manner. Conveniently, it also argues that much progress has been made since the report was delayed.

For paucity of space this column will only analyze the generation aspect which will be subsequently followed by the transmission, distribution as well governance of the power sector in the coming days. According to the SOI 2016 there was an increase of a meagre 413MW (1.65%) by 30 June, 2016 as compared to the previous year with generation reaching 112033GWh.

To make the analysis up-to-date it would be better to take the additions in the past two years from the Pakistan Economic Survey 2017 and the generation as well. As per the PES there was decline in generation which clocked in at 85,206GWh during July–March FY 2017 compared to 101,970 GW/h during July-March FY 2016.

More importantly, the additions in the past two years include 400MW of solar, 480MW wind, 340 MW nuclear, 425MW Nandipur and 760MW Bhikki which is a very recent addition and some bagasse based power plants. If one takes into account the capacity factors then the net capacity will be 244MW combined from both solar and wind along with 340MW from nuclear. Nandipur has been a headache from the start and Nandipur has provided intermittent generation capacity with a considerable loss to the exchequer in the process as well.

Moving on to the performance of GENCOs, the regulator notes that three out the four GENCOs which include Jamshoro Power Company Limited (JPCL), Central Power Generation Company Limited (CPGCL) and Lakhra Power Generation Company Limited (LPGCL) performed sub-optimally during 2016. The reasons were attributed to various maintenance issues, forced outages and fuel constraints resulting in dismal capacity utilisation. According to the ratios of dependable capacity and installed capacity for GENCOs, they have lost 20 to 80 percent of their capacity since commissioned.

This leads one to question whether increased government involvement in the generation side is a good step, given the way previous projects have been running. Neelum-Jheelum and Nandipur are glaring examples of the poor governance with consumers eventually picking up the tab.