ISLAMABAD: Power Division is reportedly willing to start Advance Metering Infrastructure (AMI) system worth over Rs17 billion as a pilot project in Islamabad Electric Supply Company (IESCO) with ifs and buts, after grilling by the Deputy Chairman Planning Commission for undue delay in implementation of project.
At a recent meeting of Central Development Working Party (CDWP) Chief Energy, Ministry of Planning, Development and Special Initiatives (MoPD&S) noted that AMI projects of IESCO and LESCO were approved by the Executive Committee of National Economic Council (ECNEC) on July 20, 2016 at a total cost of Rs 16.93 billion and Rs 30.275 billion, respectively.
Further, ECNEC in its meeting held on November 7, 2016 decided that use of technology may be left flexible upon suitability of distribution network by respective DISCO.
However, after a lapse of almost four years, Power Division has not implemented the AMI projects. Recently, Power Division submitted a position paper for consideration of CDWP/ECNEC in which it mentioned that international consultants AF-Mercados EMI were hired to conduct a detailed technical, financial and economic feasibility study for implementation of the project.
The project’s financial viability was also established at the feasibility/PC-I stage and proper due diligence was carried out during approval of the project from the competent forum.
According to sources, the project, since its inception has been facing difficulties in implementation and procurement related issues. It is included in the list of problematic foreign-funded projects and has been discussed in the National Coordination Committee on Foreign Funded Projects (NCC-FFP).
The ADB, which was ready to give $456 million for the AMI project in IESCO and LESCO, filed a special loan Review Mission on this project to review the reasons for the delay in the implementation of the project.
The Mission held a meeting with the Minister for Power and SAPM on Power on May 27, 2021. During the meeting the government side explored the possibility of changing the scope of the project from one circle each in the two Discos to the entire Discos and to install Pole Mounted Transformers (PMTs).
The ADB Mission indicated that such change, at this stage, would not be acceptable to their Board and given the limited time available, the financing for the project would have to be dropped.
Chief Energy, MoPD&SI highlighted that the government is continuously paying commitment charges on the undisbursed amount, which till now have added up to $2.2 million. The procurement process for AMI project in IESCO and LESCO is based on International Competitive Bidding (ICB) in accordance with ADB’s procurement guidelines.
The award of contract to the successful bidder in both IESCO and LESCO is, however, halted due to afterthoughts in the Power Division.
They have raised questions on the feasibility of the project and the ECNEC approved scope of installing AMI meters down to the consumer level. As per the position paper, Power Division contended that it had presented the matter of AMI project to Cabinet Committee on Energy (CCoE)) on September 13, 2021 and CCoE had directed that “the subject is not relevant to CCoE, therefore, the Power Division may approach Ministry of Planning, Development & Special Initiatives with its recommendations.”
Furthermore, if the Power Division feels that it is not an appropriate project in the current shape, the Ministry of Planning, Development & Special Initiatives may consider to scrapping it.
Therefore, Power Division submitted a position paper in which it noted that the lowest bidder of IESCO extended the bid validity 9 times i.e. up to November 20, 2021.
The bidding process in LESCO has not been successful so far and the time remaining under ADB’s financing is not sufficient to re-invite the bids.
Therefore, Power Division argued that ECNEC may allow the change in scope of the project to the extent that it may proceed as per already approved PC-I in IESCO, while it may be dropped in LESCO due to time constraints. The position has to be confirmed to ADB.
Member (Energy), Planning Commission stated during the meeting that there has been rethinking on the project scope in the Power Division.
There is still no consensus on the project design. Nevertheless, implementing a smaller scale pilot project is the best way forward at this stage.
Power Division should have converted this project into a pilot project much earlier and implemented a truncated scope of the project therefore the forum should consider approving the revised scope.
While revising the project with ADB, further reduction of scope may also be considered, he further recommended.
Implementation of the pilot even in one circle of IESCO will enable Power Division to evaluate the pros and cons of different design and rollout strategies for AMI.
He emphasized too that AMI project will bring new technology to the Disco and will involve elaborate change management.
AMI system will have a complete ERP system, central digital billing system and meter data management system which will be the core of the AMI system. The core technical capability is critical irrespective of the number of meters installed.
He stated that it is important that the system is designed in a way that its scaling-up can be made in any direction for the future.
After implementation of the project in IESCO, Power Division would have a clear evaluation as to what should be the further rollout strategy and how they should phase the project. He reiterated that AMI implementation in IESCO is a pilot project.
If scrapped at this stage, then the process will have to be initiated from the beginning which will delay the introduction of technology by many years without any practical experience gained for the Disco. Further, IESCO is a good candidate for the pilot project having the highest readiness.
Secretary Power endorsed the views of Member (Energy), Planning Commission. He also acknowledged the delay in terms of selection of particular DISCO which should have been decided when the projects were approved.
There were serious discussions inside Power Division whether meters should be installed on PMT level or down to the consumer level.
There was also discussion regarding adequacies of IRR in the system particularly when undertaken in Islamabad and Lahore.
He further clarified that Power Division was not suggesting changing the financing agency but only requesting to allow the change in scope of the project to the extent that it may proceed as per PC-I of AMI IESCO project already approved by ECNEC.
He further argued that ECNEC may be approached regarding dropping of AMI LESCO project in consideration of time constraints of bid validity.
Deputy Chairman Planning Commission expressed his concern over the abnormal delay in implementation of AMI project by Power Division. Secretary Power was directed to hold an internal inquiry to fix responsibility for the delay.
Assessment should be done on how much commitment charges will be paid by GoP for ADB loan for the AMI project.
The assessment should be carried out to learn lessons and avoid similar mistakes in the future. If anyone is found guilty during inquiry, the proceedings should be initiated as per the rules. Furthermore, recovery proceedings of the commitment charges may also have to be initiated against those who delayed implementation.
To a query by the Deputy Chairman regarding ADB financing, representative of EAD stated that ADB financing is available for AMI project.
The representative of Finance Division was of the view that AMI project may be implemented in those areas where losses are high and recovery is low rather than implementing it in the entire IESCO.
Secretary Power noted that validity of the bid in IESCO case is upto November 20, 2021. The Deputy Chairman also enquired about the consultants who conducted feasibility study.
Secretary Power apprised that international consultants AF- Mercados EMI were hired to conduct a detailed technical, financial and economic feasibility study for implementation of the project.
The financial viability of the project was also established at the feasibility stage and proper due diligence was carried out during approval of the project from the competent forum.
The Deputy Chairman observed that the project remained under discussion at various forums and venues. Points of view in favour or against the project came up, unremittingly.
He said, once a project is approved by the competent forum, the sponsoring agency is no longer at liberty to delay implementation/reconsider scope. If any rethink is required at all, the sponsoring agency should revert to the competent forum for guidance/decision.
He also noted that in case of additional questions arising about the viability of a project, the consultants must provide their technical opinion.
Third party assessment can also be done. Unending debates in the Ministry, in this case, have led to huge loss to the public exchequer and the project delayed inordinately. Power Division should have referred the matter to the competent forums which, for development projects, are DDWP, CDWP and ECNEC.
After detailed discussion, the CDWP recommended the position paper submitted by Power Division to ECNEC with the following observations: (i) Power Division will implement the project in IESCO as a pilot project to evaluate all the issues i.e. design, technology, scope etc. On the basis of lessons learnt, AMI projects of other DISCOs, including LESCO will be implemented; (ii) Power Division will appoint an independent consultant for monitoring and evaluation of the project and to carry out the analysis of different design options for future roll-out of AMI; and (iii) Power Division will hold internal assessment/inquiry for the delay in implementation of the projects and document the reasons for delay/accumulation of commitment charges and fix responsibility accordingly.
The sources maintained that the project will now land in the ECNEC for further discussion prior to final approval by the Federal Cabinet.
Copyright Business Recorder, 2021