The political parties in the run-up to the elections are making tall claims of reducing the price of electricity and making it more affordable for low-income groups. The credibility of these claims is as much as that of the general elections scheduled for February 8. The focus should rather be on the sustainability of the power sector and distribution companies.
The power sector of any country is huge and hence prone to immense inertia where enacting change can be difficult. Pakistan is no exception. The sector suffers from a sluggish culture where companies may not be encouraged to spend on infrastructure upgrades because competition demands provision of cheapest electricity to customers.
As the sector transitions towards liberalization, policymakers and regulators have a greater responsibility to balance provision of quality service to customers against the sustainability of the sector overall. Historically there has been an emphasis on reducing costs for the customers by improving efficiency, but this can have unintended consequences.
We have examples as recent as August 2023 of advanced countries like the US where wildfires in the state of Hawaii resulted in widespread loss of life and property. Postmortem of the situation revealed that failure of utilities to shut off power in time or invest in hardening infrastructure to mitigate climate change impact was a contributing factor, with many counties filing suits against the utilities.
There is another cost to the customer when power utilities are not provided sustainable tariffs that encourage actualization of investment plans. Customers will have to purchase generators and UPS or backup systems to fulfill their supply requirements because reliability of supply is not guaranteed.
Aging infrastructure coupled with growth in customer is a recipe for disaster. Even in Pakistan, nationwide blackouts are an almost annual occurrence, triggered by lack of proper maintenance and inability to invest in new infrastructure. NEPRA has acknowledged the requirement of fully functional SCADA (Supervisory Control and Data Acquisition) systems throughout the sector for visibility on the power system’s health and security. Power System Stabilizers (PSS) were also recommended to be installed to reduce the voltage fluctuations that cascade into rolling blackouts.
Pakistan’s power sector also requires urgent attention in removing transmission bottlenecks and rehabilitating aging grids to ensure better flow of electricity from load centers to demand centers. Efficiency is extremely important in this regard to serve electricity to a growing customer base in a reliable and effective manner.
Additionally, the sector needs to increase digitization and modernize to support the requirement of an open-market model where electricity is traded in real-time. These upgrades require investment, and more importantly, require policies which incentivize the adequate use of capital at the right place.
This is not an easy path to tread amid volatile economic circumstances but this maturity in the market is also an opportunity for the regulator to demonstrate its own maturity and look at customer interests and sectoral stability as two sides of the same coin and not opposing thumbs.
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