DISCOs: The usual

The power sector circular debt is at an all-time high and unarguably the distribution sector is the major culprit behind it. Even though the generation issue has been solved, the financial sustainability of the power sector is ultimately dependent on the recovery and minimization of transmission and distribution losses.

In light of the fact that generation has increased considerably, the onus on DISCOs to increase the amount of energy sold is of paramount importance. Failure to do so will only result in increasing the burden of capacity payments and lay waste to the amount of generation potential.

Nepra’s latest State of Industry 2017 report shows that the notified average T&D losses target for DISCOs excluding KEL for FY17 was 15.27 percent whereas actual losses remained at 17.9 percent which resulted in an annual gap of over Rs31 billion during the year.

Similarly, the recovery position is still far from idea. The report highlights that the actual reported recovery ratio of DISCOs remained around 92 percent against targeted 100 percent recovery. This has resulted in shortfall of roughly Rs81 billion on an annual basis.

Meanwhile, the overloading of transformers also remains a major issue. Even though the figure has come down from FY16, but the almost 37 percent of total power transformers remain overloaded. FESCO and QESCO fare the worst in this regard with more than 50 percent of their transformers overloaded above 80 percent while HESCO,PESCO and SEPCO have more than 40 percent overload.

Nepra has also highlighted that the overloading on 11kV feeders has also increased marginally and is now at 29 percent. The state of overloading by DISCOs such as LESCO and MEPCO which are seen to be better performers also remains poor and the regulator points out the LESCO has the worst record of overloading of distribution transformers.

The receivables of DISCOs increased by Rs45.82 billion during FY17 and the overall distribution sector receivables amounted to Rs730 billion at the end of the fiscal year. In the provincial government category, the KP government’s receivables stood the highest at Rs19.65 billion. The receivables of agricultural tube wells in Baluchistan amounts to a hefty Rs185 billion while the AJ&K government receivables amount to Rs80 billion
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In order to ensure the operational and financial viability of the power sector, the new government has to focus on improving the performance of DISCOs or better yet privatize them. Even though the former PML-N government had the privatisation of DISCOs on its agenda, the deed never transpired. The focus should be on eliminating losses and improving recovery but ultimately these metrics depend on governance.