EDITORIAL: A few days back, the power ministry exposed various Discos for overbilling during the last summer. This is based on a hurriedly conducted and released Nepra (National Electric Power Regulatory Authority) inquiry report on excessive billing by Discos during July and August 2023.
Shouldn’t the power ministry be blamed for overbilling, as essentially they operate under it? The government does not have the fiscal space to provide subsidy for the protected consumers, and the onus falls on the domestic consumers (using over 400 units), commercial and industrial consumers to cross-subsidise.
Reportedly, these segments are paying Rs5.9 to Rs8.6 per unit extra to cover the cross-subsidy. The cherry on the top is that Discos overbilled these consumers to cover up their own losses.
Not only does this fraudulent act attract certain provisions of the Criminal Procedure Code (CrPC), it also depicts sheer callousness and outright high-handedness to ask honest consumers to repent for the sins committed by Discos.
And the problem is that even after overburdening the consumers, circular debt continues to swell as the debt increased by a whopping Rs301 billion in 4MFY24. The data shows that the authorities are finding it difficult to handle the problem as they are taking isolated steps; thus coordination and planning are conspicuous by their absence.
Last summer there was a lot of hue and cry by consumers as not only tariffs were increased significantly, but there was also the case of subjecting 11 million consumers to overbilling across the country, whereas 79 percent of these were from four Punjab-based Discos – MEPCO, GEPCO, FESCO and LESCO.
The interesting aspect is that historically, recovery ratio is better in these Discos as compared to most of the remaining Discos in the country. The method perhaps is to overbill good bill-paying consumers to cover for non-recoveries.
The practice well may be in vogue for years. However, now the tariffs have reached a point where excessive billing is simply not affordable. Many domestic consumers have taken loans to make payments against bills, and others are cutting on the other expenditures. Moreover, the industrial sector is increasingly becoming unviable due to the rising cost of energy, contributing joblessness in the country.
The entire industry is clamouring for the government’s attention to seek removal of cross-subsidies and other inefficiencies in order to remain competitive. They demand direct wheeling (process of transmission of electricity through the transmission lines) of excessive electricity in the system to consumers.
However, the Discos ask too much charge for cross subsidy and stranded costs. Insofar as domestic consumers are concerned, they’re simply overbilled. It increasingly appears that the Discos under the current shape are not only unsustainable but also dragging the whole power sector down.
The good bill-paying consumers are gradually moving away from the grid. They are increasingly relying on alternate sources to lower their dependence on the grid.
The day is not far off, therefore, when many good bill-paying consumers will completely go off the grid. They may start using batteries along with solar and captive power solutions to reduce their reliance on the grid. And those who cannot find alternate solutions for whatever reasons would keep on lowering their consumption as tariffs become dearer. That the problems are manifold is a grim challenge.
Discos need to be privatised to lower their inefficiencies, bring better consumer on the grid, and undo overbilling. Interestingly, the only private entity, KE, is using handheld devices for meter reading which is to inject transparency into the billing process.
That is perhaps the reason, according to a Nepra report, KE has zero overbilling cases. That was not the case when the KE was privatised; and it took the company quite some time to fully overcome the challenge of overbilling.
The transmission and distribution constraints do not let the country provide peak demand in summer whereas the generation side is crippled by growing capacity payment, which currently stands at Rs2 trillion, representing Rs21/unit, and that is only going to increase. The country doesn’t have enough industrial activities to cover it.
How can the process of industrialisation get any meaningful boost when the cost is going to skyrocket while Discos are not ready to wheel directly? The power sector is just clutching at straws. There is no coherent or thought-out strategy. There are problems left, right and center.
The Discos need to be privatised so that the private sector invests in infrastructure and human resources. Furthermore, there is a huge problem with Independent Power Producers (IPPs) under the China Pakistan Economic Corridor (CPEC) where debt elongation is a must to sustain but does not appear to be happening anytime soon.
Apparently, the plan is aimed at involving the military in improving the performance of Discos. That did not work in the past; their involvement is unlikely to work now or in future as well because armed forces cannot be used as an elixir guaranteed to solve power sector problems.
Opening the energy market to bring private sector in, and revisiting the poorly structured Chinese IPPs can bring us one step closer to finding a viable solution.
Copyright Business Recorder, 2023