Sunday, August 14, 2022

Opinion: Uncontrolled power sector

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The power sector in Pakistan is in throes of crisis since many decades and no ameliorative measures have been taken about it.

Successive regimes have failed to come to grips with this problem and it has created a very serious situation for the country. The sector has remained impervious to regulatory controls and it has retained its autonomy that has given rise to negative results instead of creating a viable system.

The power sector is bereft of a viable production and distribution system and has not done its bit for making the system efficient and workable. It is beset with poor management, growing
inter-corporate debt, higher transmission and distribution losses, lower recovery of consumer bills and regulatory issues.

It is a monster that has defied all attempts to put it back on the rails.

The primary issue faced by it is insufficient power generation that has fallen desperately short of the needs of the country. The previous government tried to increase power generation but its efforts created more problems for the sector.

Defying welfare of the consumers, it entered into new contracts at higher tariffs that made electricity unaffordable for regular paying consumers.

The high cost for consumers led to an increase in power theft in many poor localities. The levying of a plethora of surcharges on power consumers such as the financial cost surcharge, rationalisation surcharge, debt servicing surcharge and Neelam-Jhelum surcharge made things more difficult.

The issue of power transmission went from bad to worse as the transmission network did not improve with the increase in generation.

The transmission network is dilapidated to the extent that it cannot bear a drop of rain
and causes nationwide outages. All efforts for upgrading and expanding the transmission network have been delayed and have aggravated the system badly.

The distribution network is also adding to the problems of the power sector. Very few distributing companies (DISCOS) have performed satisfactorily but a majority of them has
remained inefficient.

The authorities appoint heads of such companies whimsically who are not held responsible for
their conduct and output.

There was an outrage about the opaque system of conduct of DISCOS but they have remained out of proper accountability.

The affordability and sustainability of the system appears to be beyond control as the burden of paying the bills has steadily increased.

The current tariff rate is simply beyond the affordability of a majority of consumers. No project for cheaper electricity supply had been initiated by the previous government to
ease the burden on consumers.

It also did not work on consumer discipline to persuade them to pay their bills on time
and make electricity affordable for all.

The situation is aggravated by the uncontrollable circular debt in the energy chain. Currently the aggregate technical and financial losses stand at 30% including leakages in transmission and distribution and lower recovery of electricity bills.

The normal estimates of such losses are considered to be in the region of about 16%. The current gap is huge and is consistently eating into the overall performance of the sector.

The new government is required to address the huge debt challenge as the receivables in the power sector stand at billions of rupees that are to be recovered from different consumers. Power producers are required to receive their dues from the Central Power Purchasing Agency whereas any old debt, usually extremely contentious in nature but amounting to billions of rupees is temporarily assigned to Power Holding Private Limited but the issue is debated between the governmental ministry and NEPRA and it is still not resolved that
who will bear the losses sustained by the sector.

The solution of the problem may result in shifting the load to the consumer as government is pushing for that.

During the previous government the power ministry had assumed control of some power companies such as Pakistan Electric Power Company and tried to obtain a solution to its liking by exerting influence on non-technical officials that were dealing with these companies.

The non-technical nature of the official manpower associated with this sector has played havoc with it. Despite taking over the management of power projects the government did nothing to improve their performance.

The projects moreover focused on thermal plants that produced expensive electricity.

The laying down of new transmission lines could hardly be over-emphasised. Making power affordable should be another priority because high tariffs will lead to more theft.

The power theft is a massive issue that successive governments have conveniently avoided
to the chagrin of the nation. The need to bring in renewable energy contracts for cheaper electricity production is imperative.

The sector desperately requires to be handled by experts instead of non-technical decision-makers. It is also required that due autonomy is granted to the regulator so that proper settlement of issues takes place.

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