KE reduced T&D losses but failed to improve power generation: Chairman NEPRA

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Chairman National Electric Power Regulatory Authority (NEPRA) Touseef Hassan Farooqi, while expressing sheer disappointment over the performance of DISCOs across Pakistan including K-Electric, stated that KE, being a private entity was better as compared to other DISCOs as KE has drastically brought down Transmission & Distribution (T&D) losses from more than 40 percent to 15.5 percent but the biggest dilemma was that they have failed to improve the power generation.

“Technology and competition were the only way forward. Technology is already there but the competition is missing. As KE’s exclusivity would come to end by July 2023 and the CTBCM would allow Karachi’s businessmen to make their own choice for fulfilling their electricity needs either by setting up their own power plants or by acquiring from any other power producer”, he added while exchanging views at a meeting during his visit to the Karachi Chamber of Commerce & Industry (KCCI).

Chairman Businessmen Group Zubair Motiwala, Vice Chairman BMG Jawed Bilwani, President KCCI Mohammed Tariq Yousuf, Senior Vice President Touseef Ahmed, Vice President Mohammad Haris Agar, Former President Muhammad Idrees and KCCI Managing Committee Members attended the meeting.

Chairman NEPRA informed that Competitive Trading Bilateral Contract Market (CTBCM) provides a roadmap for opening the Wholesale Electricity Market of Pakistan, aiming to provide choice to the bulk power consumers to purchase electric power from the DISCOs or a competitive supplier of their choice.

He said that during the last three years and five months, it has been one of his top most priority to ensure that no imported fuel-based project or no take-or-pay based project was given go ahead, hence, neither any new license nor tariffs were issued for imported fuel-based project. “It is my utmost effort to bring in green revolution in Pakistan which was very important for our country as the entire world nowadays seriously looks at how green you are”, he added.

He noted that the industrial support package yielded positive results wherein 25 percent discount was offered to Large Scale Manufacturing and 50 percent discount was given to Small & Medium Enterprises compared to their previous consumption which led to accelerating industrial activities and helped in achieving an impressive growth rate of 5.8 percent in first year and 6 percent growth in second year.

Pakistan’s power was currently going through worst situation as despite having installed production capacity, the country was unable to produce electricity as no funds were available to buy imported fuel for electricity production, he added.

He was of the view that the overall fuel prices have risen by at least eight times in the international markets whereas PKR has also depreciated to half against dollar which means the overall impact on electricity tariff should have been 16 times higher as 65 percent of the country’s electricity was being produced from imported fuel but NEPRA has neither raised the tariff by 16 times nor by 8 times and not even by 4 times which deserves to be appreciated.

In response to concerns expressed over retrospective liabilities, he explained that as the power generation is mostly based on imported fuel, the invoices usually arrive at NEPRA through CGPA after a lapse of two months which leaves no choice but to charge retrospectively, however, efforts will be made to expedite the process and reduce the lapse to one month.

Replying to a question regarding fixed charges by KE being charged from closed industries, Chairman NEPRA said that under the relevant rules all such closed industries have the option to apply for disconnection which would save them from fixed charges. KE is liable to reconnect them anytime upon receiving an application from such industry without seeking any security deposit and system development charges.

While referring to NEPRA’s Mission Statement, Chairman BMG Zubair Motiwala stressed that NEPRA has to bring the affordability of electric power for industries to such an extent that they are able to compete with their regional competitors because the current electricity tariff was exorbitantly high as compared to India, Bangladesh, Sri Lanka, Vietnam and Cambodia.

“In energy sector, electricity tariff was 22 percent lower in Bangladesh while in gas, they are about 30 to 32 percent cheaper than Pakistan. For this reason, we are unable to compete and enhance our exports”, he said, adding that if energy tariffs were brought at par with Bangladesh, Pakistan’s exports will not be less than US$60 billion.

He said, “If the government has entered into agreements with IPPs to buy electricity at exorbitantly high tariffs, it is not the industries’ fault yet we are being penalized in shape of high cost of doing business and as a result, we are unable to export more.”

Zubair Motiwala further stressed that the industries should not bear the entire burden of the line losses and pilferages and they must be segregated because the overall burden of line losses and pilferages raises the cost and was tantamount to making compromises over Pakistan’s progress and prosperity, therefore, the industrial electricity tariff should be calculated according to the industries’ line losses and pilferages.

He also pointed out that during the last two years, a new trend has emerged wherein a retrospective liability is created and collected from current occupier consumer which was unconstitutional as Pakistan’s constitution does not allow retrospective levies, punishments or collections, hence, it needs to be reviewed by NEPRA.

Chairman BMG mentioned that Pakistan currently has production capacity of around 23,000 megawatts while another 1300 megawatts will soon be added to the system from Thar and the electricity generation from solar, wind and hydel resources have also been rapidly increasing. “In this scenario, it was highly unfair to charge peak hour tariff. If I would have been a policymaker, I would rather reduce electricity tariff by 50 percent to those consumers who stop using gas and switch to electricity for carrying out their production activities as the country faces dire gas shortages. We are already paying capacity charges for idle electricity which must be given to industries at 50 percent discount so that they could be encouraged to switch from gas to electricity.”

He said that there was a government policy wherein those units who utilize more electricity than previous year, the incremental use would be subjected to 50 percent lesser price which was being given to industries all over the country except those in KE territory. 

Earlier, President KCCI Tariq Yousuf, while welcoming NEPRA Chairman, pointed out that circular debt skyrocketed to an alarming level of over Rs4000 billion. High transmission & distribution losses, recoveries issue, underutilization of assets, running defaulters and delays in payment of subsidies have been the biggest contributors to circular debt. “This huge circular debt is detrimental to the industrial sector & economic growth of the country. It is imperative to take corrective measures and improve the distribution system. Our focus must be to efficiently deal with higher T&D losses and efforts have to be made to bring them down at least to the level of given targets”, he added.

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