K-E, SSGC told not to punish people of Karachi

Murad Ali Shah wants both entities to sit together, resolve differences

KARACHI: Chief Minister (CM) Murad Ali Shah said on Saturday that his government would not allow power and gas companies to punish the citizens of Karachi due to their disputes. Presiding over a joint meeting to resolve the dispute between K-Electric (K-E) and Sui Southern Gas Company (SSGC) at CM House, he urged both entities to sit together from Monday and iron out all their differences.

“I want a solution to the problem. The people of the city cannot be punished further," he said.

The CM said that Karachi is currently facing increased load-shedding. K-E blamed SSGC for reduced gas supply, resulting in the decreased generation of electricity. Meanwhile, SSGC denied such allegations and claimed that 90 million cubic feet per day (mmcfd) is being supplied against the old agreement of 10mmcfd signed in the 1970s.

Murad said that amid claims and counter claims between the two organisations, the people of Karachi were suffering in the sweltering weather. Therefore, he had written a letter to the prime minister and took up the issue with him.

It was pointed out in the meeting that SSGC provides gas to K-E without any gas supply agreement (GSA) for production of electricity from gas-based power generation plants. The company follows the ECC decisions for supply of gas. It was also noted that from 2001 to 2008, the ECC allocated supply of up to 276mmcfd gas to K-E for its multiple gas-based power plants.



K-E has four gas-based power plants that require 180mmcfd to generate 1,104 megawatts (MW) of electricity. Additionally, K-E requires 10mmcfd as pilot fuel to operate its dual fuel gas or furnace oil-based plant at the Bin Qasim power station.

The meeting was also informed that a minimum 190mmcfd gas is required in the summer to operate single fuel gas-based plants at full load. SSGC has significantly curtailed gas supply to K-E and the current supply is 90mmcfd. The average for 2017 was 141mmcfd versus 177 and 167 in 2015 and 2016 respectively.

The CM was informed that there was a billing dispute between K-E and SSGC. The bill payment issue first surfaced in 2010 when K-E defaulted on payment of a cumulative bill of arrears of Rs10 billion. Since then, SSGC has been charging a markup at the rate of 15.5% on the arrears.

The two entities signed a payment plan in 2014. As per the agreed plans, K-E was obligated to pay arrears in addition to its current billing if the agreed benchmark gas supply was met.



K-E’s outstanding balance towards SSGC is Rs13.7 billion, while SSGC says the receivables are Rs80 billion. K-E's average monthly bill is between Rs1.5 billion and Rs2.5 billion, which is regularly being paid and besides this, part of the outstanding ‘principal' amount is also paid.

The CM was also informed that K-E contests SSGC’s markup claim and considers it an outcome of circular debt. Moreover, markup is not charged on other entities, such as the Karachi Water and Sewerage Board (KWSB). The matter is now pending in the Sindh High Court, the K-E officials said.

Talking about the summer situation, the Murad said that peak demand is expected to be around 3,400MW and the shortfall at the peak summer time would be 400MW, provided all plants of K-E are running at their full capacity.

He added that K-E requires at least 190mmcfd supply of gas as in previous years to run its single-fuel gas plants to ensure smooth supply of power to domestic and industrial consumers. "The reduction of 20mmcfd creates an additional gap of 100MW which would result in a significant load-shed for consumers, including industrial consumers,” said Murad.



The CM concluded that with the gas supply at the current level of 90mmcfd, the power shortfall would further increase by 500MW in addition to the existing 400MW in peak summertime.

"This means the people of this city, including the industrial units, would have to face more than 10 hours of load-shedding," he said, adding that this was unacceptable.

The meeting was attended by SSGC Board of Directors Chairperson Lieutenant General (retd) Javed Zia, SSGC’s Agha Sher Shah and Rizwan Kehar, SSGC Managing Director Amin Rajput, Senior General Manager Saeed Larik and CFO Fasihuddin Fawad. K-E was represented by its chairperson Waqar Siddiqui, Chief Executive Officer Tayyab Tareen, Board of Directors members Zubair Motiwala, Khalid Rafi, Mubasher Shaikh and Freeric Sicre, Chief Generation Officer Dale Sinkle, Chief Financial Officer Moonis A Alvi and Director Aamir Qureshi. The CM was assisted by his Principal Secretary Sohail Rajput and Energy Secretary Agha Wasif.