Experts call for power sector reforms

Emphasise need to reduce cost of electricity production, revise tariff structure

LAHORE:

A discussion convened by the Lahore Economic Journalists Association (LEJA) titled ‘Increase in power tariffs - impact on consumers’ affordability, DISCOs recoveries, and circular debt’ brought together experts who emphasised the urgent need to reduce the cost of electricity production, revise the tariff structure, and enhance the efficiency of distribution companies (DISCOs).

The experts highlighted several key measures to address the ongoing challenges in Pakistan’s power sector. Their suggestions included appointing more professionals within DISCOs, boosting power generation from indigenous resources and renewables, and separating non-electricity-related financial charges, such as taxes and fees, from consumers’ electricity bills. The need to protect compliant consumers and penalise power thieves was also emphasised as part of a broader strategy.

During the discussion, experts referred to a study conducted by the Institute of Policy Studies (IPS) titled ‘Impact of rising electricity prices on consumer behaviour.’ The study revealed the negative impact of tariff hikes on consumers' ability to pay, leading to reduced recoveries and a detrimental impact on the circular debt in the power sector.

LESCO Board Chairman, Hafiz Muhammad Numan, acknowledged that DISCOs implement tariffs established by the Government of Pakistan through the National Electric Power Regulatory Authority (NEPRA). He explained that the government increased power tariffs due to pressure from the International Monetary Fund (IMF) and highlighted the role of capacity charges paid to Independent Power Producers (IPPs). Despite these challenges, the demand for electricity remains high, with LESCO receiving approximately 30,000 fresh connection applications each month, underscoring electricity’s fundamental role in daily life.

Read Power sector debt soars to Rs2.54tr

Energy expert and former MD of PEPCO, Tahir Basharat Cheema, shared insights on addressing power theft issues, highlighting Kasur city as a hotspot for power theft in the LESCO region, with losses exceeding Rs20 billion. Cheema suggested that addressing capacity payment challenges requires ending forced load management. He also pointed out that there is still an unmet demand of over 5,000 MW within the system that could be immediately supplied from available resources.

Cheema advocated for the discontinuation of the uniform tariff policy, arguing that ending this system would lead to increased efficiency among DISCOs and prompt poorly performing DISCOs to improve their operations. He also called for the elimination of various taxes and fees that account for nearly 30% of consumers’ total electricity bills.

Regarding the privatisation of the power sector and its potential transfer to provincial governments, Cheema believed that the government is exploring management contracts to transfer DISCOs to the private sector for 20-25 years, accompanied by the government’s oversight. He considered provincial control unworkable.

Speaking at the occasion, Shahid Haider, CEO of LESCO, highlighted LESCO’s efforts to combat power theft. LESCO registered 22,683 FIRs against power theft and recovered Rs600 million out of a demand of Rs1.91 billion. The company also took action against 70 employees involved in power theft, with over a dozen already terminated following proven guilt.

K-Electric (KE)’s Director of Communications, Imran Rana, said that over the last 10 months, KE conducted over 14,000 kunda raids and removed over 130,000 kilograms of illegally hooked kunda connections in the distribution network. According to World Bank reports, over 50% of the city had unplanned settlements, making it challenging to provide stable power supplies. KE registered over 750 FIRs against 74,000 power theft cases, recovering more than Rs60 million.

President of the Lahore Chamber of Commerce and Industry, Kashif Anwar, emphasised the need to utilise renewable resources for power generation, including the construction of the Kalabagh Dam and indigenous solar power generation. He called for the development of a charter of the economy before the upcoming elections to set the country on a growth path. Anwar also stressed the importance of accountability among distribution company staff, as power theft often involves their complicity.

Published in The Express Tribune, November 7^th, 2023.

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