Burden of power: Why we are in the dark

Frustrated citizens are left with no choice but to endure unrelenting load-shedding schedules.

ISLAMABAD:

As the mercury rises, the protracted spells of what is arguably the worst load-shedding show no sign of mercy. Ironically, the government says there is no short-term solution to the chronic problem.

Frustrated citizens are left with no choice but to endure the unrelenting load-shedding schedules that range between 10 and 22 hours.



Although the Pakistan Muslim League-Nawaz (PML-N) government has taken action against power bill defaulters – with the recent sweep across the power corridors in the capital earning it a pat on the back – the longstanding predicaments of transmission, distribution losses and power theft persist.

Despite the N-League’s tall promises and attempts at resolving the issue of debt, the true picture of the existing situation is overwhelmingly dark; consumers are without power, crushed by heavy bills and fast losing confidence in the current government’s ability to handle the crisis. This report examines the current state of the power sector, and the causes of prolonged outages throughout the country.

Circular debt and supply

At every level, outstanding dues are owed to stakeholders in the power sector. Unpaid amounts add up to a staggering Rs503 billion, causing a circular debt of Rs197 billion. While the private sector owes Rs288.06 billion to electricity companies, these companies owe billions to suppliers, who, in turn, owe Pakistan State Oil Rs175 billion on account of fuel.



Due to circular debt, power plants have again dropped production as they are uncertain about payments, with supply standing at 10,167MW against a generation capacity of 16,400MW. With demand standing at 14,900MW, the shortfall translates into outages.

In the coming months, the peak demand is expected to cross 17,000MW. It is feared that the masses will face an extreme power crisis if supply is not enhanced, with Water and Power Minister Khawaja Asif already asking people to brace themselves for more power cuts.

Power theft, losses and recovery

The recovery of bills in 2009 stood at 92 per cent, which dropped to 82 per cent during the tenure of the Pakistan Peoples’ Party-led regime. The situation is not any different today, as recovery stands at 82 per cent. The government says that average loss is 22 per cent. But, according to officials, these losses have increased to 29 per cent – a major big setback for distribution companies which are facing a financial crunch, as one per cent loss equals Rs4.4 billion.



The National Electric Power Regulatory Authority (Nepra) has recently reduced permissible loss to 12.8 per cent from 16.5 per cent which may lead to a cash flow crisis for Discos swelling to Rs40 billion a year from Rs28 billion. Consumers would now be paying for 12.8 per cent losses in the power tariff instead of 16.5 per cent.

Fuel supply

Restricting gas supply to the power sector is a big issue which has not only made power expensive but also forced the government to keep generation to a minimum level to provide fewer subsidies.



According to government officials, in 2014 power plants received only 47 per cent of the earmarked quantity, leading to increase in power tariff and widespread outages. The head of the IPP Advisory Council, Abdullah Yousuf, said that several power plants were shut down due to non-availability of gas.



An official assessment reveals that the gap between gas demand and supply is widening and production is expected to drop to about half of the existing levels by 2020 if new reserves are not tapped or output not increased from existing fields.

Due to non-payment of dues by the power sector, PSO has been providing 18,000 to 20,000 tonnes of furnace oil to power plants against the requirement of 25,000 tonnes, leading to a drop in power generation.



PSO has recently asked the government to release Rs150 billion to arrange fuel for power plants during May, June and July. If this large amount is not released, PSO may default payment to international banks and fuel suppliers.

Poor governance

Officials say the present government is continuing to follow the previous regime’s tendency to run the system on an ad-hoc basis. Entities are still being run by acting heads who are unable to make decisions, with power entities being run by the water and power ministry, sources say.

N-League’s way forward

At present, the government is working on a plan to disconnect defaulters and areas where line losses were above 90 per cent in a bid to provide enhanced supply to those consumers who are paying bills.



Under plan-B, the government wants the industrial sector across the country to have staggered load-shedding on a ‘one-day a week’ basis and also hopes to implement the closure of commercial centres/markets by 8:00pm.

The ministry proposes that marriage halls be allowed to operate for three hours only. Under the plan, the government will also ban the use of air conditioners before 11:00am in public sector offices.

Published in The Express Tribune, May 5^th, 2014.