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A site-visit of Hubco Power Plant

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  7. HUBCO Power Plant

Larger purchases of power can reduce the power rates

Feb 14 - 20, 2000

The less capacity utilization of Hubco Power Plant by WAPDA, costly fuel price and devaluation of currency are some undeniable hard facts responsible for increasing the price of power in Pakistan.

This assessment was made by Dr. Anjum Siddiqui, Senior Advisor on Financial and Risk Management of Hub Power Company at a press briefing.

In fact, Hubco had arranged a site-visit of the Hubco Power Plant in which mediamen from all major publications and news agencies were invited for updating the current situation and on the spot appraisal of the plant performance. When the newsmen were taken around, three out of 4 generators of the plant were in operation while the 4th generator was put off due to lesser demand of power by WAPDA. The generators are required to work in accordance with the demand of power by WAPDA which is the sole procurer of electricity produced at Hub Power. Explaining the situation Dr. Anjum said that the price of power goes down with the increase in capacity utilization of the power plant. Larger purchases of electrical output by WAPDA on one hand will increase total payments but would reduce the per kilowatt tariff paid by WAPDA on the other hand. The fall in the tariff per Kwh is due to the fixed cost being spread over more units of purchased power. Hubco has urged WAPDA time and again that WAPDA's payments to Hubco can reduce with a larger purchase of hours, he said. Although WAPDA is always short of power supply it is unable to sell more due to various reasons including poor distribution system, leakages and line losses running in billions of rupees. Contrary to the allegations levelled against Hubco for irrational power tariffs charged from WAPDA, in fact it is the inability and inefficiency of WAPDA which led this huge organization to financial crisis, Dr.Anjum said. Supporting to his arguments for high cost of power generation in Pakistan, Dr. Anjum supplemented in his point of view with the figures that the price of furnace oil which was Rs2380 per tonne in 1992 was jumped to Rs5510 in 1998 which is more than double of the fuel price. He said that the governments in Pakistan find it easy to use the oil sector as an effective tool for revenue generation. He said that out of the total revenue target that is something plus Rs300 billion a huge chunk of Rs75-80 billion is generated from oil sector under the head of development surcharge.

He said that power tariffs can be drastically cut provided the furnace oil prices are charged in relevance with the international prices and the power generation is shifted from oil to gas turbines.

Dr. Anjum indicated there are possibilities that 50 per cent of the power generation at Hubco may be shifted to gas as the LASMO, one of then major oil and gas exploring companies has discovered a good size of gas in Sindh. He however said that at least it may take another two years to complete the development work on that project.

Dr. Anjum was of the view that currently WAPDA is generating comparatively more expensive thermal power by using outdating generators which are not only cost pushing but can not be run for capacity utilization due to their old age. He suggested that such old generators should be discarded to avoid costly generation.

Replying to another question about the attitude of the present government towards IPPs and Hubco as compared to previous government of Nawaz Sharif, Dr. Anjum said that apparently there is a visible change in the conduct of the two governments. He said unlike Nawaz Sharif government, the present government has no political vendatta against the policies earlier introduced by Benazir government.

He regretted that former prime minister Nawaz Sharif created a mess of the situation by blowing the IPP's issue out of proportion at electronic media just to malign the Hub Power company as well as other IPPs due to his political vendatta against the policies of his rival previous government.

Regarding World Bank's outlook towards the IPPs issue in Pakistan, Dr. Anjum recalled that the World Bank was involved in energy policy of 1985 introduced in Pakistan. In fact, the World Bank had ratified the sovereign guarantee given by the government to the international lenders to the IPPs and Hubco, and that is the reason why the World Bank is asking the government of Pakistan to resolve the issue.