Nov 03 - 09, 2008

Present load shedding spell, started in last winter and continues into the worst summer. It is mainly due to demand exceeding supply and thermal power plants operating at less than nameplate capacity due to interruption in oil/gas supply.

The ongoing load shedding has virtually halted economic activities in the country. To keep their factories running and offices open, business community has to depend on stand-by generators, which certainly adds to the cost and erode their competiveness. At times they cannot meet delivery commitments. Similarly commercial buildings and shops have to use generators, which not only adds to the cost but compounds miseries as customers prefer to stay away from the markets during load shedding hours.

In last winter load shedding started mainly due to very low water levels in the dams and actual output was about 25% of installed capacity. However, it was not unusual because historical data shows that output of hydel plants reduced to this level when water in dams touches 'dead levels'. However, inefficient operation of thermal power aggravated the situation. On top of this load shedding of gas didn't allow most of the business enterprises to keep on running their factories.

This summer the spell of load shedding sell ranges from 8 to 16 hours in different cities/localities. It is true that demand has increased over the years, but output has also gone down due to aging of plants, hardly any maintenance and running of units beyond stipulated number of hours. The wiz-kids may have skipped planed shutdown for maintenance but called for frequent breakdowns.

The key issue is that economic managers and policy planners do not know for sure the quantum of demand and supply as well as the potential shortfalls during various seasons. Hydel capacity is taken at installed load completely ignoring the fact that hydel generation varies from month to month due to changing water levels. It may touch the maximum for awhile but also reduces to around 25% when water touches dead levels.

Similarly thermal generation capability is also taken at nameplate capacity, keeping no 'spin over' margin and scheduled outages and breakdowns. It may be true that the management of power companies had the pressure from the government to ensure supply, but they should have not agreed to skip shutdowns for scheduled maintenance. By bowing down to the pressure they have worn-out these machines at much faster rate and their serviceable life has been reduced substantially. In fact this is a criminal act and all those who issued such orders should be prosecuted under law of the land for causing damage to national assets.

One of the reasons for load shedding is interruption in oil and gas supplies to thermal power plants. This is mainly due to huge receivables and at time non-payment by the power generation companies. Though supplies are not stopped but have to be curtailed because of liquidity crunch faced by oil and gas marketing companies.

For KESC the main source of supply is Bin Qasim thermal plant based on dual fired system, capable of using furnace oil and gas. Enhanced or above the allocated quota gas supply is assured to optimize cost of generation but in case of an interruption in gas supply form any of the fields SSGC has to curtail supply below the allocation. In such a situation if KESC does not have ample furnace oil inventory it has no option but to shut down some of its Bin Qasim units. However, SSGC does not curtail gas supply to the smaller power plants of KESC operating within the city.

The KESC suffers from an acute shortage of in house power generation. It has a dependable capacity of around 1200MW compared to peak load of 3000MW during worst summer. If fact if the load of all the factories/commercial building having in-house power plants is also added the peak load is estimated above 5000MW. It has to depend on IPPs and WAPDA. Karachi often goes on low priority when WAPDA faces shortage

The second problem faced by KESC is massive theft, exceeding 30%. While money is spent on generation and purchase from WAPDA and IPPs, there is no recovery. At times the entire quantum of purchases was going towards pilferage. In an attempt to overcome the liquidity crunch the KESC often resorts to hike in tariff but every hike provide incentive for more pilferage.

Overcoming the load shedding menace is not an easy task and demands multi fact approach. Increasing in-house power generation capacity to 5000MW over the next couple of years should not be an issue for the new strategic owners. They are capable of arranging the finance but certainly need certain guarantees from the federal and provincial government. Cost of borrowing could be reduced if sovereign guarantees made available by the GoP.

Poor cash flow of the KESC can be improved by payment of amounts outstanding in the names of government, semi-government authorities and private sector. It is true that the full amount cannot be paid in one go but a schedule can be agreed upon between the KESC and the consumers.

One of the reasons for theft is refusal of new connections during KESC's operation under the state control. These connections were denied because of non-availability of electricity and depleted transmission and distribution network. Since billions of rupees have been spent on upgrading the system regularization of unauthorized connection should be completed at the earliest. It will let the KESC know the demand as well as get enhanced revenue.

At the same time consumers should also try to conserve electricity. There is an old saying each unit saved is equal to additional unit produced without incurring any cost. Consumers expect the new KESC management to resolve the issues. However, they should also remember that these issues cannot be resolved overnight. All the stakeholders will have to play their role diligently.