Jan 05 - 18, 2009

Electricity load shedding often extended beyond 12 hours a day has become the biggest hurdle in accelerating GDP growth rate. On top of prolonged outages persistent hike in electricity tariff is not only causing resentment among the consumers but also increasing electricity theft and non payment of dues, the main cause of rising circular debt.

Though, the policy makers still say that the country has the potential to export electricity, the reality is 12-16 hours load shedding. While the consumers are forced to meet the demand by installing stand-by generators, PEPCO is running a totally misleading campaign in print and electronic media that there would be no load shedding in 2009. Had this amount spent on this campaign spent on revamping generators and upgrading transmission and distribution system the overall situation would have improved certainly.

It may not be wrong to say that the ongoing power crises in the country for the last three decades is the outcome of misplaced priorities, incoherent policies and complete lack of the dynamics of the sector. In simplest word the cart has been put before the horse.

The sector experts have been saying for ages that there is no authentic data available regarding demand and supply of electricity, which does not allow proper planning. They are partly right and partly wrong. The haphazard growth of cities, improving life style of population and coverage of electricity theft under T&D losses certainly give distorted picture of demand and supply.

However, finding the facts is possible because of extensive use of computers for billing by the distribution companies. The basic unit accounting units should be the grid stations having record of number of units received and dispatched. The record certainly gives clue to rising demand and quantity of pilferage. In other words determining demand, supply and pilferage is very easy but vested interest groups, employees as well as the pilfers mislead the management, which is turn provides tempered data to the policy makers. The result is that duration of electricity load shedding is on the rise, consumers who pay their bills also pay for the pilferage.

Without going into too many details it could be said that electricity demand for KESC's franchised areas exceeds 4000MW (this includes the demand currently met by consumers having in-house power generation. As such KESC's record also substantiates that the current peak demand exceeds 2500MW, this is only the suppressed demand. If the utility approves all the pending applications for new connections, the demand may exceed the 4000MW. As against this KESC has an in-house power generation capacity of 1200MW and has to buy around the same quantum of electricity from WAPDA, IPPs etc.

The situation is worse in case of DISCOS because WAPDA has not only been failing in developing authentic data but its corrupt staff, subsidy for agriculture and politically driven new connection schemes have made it the worst managed entity. WAPDA's Power Wing was broken down into NTC, GENCOS and DISCOS and PECO was made their management company. The entities are there for about a decade but situation has gone from bad to worse. A white elephant has given birth to many offspring and the expenses have increased manifold but the basic objective of creating smaller manageable units could not be achieved.

It is important to highlight a point which is being completely ignored, capital requirement for establishing additional 6000MW capacity. As a rule of thumb, the country needs US$6 billion but no one has the clue that how the funds would be mobilized. It must also be remembered that to revamp the transmission and distribution to carry this additional load another US$10 billion would be required.

Therefore, the government has to come up with a comprehensive Power Policy to convince the entrepreneurs to undertake this gigantic work, determine a mix of hydel and thermal power generation, selecting appropriate indigenous fuel and above all improving the cash flow of each entity to make its economically viable.

In the past government had committed two mistakes 1) offered bulk power purchase rate and 2) based all the IPPs on imported furnace oil. It also took the entire burden on its shoulders by offering all sorts of guarantees. It may be true that investors demand incentives and guarantees but they should not be given an opportunity to fleece the country and the consumers. In case of HUBCO the biggest beneficiary has been its sponsors and the shareholders receiving more than 30% return on investment annually. However, the blame could only go to the policy makers for this kind of handsome return. In case of KAPCO the biggest beneficiary is the government as it owns 60% shares of the company and gets at an average 35% dividend annually.

Another point to be kept in mind is ensuring higher share of hydel power in the total installed generation capacity. It yields two benefits: 1) development of more water reservoirs and 2) low cost power generation. Since hydel generation is dependent on water availability and may go down as low as 10-15% in winter sufficient thermal generation capacity has to be created to avoid shortage of electricity during this period. Developing this kind of mix will help in bringing down average cost of generation and provide ample time for the repair and maintenance of thermal power plants.

The 1994 Power Policy may have many odds but since then the country has not been able to attract any significant investment. This time the private sector has to be involved in all the three areas: generation, transmission and distribution. Ideally both the GENCOS and DICOS should be privatized at the earliest but now it is time to create distribution companies in the private sector.