WAPDA - AN OVERVIEW OF GENERATION CAPACITY, TARIFF, & PERFORMANCE

AROOJ ASGHAR (Arooj.asghar@hotmail.com)
July 13 - 19, 2009

The electricity supply service in Pakistan was initially undertaken by different agencies, both in public and private sectors, in different areas. In order to provide for the unified and coordinated development of the water and power resources, Water and Power Development Authority (WAPDA) was created in 1958 through WAPDA Act, 1958. The responsibility of power provision in Pakistan is shared between the Water Power Development Authority (WAPDA) and the Karachi Electric Supply Corporation (KESC).

WAPDA is responsible for developing Pakistan's water resources and for construction, operation, maintenance of power generation, and transmission and distribution facilities throughout the country, except the Karachi area. WAPDA accounts for over 90% of the total installed hydro and thermal power generation capacity of around 13,000 MW, while supplying approximately 88% of Pakistan's electric consumption. KESC supplies the remainder of the power demanded in the Karachi area and is responsible for that area's construction, operation, maintenance of power generation, and transmission and distribution facilities. The World Bank, as part of its Power Sector Development Project in Pakistan, is helping the Pakistani government to privatize the majority of its power sector. WAPDA, in particular, has been under close World Bank scrutiny.

Prior to the World Bank's help to Pakistan in liberalizing its economy, investor's interest in Pakistan's power sector was minimal. The tedious and time-consuming process of entering into the private energy sector in Pakistan elicited few offers from investors in 1992 when the government first allowed the establishment of private power generation projects in the private sector. In addition, investors were discouraged by the prohibitive costs of importing the power plant materials (there was at that time little industry to support the construction of power plants.). In reaction to the indifferent response of foreign investors to liberalization of the energy sector, the government convened a high-level task force on the power sector in 1994, which formulated the "Policy Framework and Package of Incentives for Private Sector Power Generation Projects in Pakistan." Ever since then Pakistan has inducted over 4,000MW in private sector and has issued four power polices so far. More than 2,000MW is under construction at the moment in private sector as well majority of which will be added in WAPDA's system.

WAPDA is facing various problems since long and even than its efforts have not yet come out of that successfully. One of the chronic problems faced by WAPDA is the excessive loss of energy in its power system. There was little realization to improve the situation until the impact of sudden increase of oil prices was felt in the 70s' then there was complete silence and in early World Bank took the task to improve the performance of this utility. The countrywide scarcity of energy resources and the increasing costs of energy supply highlighted the importance of both the energy conservation as well as power system losses.

Electricity tariffs do not contribute to the technical losses, but they cause distortions in economic patterns and social life style of consumers. Pricing will cause shifts in non-technical losses, mainly theft of electricity. Pilferage of electricity has no data available and is estimated through losses. The analysis of losses and the interviews with the WAPDAís relevant officers indicate that it ranges from 22%-25% which is way high than any international benchmark. One of the main reasons for these line losses is power theft and significantly lesser investment in transmission system.

Pakistan is facing worst power crisis of its history. It should be remembered that there are more serious economic ramifications resulting from power shortages and the all too frequent failures of the distribution and transmission systems. WAPDA is found woefully lacking in devising effective ways and means to tackle the on-going power crisis. The resort to load shedding to save the system from overheating and tripping cannot be a permanent solution. As demand for electricity grows, overheating of the existing power infrastructure will lead to more frequent tripping and shutdowns. WAPDA has no long-term maintenance or capacity enhancement program. The price the people are paying because of frequent power failures and cuts is all too evident. These and other failures of political and economic aspects of governance are least likely to restore investor confidence in the country.

Due to financial difficulties, World Bank stopped WAPDA for further investment. Since early 80s' World Bank supported with the objective to improve the performance but despite all efforts by donor agencies and government, WAPDA could not eliminate corruption and mismanagement from its system. Resultantly it was stopped for further investment. There is hardly any single project done by WAPDA, which was not delayed, and its cost was not over run. Now when the private sector has also some how disappointed, WAPDA has been given green signal to start investing in generation. WAPDA can invest in hydro projects which is the need of the day. Pakistan can't afford thermal power plants any further and the only solution available is coal and hydro. The magnitude of investment requires WAPDA to take the lead. Because of high cost of generation, WAPDA is continuously under pressure and delays payment to IPPs. Since beginning, electricity tariff for IPP in Pakistan has fatal errors, which are now so evident that people are paying the price in the shape of load shedding and loss of revenues and opportunity for business.

The donors argue that if the power sector reforms are not carried out in full they will not extend large loans for the big dams. We cannot only blame donor agencies for this, because of our long history of political disputes, the donor agencies have recently raised a new demand i.e. national assembly of Pakistan must pass a resolution that Basha Dam shall be constructed and there is no dispute. Look how we have damaged our country and how we are being perceived worldwide. The government is also slow in implementing the reforms for unknown reasons though they are continuously increasing the power rates. Wapda's cash shortfall in 2002 was Rs30 billion at the time of issuance of last power policy. Since then there has been increased more than 10 times but no concrete step has been taken to ease its financial burden.

WAPDA is supplying electricity to FATA at zero rate, which means there is no recovery from that area. The time has come when every one must stand up and stop paying for others. If someone is influential and is not paying the bill then why others are being forced to pay for it. The massive power theft must be rooted out in a systematic manner. Otherwise, the poor and the middle class will continue to pay very high rates for power as well as suffer the privation of frequent load shedding.

The need of the hour is a relentless drive to cut waste of power and promote energy conservation assiduously. However, in reality the waste is on the increase and very conspicuously. Besides that, WAPDA also need complete overhaul and restructuring where it must be run like private organization but under state control. There must be accountability and sense of ownership.