CAPTIVE VERSUS INDEPENDENT POWER PLANTS
SHABBIR H. KAZMI
Sep 21 - Oct 04, 2009
It is on record and no one can dare to deny that the real cause of load shedding is poor financial condition of generation and distribution companies. IPPs have flourished mainly because they are paid for whatever electricity they produce but distribution companies just cannot bill more than 60% of available electricity and even half of the billed amount is not received at all.
In nineties, permissions for establishing captive power plants were granted and import of equipment for these plants was also exempted from import duty etc. While the decision helped in private sector in avoiding load shedding, electric utilities operating in the public sector considered them the worst competitors.
Despite withdrawal of many incentives entrepreneurs are still willing to opt for captive power plants for ensuring uninterrupted electricity supply at an affordable cost.
All over the countries many mega industries have established their own power plants and even the medium and small establishments are forced to have sufficient standby generation capacities. There cannot be any doubt that smaller power plants are inefficient when compared with big power plants. But it is also true that often opportunity cost is very high i.e. meeting orders in time, ensuring continuous operations, therefore paying a little higher cost is better than out of operations due to extensive load shedding.
Living in Karachi would have been like a nightmare had hundreds of industrial and commercial establishments not opted for captive power plants. Conservative estimates show that electricity demand in Karachi is around 5,000MW. As against this the KESC has dependable capacity of around 1,300MW. At the best the utility can supply 2,500MW by buying electricity from PEPCO and two IPPs operating in its franchised area.
This raises a question how the remaining demand for 2,500MW is met? The reply is simple and that is, through captive power plants.
Some of the critics wonder how such a huge power generation capacity could have been established. They also wonder about the economic viability of the entities depending on these rather inefficient plants. The experts say that as the menace of load shedding started appearing people started establishing standby generation facilities. With the passage of time and based on their experience these standby facilities became captive power plants. Many of the industrial units opted for cogeneration at it is cheaper as well as 100% dependable.
The cost of generation of standby facilities as well as captive power plants is high when compared with big and efficient power plants but overall the cost is lower when compared with the tariff being charges by PEPCO and KESC. The logic is simple, tariff charged by the utilities include cost of 40% pilferage whereas in case of captive power plants pilferage in zero as each unit is accounted for.
Initially standby and captive power plants were operated on diesel but with the passage of time most of these have been converted to gas. While this has helped industries and commercial entities in reducing cost of generation the move has increased gas consumption for power generation. The other may have also switched over to gas but gas marketing companies are not allowing this due to limited availability of gas during winter.
Many of the people ask can captive power plants be substitute for IPPs and rental power plants (RPPs)? The reply is YES because in case of captive power plants T&D losses are virtually zero which makes them better despite higher cost of generation. The other but most important point is that there is incentive in power theft when being supplied by others. In case of a captive power plant there is no incentive for pilfering.
Many critics say that power crisis of nineties gave birth to IPPs and the present crisis has paved way for RPPs. However, basing on an old saying 'choosing the lesser evil' captive power plants are the best under the prevailing conditions, simply because there are no T&D losses. Besides, it also frees generation from adding new generation capacities and distribution companies from buying electricity from the IPPs and RPPs.
To facilitate establishing captive power plants the government must abolish all duties and taxes applicable on generation and distribution equipment. Charging duties and taxes (front loading) inflates cost of project resulting in higher financial and operating costs. These plants should be allowed to run on natural gas. Having proposed this sector experts insist that a cutoff point has to be defined to segregate standby plants from captive power plants by specifying minimum power generation capacity of the captive power plants.
SPECIAL ATM OPERATIONS DURING EID HOLIDAYS
All commercial banking networks has been specially advised to make foolproof Arrangements for smooth functioning of Auto-Teller-Machines to facilitate customers during Eid Holidays.
The State Bank of Pakistan has advised commercial banks to make special arrangements for avoiding breakdowns and providing adequate cash at Automated Teller Machines, especially on the eve of Eid-ul-Fitr, to facilitate customers.
In a communication to all commercial banks, the SBP informed them that there has been no let up in public complaints regarding automatic credits to bank customers in case their accounts are debited without cash disbursements, retention of ATM / Debit cards at ATMs and management of cash and increasing breakdowns of ATMs during Ramazan.
With regard to automatic credits to bank customers in case their accounts are debited without cash disbursements, SBP has reminded banks that they are required to re-credit amount in one to seven working days, depending upon nature of the transaction. Similarly, banks are required to provide/re-issue retained debit/ATM cards within two to eight working days, while banks have also been asked to ensure adequate back-up arrangements to ensure availability of ATM service round the clock and comprehensive operating procedures should be put in place to timely resolve the cases of out of cash, breakdown of ATMs, systems and network.
SBP has advised banks to follow its instructions in letters and spirit failing which penal action will be initiated against those banks which are not in compliance of SBP circulars.