Research Analyst, PAGE
Aug 2 - 8, 2010
A shortage of hundreds of megawatts of power has hit large parts of Pakistan since the onset of the summer, causing riots and violence.
Transmission and distribution (T&D) losses as per cent of net system energy has remained more or less stagnant 21 per cent to 25 per cent from 2000-01 to 2008-09.
During July-March 2009-10, T&D losses have witnessed an increase of one per cent over the corresponding period last year. Keeping in view these losses, the NTDC and Disco's have invoked various technical and administrative measures to improve operational and managerial efficiency to reduce power losses.
Other measures such as renovation, rehabilitation, capacitor installation, and strengthening the distribution system network are a continuous process for controlling wastage of power.
The transmission and distribution as of Net System Energy of Wapda during the year 2000-01 were 24.3 per cent. During 2002-03 it was 24.4 per cent, in 2005-06 it was 22.4, it was 21.3 in 2007-08, 21.1 (2008-09), July-March 2008-09 (19.4), and during the same period in 2009-10 it was 19.6.
UNACCOUNTED FOR GAS LOSSES
The oil & gas regulatory authority (Ogra) is likely to give some relaxation on Unaccounted for Gas (UFG) targets set for Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline (SNGP).
The plan was under way to raise UFG limit from 5.5 per cent to 6.5-7 per cent. This bodes well for the local gas utilities as higher the UFG targets lower will be the profit erosion for local gas utilities.
SSGC and SNGP would be the beneficiaries, as their earnings will improve. World Bank will extent $250 million loan to gas companies to reduce UFG losses.
In order to check the efficiency of these gas utilities and to limit their line losses, government sets UFG targets for local gas companies. UFG is the term used for units, which are not billed (due to theft) or lost during the transmission of gas to the consumers. It is the difference of gas purchases and sales after adjusting internal consumption. For this, Ogra has allocated upper and lower limits. This means that if actual UFG losses will be higher than the upper limit, the entity would bear the full loss from its own profits.
On the other hand, it can retain the savings in the event of performance being better than the lower target while absorbing 50 per cent of the loss on account of UFG between lower and upper target.
Historically, actual UFG losses are far above the upper targets due to system leakages and theft. Moreover, the value of UFG losses also depends on the cost of gas, as higher the cost of gas higher will be the value of loss units. That means whenever gas prices increase, probability of UFG losses to raise increases.
In fiscal year 2009, both SSGC and SNGP posted combined UFG losses of Rs7.4 billion. SSGC's actual UFG losses stood at 7.9 per cent (target 5.15 per cent) to Rs2.8 billion whereas SNGP's actual UFG losses were higher at 8.1 per cent (target 5.15 per cent) to Rs4.6 billion. Their profits, on the other hand stood at Rs257 million (earning per share Rs0.4) and Rs930 million (earning per shares Rs1.7), respectively.
SSGC TO SPEND RS24BN TO CHECK GAS LOSSES
The SSGC plans to spend Rs24 billion over the next five years to replace corroded pipelines, which leak large quantity of gas.
So far, SSGC has lost Rs10 billion every year owing to leakages while the regulator imposes penalty on SSGC for this gas leak is another Rs3 billion.
SSGC, one of the two natural gas distribution companies of the country, operates under strict monitoring of Ogra. The utilities have to pay billions of rupees if gas loss, known as unaccounted for gas (UFG), exceeds five per cent of total sales volume.
SSGC has sales of around 1,100 MMCFD of gas annually. In nine months to March 2010, the UFG loss increased to 8.63 per cent and the company reported loss of Rs306 million.
UFG might go up to 12 per cent by 2015 if it continues with the current pace. The UFG losses stood at 100 million cubic feet per day (MMCFD), enough to run a 500MW power plant. Fifty per cent of this loss is because of pipeline leakages and measurement errors while the rest is due to theft.
The company has fast expanded its outreach in Sindh and Balochistan in the last ten years. From 1.5 million in 2000, the number of customers has jumped to over 2.2 million in 2010. The length of pipelines has increased to 34,000 km from 21,000 km 10 years back.
The growing thefts will not deter the company from adding customers. The management has empowered officials at the grass root level to monitor customers and detect gas leakages and theft.
T & D LOSSES TO KESC
The Karachi Electric Supply Company (KESC) suffers an estimated Rs35.8 billion losses annually on account of transmission and distribution losses. One per cent of T&D loss in the KESC's system translates into about one billion rupees to the power utility, but it seems that the company has other plans to generate revenues instead of arresting its huge T&D drain.
The total KESC income from September 2008 to May 2010 was estimated at Rs162 billion, while the total expenditure of this period stood at Rs199 billion. A visible cash shortfall of Rs37 billion was filled by a new investment of Rs23 billion, while the remaining Rs14 billion came from various local and foreign financial institutions, suppliers and creditors. Instead of increasing the tariffs, KESC should reduce the T&D losses around two to three per cent annually.
GROWTH IN CONSUMERS
The number of consumers has been increasing due to expansion of electric network to villages and other areas. The growth in number of consumers has increased by 4.5 per cent during July-March 2009?10 against the 4.2 per cent rise in same period last year.
Because of hefty increases in end-user electricity and gas tariffs over the past two years, a significant gap still exists between generation cost and recovery.
This imbalance between cost of generation and distribution, and the final tariff, is the root cause of the circular debt issue, with each downstream player in the energy chain being forced to delay payments to upstream entities. The net effect is a declining effective utilisation of available generation capacity in the system.