Dec 12 - 18, 20

At present, Pakistan faces one of the worst energy crises due to gas shortage surpassing 1,500mmcfd and electricity shortage to reach 5,000MW due to water reaching 'dead level' at mega dams.

In an attempt to ensure adequate supply of gas for domestic consumers and power plants, supplies to fertilizer plants, industrial units, and CNG stations are being curtailed. All this mess has been created because of not following good governance, inability to recover overdue amounts and above all failure of the government in resolving inter corporate debt. Energy sector experts term present energy crisis as an 'outcome of gross mismanagement rather than demand exceeding supplies'.

Before commenting on the prevailing electricity shortage, it is necessary to understand what Dr. Abdul Hafiz Sahikh, finance minister has said recently. According to Shaikh, the government has pumped in around one trillion rupees into the power sector but crisis has aggravated only. It is true that no significant power generation capacity has been added but one completely fails to understand the logic behind running power plants at lower capacities to save fuel. To be honest the generation companies (state owned Gencos as well as IPPs) don't have money to buy fuel and fuel suppliers are reluctant to continue supply keeping in view the huge receivables.

However, some experts are of the view that incorrect information regarding installed power generation capacity is spread deliberately to embolden the prevailing mess. Many of the experts say that total installed capacity in the country, excluding KESC is less than 20,000MW. However, some experts say that installed capacity has exceeded 24,000MW with the commencement of new IPPs and Chashma-II.

According to the informed sources, the overall installed capacity of IPPs now exceeds 7,800MW and total will get close to 10,000MW once a few more IPPs commence power generation. They go to the extent of saying that installed capacity was understated to create a justification for the creation of rental power plants (RPPs) and also to offer them higher tariff (based on opportunity cost).

Experts term performance of Gencos operating under Pakistan Electric Power Company (Pepco) the most deplorable. According to the data available the total generation capacity of these Gencos exceeds 4,800MW but at an average these are generating around 2,000MW. The plea taken is that since some of the plants have 'too high fuel cost' it is advisable not to operate these. A question arises if these plants are inefficient why new and more efficient generators have not been installed? Is it not advisable to close these plants permanently and also relieve the staff?

Examining KESC more closely reveals a more disappointing saga. According to experts the peak demand of KESC's franchised area exceeds 5,000MW. Keeping in view its inadequacy many industrial units and commercial buildings have installed in-house power generation facilities. Therefore, the peak load has reduced to around 2,700MW.

However, the utility could not meet even this demand. At an average KESC produces less than 1,200MW and output is heavily dependent on supply of gas from SSGC. As and when SSGC curtails gas supply, due to valid reasons outages get longer. It seems KESC management is not ready to operate power plants on furnace oil. In the recent past outages stretched up to 12 hours. Interestingly, KESC keeps on demanding more gas but has been failing miserably when it comes to paying the overdue amounts. At present KESC owes Rs30 billion to SSGC alone. The situation is real precarious because KESC could not pay even the monthly bills.

RPPs can be termed the worst scam in the history of Pakistan. The favorites were paid billions of rupees as advance and were being paid capacity charges without delivering a single unit. Thanks to Faisal Sawlah Hayat who has helped in recovering Rs2.5 billion in the first instance from some of the RPPs and more recoveries are expected in due course.

Despite much hype, overall contribution of RPPs remains around 100MW as against an overall generation of 12,000MW. Bulk of this comes from hydel plants, IPPs and nuclear power plants. Contribution of Gencos operating under Pepco remains disappointingly low. Output of hydel plants varies with the water level in dams.

All along experts have been saying that if power plants are operated at optimum capacity the shortfall can be reduced to manageable quantum. They also say that transmission and distribution losses hovering around 40 per cent is the mother of all evils. No business in the world can be profitable if 40 per cent of its production is pilfered.

They also say that distribution companies can't overcome this problem at their own and need support of the government in identifying 'power thieves' and punishing them. However, others say that higher tariff is the biggest incentive for pilfering electricity. Therefore, they suggest immediate reduction in tariff. However, this becomes 'chicken or egg first' situation.

Privatization of distribution companies is often pleaded to overcome the crisis. However, KESC's privatization is often termed a big failure. Therefore, the government remains reluctant in privatizing distribution companies. Experts have the consensus that woes of KESC can't be resolved unless its cash flow is improved. To achieve this they suggest two-pronged strategy: 1) reducing T&D losses and 2) recovering overdue amounts. Reduction of one percent T&D losses can improve KESC's cash flow by Rs1.5 billion and recovery of overdue amounts help in paying off fuel suppliers.