Caretakers likely to ease the woes of power sector

The power sector’s capacity payment is expected to reach Rs 3.766 trillion per year by FY 31, accounting for 75% of the total energy bill, rendering electricity affordability untenable for all consumer groups.

Capacity payment, which was around Rs 185 billion per year in FY 13, is currently estimated to be around Rs 1.954 trillion. However, the Energy Purchase Price (EPP), which was Rs 663 billion in FY 13, has already reached Rs 904 billion and will be Rs 1.246 billion by FY 31.

“CPP, which was 22 percent of total tariff in FY 13, will be 75 percent in FY 31,” the sources claimed.

The Power Division has suggested to the caretaker administration the implementation of “old proposed measures with new words” with the argument that failure is no longer an option, following which a significant crackdown on power theft has begun.

In its presentation to the Prime Minister, the Power Division proposed many short-, medium–, and long-term ways to close the Rs 976 billion imbalance.

To address the under-collection of Rs 387 billion and loss/theft of Rs 201 billion, the Power Division has proposed a medium-term method in which the difference between delivery of energy to AJ&K at bulk rate and payment at recovery rate is covered by the Finance Ministry. The current loss level will be gradually lowered. In AJ&K, the financial impact of losses/theft is Rs 65 billion.

However, no mechanism for recovering Rs 478 billion from agri-tube wells in Balochistan has been proposed because neither the province government nor farmers are willing to pay their agreed-upon part of this bill. Current losses/theft in the agri-tube wells sector amount to Rs 83 billion.

For FATA, where losses/theft total Rs 50 billion per year, Power Division has proposed reconsidering supply sources as well as outsourcing operations.

According to sources, for the recovery of Rs 390 billion in losses/theft, technical assistance has been proposed for the recovery of Rs 126 billion through feeder outsourcing, whilst losses are 30-60% for the recovery of Rs 140 billion. The implementation of enforcement procedures has begun in order to collect Rs 323 billion in locations where losses exceed 60%. Surcharge of Rs 3.23 per unit has been imposed for interest costs of Rs 171 billion (national average Rs 2.63 per unit).

The Tariff Differential Payment (TDS) for Discos is Rs 158 billion, according to Power Division. Through tariff restructuring, the TDS amount for domestic users has been decreased from Rs 433 billion to Rs 122 billion. However, protected customers will be segregated after a World Bank assessment of Rs 36 billion of agriculture consumers.

A new contractual arrangement of PPA, ICA, and TDS agreements would be put in place for K-Electric (KE) TDS of Rs 169 billion.

The Power Division has proposed the following National Electricity Plan:

Short-term actions include (i) an anti-theft effort to reduce system losses of approximately Rs. 589 billion; (ii) generating cost reduction to alleviate the impact of high tariffs with the installation of solar power; and (iii) an increase in demand through the introduction of a winter package for incremental consumption.

Medium-term Actions: (i) drive for energy conservation – plan already prepared; (ii) generation cost reduction – debt tenor increase renegotiation; (iii) operationalization of CTBCM – competitive market for bulk consumers 1MW; (iv) private sector participation in power sector entities – IPO for national transmission and 1 DISCO as pilot; (v) subsidy reform – targeted and direct subsidy for domestic and agriculture/ reduction in cross subsidy and; (vi) Long-term actions include: (i) privatisation of distribution companies – a new exercise to be launched by the Privatisation Commission; (ii) indigenization of fuel and technology; (iii) technological advances in transmission and distribution, as well as system expansion; and (iv) circular debt management – flow and stock.

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