ISLAMABAD: Challenging the "intrusion" in its affairs by the National Office of Responsibility (NAB), the National Electric Power Regulatory Authority (Nepra) has admitted breach of its policy of charging greater system losses to consumers.
In its 2018 State of the Industry Report, Nepra also questioned the sustainability and affordability of the electricity sector with more than Rs1.2 billion of circular debt and bankrupt distribution system.
"Almost all the projects on which Nepra had made determinations in the past have been questioned by NAB, and the way in which the investigations are carried out has completely stifled the morale of Nepra professionals," complained the regulator of Energy.
Nepra also regretted that this matter has essentially reached its regulatory jurisdiction and "the limits beyond which NAB cannot intervene." He stressed that a holistic approach was urgently required so that the confidence of the electricity sector in general and that of the regulator in particular was not impaired.
He said that with a circular debt exceeding Rs1 billion by the end of December 2018, the electricity sector posed "a great challenge for the government" and that urgent measures were needed for a "revival of a collapsed sector." After the addition of more than 10,000 megawatts of generation capacity in the last five years, the transmission sector only showed an improvement to a certain extent, while the distribution sector had totally fallen into failure.
Suggests privatization of distribution companies to save the electricity sector.
The regulator also lamented that a reform process that began in the early 1990s to achieve efficiency in the electricity sector still suffered from an "unreliable energy supply due to the limitations of the transmission and distribution system and others. inefficiencies "despite the addition of generating capacity and the improvement in the position of the energy supply at different times.
"Electricity consumers continue to receive expensive electricity due to external and internal factors," the regulator said, adding that the government had significant challenges to revive a collapsing sector. Due to the strong dependence on the power generation of imported fuels, the price of imported fuels was among the main external factors, which directly affected the cost of power generation.
With the rapid depletion of indigenous gas at a subsidized price, space for other options is limited. Internal factors also continue to increase inefficiencies, which leads to an expensive energy mix. The federal government, being the owner of the power generation companies (Gencos) in the public sector, has not decided on the fate of the inefficient Gencos, while restrictions on transmission and distribution networks have forced the operator of the system to underuse the available generation capabilities and reduce energy. supplied by conventional fuel and wind power plants.
In general, XW-Discos (former Wapda distribution companies) have failed to reduce their transmission and distribution losses and Nepra's policy of allowing higher rate losses has not yielded results.
He said Discos reported real losses of 18.72 percent in 2013-14, while Nepra set a target of 13.29pc for Discos to bring efficiency in this area, while allowing them to invest according to their investment proposals to reduce transmission and distribution (T&D ) losses. Consequently, Nepra allowed an increase in T&D losses to 15.72pc in the 2014-15 financial year and then to 16.28pc in the 2015-16 fiscal year. He said the same target losses were maintained for the 2016-17 fiscal year, while the losses were reviewed at 16.15pc for the 2017-18 fiscal year.
“However, Discos could not bring sustained improvements in its real loss levels. General losses showed a slight improvement in fiscal year 2015-16 and fiscal year 2016-17, but for fiscal year 2017-18, the Disks again reported their actual losses at almost the same levels as in fiscal year 2013- 14. Even Disks with better performance could not reduce their losses during this period, ”said the regulator.
As a result, the circular debt of the electricity sector is currently touching the Rs1.2 trillion mark, with the continuous addition of around Rs200bn to Rs250bn annually. The fundamental issues of governance, capacity and induction of technological improvements in operations must be addressed immediately, said the regulator, asking for their proper independence and the end of the centralized structure.
He recommended structural changes such as the privatization of Disks to save the sector.
The regulator said the modifications were made to the Nepra Law in April 2018 without having due deliberation with the result that the requirement to maintain a uniform rate throughout the country and certain new concepts in the Law were inconsistent.
The regulator also questioned the "regressive policy" of the shedding government in areas of high loss, because it would not result in the long-term viability of the sector. “It is not enough to concentrate only on carrying out the shedding in areas with large losses,” but other measures to reduce losses effectively should be more important for implementation.
Nepra demanded specific and higher renewable energy targets, but asked the government to "review the previous decisions to import energy from the states of Central Asia, as it is not expected to replace any other generation of expensive energy, while adding to the capacity payment requirements "and would also be a burden for the National Transmission and Dispatch Company for the timely development of the transmission infrastructure.
Posted on Dawn, September 21, 2019