Power tariff and losses

Power tariff and losses often come under criticism in the media, in editorials, columns and articles as well. They say that electricity rates are higher in Pakistan than many other countries, a true criticism. No doubt, the higher the price of the energy the more it is burdensome for low and average income groups.
Industrial and agricultural consumers also raise their voice over the higher electrical energy rates and claim that as energy is one of the basic inputs, its rates are a source of high production cost.
And that losses in the power system are on the higher side. Nevertheless, electricity tariff and losses are required to be seen in this true perspective.
Truly, criticism is a democratic right of the people, but the national utility bodies obliged to produce energy for the people, the WAPDA and KESC, do have their own reasons.
They are responsible for providing electrical power to Karachi and Lasbela districts. KESC owns and runs the expensive oil-based thermal power houses.
Most of the power producers operating in Pakistan operate on oil fuel. WAPDA is a country-wide national body operating its thermal power plants on oil and gas fuel, besides hydro-electric power.
But, unfortunately, after Warsak, Mangla and Tarbela, by the mid-1970s, no significant hydro-electric power station could come up for a long time because the next planned Kalabagh Dam project because disputed in the early 1980s, when it was about to be constructed, a bad luck.
Consequent to this misery, in order to overcome the power shortage and the resulting load-shedding, (brown out) thermal power plants, which involve a low gestation period, were found to be the only option left to overcome power shortage and consequent brown outs.
This gave birth to another problem, that the ratio of thermal power in the hydro-thermal mix of the system, which at one time was one-third of the total capability, went up to two-thirds and the low-cost/cheap source of hydro-electric power share in the system, fell from one-third to one-fourth.
Additively, the prices of oil and gas fuels used to generate thermal power started soaring. However, after a long time, the 184 Megawatt Chashma Hydro-electric power plant was accomplished, during the last decade, whereas development activity at the Ghazi Barotha hydro-power project was increased after removing bottlenecks.
Four units of the project have already become operational. Its fifth and final unit will also start generating power by mid-next year and the complex would start pooling its designed 1,450 megawatt power into the national grid.
This would improve the low-cost hydro-electric power generation ratio in the system, expectedly, to rationalise power tariffs.
WAPDA, a national organisation in the public sector, playing a vital role in the progress and prosperity of the country, as a life line, owns and runs one of the greatest contiguous electric power networks in the world.
The utility body, as a defender of the economic frontiers of Pakistan, does play the role of a backbone of the national economy.
Electricity, undoubtedly, is the modern day basic necessity, upon which depends the bringing of progress and prosperity in the domestic, commercial, industrial agriculture sectors as well as all spheres of the socio-economic fabric.
The well known development works rendered by WAPDA since its inception, are an example to envy.
Albeit, ignoring the due weight-age to its acknowledgeable efforts for development and stability of the country, it is customary to criticise WAPDA for its utility aspect, because of the grievances of the people. Of which, there are some genuine while others criticise for the sake of criticising.
In order to better serve the consumers, to efficiently manage and operate the power system, for improvement and construction of projects, WAPDA is obliged to fund forty percent of cost of a project, as matching equity from its own kitty to fulfil the requirement of foreign funding.
Obviously, to meet the requirement, WAPDA and KESC need the financial resource, while their only source of income is the revenue from the sale of electricity.
The various components of the electricity bill, only the nucleus one - ie cost of the energy units consumed by a domestic customer, is the share of WAPDA as energy charges.
This component is categorised in different slabs of tariff consumption. So is the case with other categories, such as commercial, industrial, agricultural and others, categorised as street light, municipal water supply, traction (for railways), bulk - ie having supply at one point and distributing further on to their clientele in housing colonies, for example, Model Town Housing Society, Lahore etc.
WAPDA is presently serving around 138 million customers. A majority of these are the consumers who use upto 300 units-a-month. These are being provided electricity at a price below WAPDA's own cost of production.
One of the bill components 'Fuel Adjustment Surcharge', commonly called 'FAS' or 'FAC', is in fact, the actual cost of fuel (oil and gas), used for thermal power generation in a billing month, charged as calculated on per unit basis, for the units consumed by a customer in the particular month, on a "No Profit, No Loss" basis.
The bill component of 'Hydel Surcharge' was levied by the Government of Pakistan in 1993. This is the constitutional share of provinces concerned, from the net profit of hydro-electric power generation, from a power house located in a province, presently going to the NWFP government, as per the settled AGN Kazi Committee formula.
Whereas the component of electricity duty collected by WAPDA, in bills, goes to the provinces, being their revenue, the revenue of the levies of the Central Board of Revenue (CBR) - ie 'Withholding Tax', General Sales Tax (GST) is transferred to the CBR.
This is neither an income of the WAPDA, nor it shares even a penny out of these levies. Rather, a colossal sum of Rs 30 billion yearly collection, of the taxes, in monthly bills, is transferred to respective quarters of the provincial governments and CBR.
The additional surcharge component is the source needed to execute development projects aimed at extension, augmentation, sophistication of power system in the consumers' interest to cater for the element of forty percent self-financing. Ultimately, end-consumers reap their benefits of better and stable power supply to them.
The projects under execution in this direction are 1,450 Megawatt Ghazi-Barotha Hydropower Project, the schemes of new transmission lines and grid stations and extension/augmentation of power distribution system throughout the country.
The above explained components compose a simplified electricity bill of a customer. These were made, one in 1999, for the convenience of customers, to save them from confusion of a number of components in their bill.
However, under an automated programming, book keeping is maintained for the provincial governments and CBR's revenue recoveries.
An aspect of criticism on electricity rates, and their increase, is that the energy prices are going out of reach of domestic consumers.
It may be viewed in the perspective that the energy price escalation is a logical result of a historical and gradual raise in the prices of the fossil fuels in use for thermal power generation, in addition to the factors that the energy is being provided to the bulk of the clientele, using up to 300 units a month at a price even less than WAPDA's own cost of production and also, at subsidised rates, to the consumers of agricultural tube-wells and the drinking water supply schemes.
Raise in power tariff, to be appreciated, is always a requirement resulting from raise in prices of inputs for thermal power generation, like oil and gas.
Also the cost of fuel, used by private power producers in their plants, is a pass through item, paid by WAPDA, to them, as per the sovereign guaranteed Power Purchase Agreements with them.
The raise effected in the employees' salaries announced from time to time by the Government, increase in expenditure due to hike in prices of machinery and equipment required for power system, addition in expenditure for maintaining ever-expanding power system infra-structure, repayment of bank loans taken to meet the cash flow shortfalls for development activity because of non-paid bills, are the elements which cannot be excluded as WAPDA has to bear and meet the expenditures, while its only source of income is the revenue from the sale of power, a chunk of which continues to be unpaid by the public sector departments, the people of FATA and the agricultural sector of Balochistan, despite the continued utmost efforts for their recovery.
It is worth mentioning that WAPDA is not authorised to, upward or downward, revise electricity tariffs. Any change in the tariffs is decided by the National Electric Power Regulatory Authority (NEPRA) and the tariff decided by the Regulatory body is implemented only, as and when approved by the Government.
The consumers' difficulties in view, WAPDA is never happy, but pained whenever it has to consider and take a step to ask NEPRA for an upward revision.
It may be viewed in the perspective that electricity rates in the country are based on the May 1998 prices of oil and gas, the inputs of expensive thermal power generation, which is around seventy per cent of total powergen of WAPDA system.
Since then, the prices of these inputs have gone up by over hundred per cent. Against this colossal hike, WAPDA has been permitted only a 17.5 percent increase/relief in electricity tariffs.
On the other hand, when compared, on July 2003 base, the prices of other utilities have been raised to a bigger extent.
For example, the fares of PIA and railways have gone up by 55 percent and 82 percent respectively, cost of postal envelope by 100 percent and registry by 50 percent, telephone line rent by 81 percent, price of gas by 108 percent, petrol by 20 percent, diesel by 87 percent, furnace oil by 152 percent etc.
It may be seen that against the heavy increase in expenditure on thermal power generation, WAPDA has been allowed a relief of only 17.5 percent, in the form of raise in electricity rates and the rest of the about 92 percent additional financial burden is being borne by WAPDA itself, obviously, the need to take loans from commercial banks to square the deficit.
The industrial and commercial sectors enjoy the convenience of passing on the raises they face to the consumers, but, for WAPDA, it is not possible. Let us be rational to consider that while expecting and demanding from WAPDA the most efficient and standard services, we may appreciate that to perform and live up to our expectations, WAPDA needs finances that comes to it only from sale of electricity.
We should be fair to appreciate if WAPDA is constrained with the non-payment of bills by the consumers, who are not able to understand its reason far on-the-rise expenditure, through a raise in electricity rates proportionate to ever-increasing fuel cost for thermal power generation, and that for how long it would be able to survive on bank loans to better serve its customers/consumers and sustain the shock. Obviously, there is always a limit for such shock absorbers.
What is important to vouch for, is that, while taking the painful decision of raising in electricity rates per affecting market forces, increase in the tariffs for productive industry and the agriculture sectors has been controlled and in addition to keeping their electricity tariffs structures, "Incentive Packages" have been offered to monetarily facilitate them.
The latest example is that the government is not encouraging the raise in power tariffs. The agriculture sector has been given a 33 percent subsidy in electricity rates, that is being equally borne by the WAPDA, the federal government and the provincial governments.
In rationalising electricity rates, cross subsidies from the industrial sector to domestic and other non-industrial sectors tend to be reduced. So, as to make the production cost rational and to enable the manufacturing sector to compete in the international market to increase export of their products and thereby make a contribution towards enhancing the country's foreign exchequer for the overall good and strengthening of the national economy.
This happy world augury is to ultimately benefit the socio-economic good of the common man.
WAPDA, it may be viewed, is out of the development budget of the government, since 1988, and obliged to arrange and manage its financial needs on its own.
However, funds for the projects given to it for execution on behalf of governments are provided on a yearly basis by the respective federal and provincial governments.
These include water resource development projects of the governments and village electrification schemes.
The subsidy funds provided to WAPDA by the government are, as a matter of fact, the equity of the government taken upon it in extending subsidised electricity rates to domestic and agriculture consumers.
Fingers are raised on losses in the power system and unauthorised usage (theft) of electricity and it is said that the energy price could be brought down by controlling these elements.
Let us be brave to ponder that "good" and "bad" are everywhere. WAPDA is a countrywide organisation, running one of the largest systems in the world. Its power generation, transmission and distribution systems in a country under development is spread over the entire length and breadth, from east to west, north to south.
There are problems, difficulties and issues in running such a big system that cannot be absolutely ruled out. With a view to overcoming these things, the Power Wing has been decentralised and restructured into small systems of independent and autonomous entities of eight distribution companies (DISCOs), a National Transmission & Despatch Company (NTDC) and four power generation companies (GENCOs).
To improve the performance of DISCOs, measures have been taken to reform their customer services and imbibe customers-friendly "we care" culture in the companies.
These include "One Window" operation from sub-division to company headquarters levels, complaint centers from lowest ebb to Chairman WAPDA tiers for quick redress of customers' problems. A simple one page new connection application form in Urdu has been introduced.
Model sub divisions have been established from where new industrial and other connections are provided within one week. Mobile customer centers have also been set up. This computerised facility serves the customers at their doorstep, involving the correction of bills there and then etc.
Many a of the other reforms and "we care" steps have also been taken at the DISCOs level which include the creation of new sub divisions, divisions and circles.
This has resulted in the decrease of the heavy load of customers, number-wise on the existing formations, thereby better facilitating their clientele.
A comprehensive, multibillion rupee project has been undertaken to upgrade the existing transmission and distribution infrastructure throughout the country, construction of new lines and grid stations, bifurcation of extraordinary long power lines, matching with the power load of the fed areas, installation of higher capacity transformers for the same purpose etc.
Under this "Energy Loss Reduction (ELR)" project, simultaneously aimed at the provision of improved and stable supply to the customers, over Rs 116 million have been invested in executing a number of schemes last year.
Similar investment is going into the project this year as well and in the coming years, all from WAPDA's own exchequer. Suffice to say that corrective and reform measures are being taken and will so continue.
Nevertheless, certain problems crop up due to shortage of financial resources too. WAPDA's chartered developmental role has been revived after its coming out of the crisis and becoming a profitable body again in the recent years.
Thus it has presented multibillion "National Water Resource and Hydropower Development Programme-Vision-2025" to the nation, of course, with the approval of the government of Pakistan.
The fast track Gomal Zam Dam, Mirani Dam, Mangla Dam Raising, Thal Canal, Rainee Canal, Katchhi Canal projects are apace in the first phase.
On their completion in the next three years, 4 million acre feet of water for irrigation supplies will be available from the reservoirs, to the benefit of six lakh acres of new fertile lands to come under plough.
The "Vision 2025" plan would facilitate development of reservoirs to store an additional 6 million acre feet of water and bring under irrigation 2.2 million acres of virgin fertile land besides 23,000 megawatt of hydro-electric and coal based low-cost power generation.
A number of projects to complete in the next three years to produce 655 Megawatt of cheap resource of hydro-electric power, namely, Alai Khwar, Khan Khwar, Duber Khwar, Golen Gol, Jinnah Barrage are under implementation besides Ghazi Barotha. These projects would contribute towards rationalizing/lowering electricity rates.
The power losses are linked with transmission, transformation at grids and distribution systems. In the production area, the energy is not lost, but consumed to generate electricity at power houses.
Without this consumption, production of electricity is not possible. Here the consumption is upto international standards.
In the transmission system, modernisation, extension/augmentation of the existing 66,000 volts (66 KV) to 500,000 volts (500 KV) extra-high voltage lines, construction of new lines, possibly doing away with the low-voltage 66 KV lines in the system, is a continuous process, to control the losses in this sphere.
Extraordinary long transmission lines have been and are being bifurcated. Capacitors have also been installed on the lines.
Their insulators and conductors are washed by live line crews without shutting down the flow of power through them, to wash the dust deposit on them due to wind storms which adversely affect the smooth flow of current and thus causes losses.
To do the risky job on live lines, the crews are especially trained. The losses in this sphere are also in accordance with world standards.