EDITORIAL: Nepra (National Electric Power Regulatory Authority) is not going easy on the government and its inefficiencies in the distribution, transmission, and generation sector. The regulator is not shying away from adopting a hardline in its latest state of the industry report. The regulator is also writing letters to the ministry of energy on latter’s action of passing unjustified financial burden of its own inefficiencies on to consumers. The regulator is, in fact, very accurate.
The gist of the report is that the centralised government control from generation to distribution is resulting in higher losses that constitute a formidable impediment to the efforts aimed at enhancing or broad-basing the market.
Nepra is not at all happy at the growth of the circular debt despite increase in the consumer tariff. The transmission and distribution (T&D) losses are around 4 percent higher than the permissible limit while recovery is 10 percent less than the target of 100 percent. These two elements alone have added Rs343 billion to the power circular debt in FY22.
The regulator has taken notice of deliberate load-shedding that many Discos are carrying out in areas of higher losses as the tariff-based load shedding is condemned by the regulator. Discos lack the capacity, competency, and authority to lower the recovery losses. That is hurting the power sector and the cost is being borne by overall taxpayers in the form of higher fiscal subsidy, by countrywide energy consumers in the form of higher tariffs and by local feeder level consumers in the form of deliberate load-shedding. That is sheer injustice. Discos and the ministry of energy cannot be allowed to run away with it. They must face the music.
The basic issue is that the Discos are not independent entities per se. The regulator has in a way accused the federal government of not allowing Discos to take commercial decisions on their own under their respective boards of directors. The regulator is once again spot on here. The control-freak ministry of energy is one prime reason for consistent poor performance of Discos.
The one good example in the country is of K-Electric which has been portrayed as a big risk of natural monopoly as the entity has all the three streams — generation, transmission, and distribution. However, the ministry never acknowledged how K-Electric has reduced the losses massively in the last fifteen years in a complicated and hostile environment that characterises the ethnic, social and political landscape of the city of teeming millions.
The bureaucracy must learn to recognise that the Discos operating in the country are nine big companies and must run by themselves for improvement. There is no way Islamabad can run these. Their boards of directors should be made independent in letter and spirit and task the management to make improvements in aggregate technical and commercial (AT&C) losses.
Then there is another issue of lack of coordination amongst various agencies in the power sector that has resulted in violation of merit order and under-utilisation of additional capacity for which the consumers are paying through their nose.
Recently, in a letter written to the ministry of energy, Nepra hit out at the government for not procuring RLNG in the last two years and as a result of which expensive power plants had to run. The cost is of course was borne by the consumers. Be that as it may, there is limit to government inefficiencies that consumers can tolerate. We strongly urge the regulator to keep the pressure on the government as deregulating and privatising the sector, and unbundling of the Discos could be the only way out of this protracted power mess.
Copyright Business Recorder, 2022
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