It is too painful to see Karachi suffering due to lack of electricity in scorching heat. This is despite the available generation capacity within Karachi that is not being utilized. This time gas supply is a contention. In earlier load-sheddings, running steam power plants was an issue. Nepra kept asking KE to run its plants, but it won't despite notices and fines. Now, there is gas supply issue with claims and counter claims.
For some secret reason, there is some profit to KE in not producing its own electricity. Apparently, all fuel costs are reimbursed and there should not be an issue. They have not shared the issue with the regulator or the public, so that their real loss in profit could be understood and possibly provided for. Partly, there might be cash flow issues due to the circular debt. Gas was apparently available without cash which SSGC refuses to continue, claiming receivables of some 87 billion Rupees or so. SSGC could have reduced supply to other sectors, had KE being a cash paying customer. On merit grounds, KE should get priority over CNG and captive power plants. Captive power plants have much lower thermal efficiency. It was once proposed and rightly so that if all captive power plants are closed in Karachi, the surplus generated due to higher energy efficiency would solve the gas problem. It should be at least partly valid today.
The irony is that in real terms, there is no shortage of gas, in fact there is surplus. The second RLNG terminal is heavily underutilized due to the delay in full commissioning of three RLNG power plants of 3600 MW. All contracts are 'Take or Pay', meaning that one has to pay even if not utilized or consumed. There is double jeopardy. Capacity payments for RLNG terminals are to be paid along with full payment of unutilized RLNG. I have mentioned earlier in this space that 'Take or Pay' contracts in LNG supply from Qatar should be renegotiated to delete single destination clause enabling diversion of unutilized LNG to other destinations through spot market. Under new market conditions it is possible to do that. Another solution matching the demand-supply surplus situation is to build gas storages in depleted fields. It is good to know that the government is considering that option. This was a little diversion, but a necessary one. Let us turn back to the issue.
Keeping the aforementioned in mind and other issues that I would discuss, it has become apparent that KE cannot run the generation function. And I have been recommending for a long time now - taking the generation function away from KE and letting it function as a normal DISCO as others are doing in the country. As such KE business model of integrated utility combining Generation, Transmission and Distribution is an anomaly and is outmoded. The world has long left this type of utility organization except some exceptions. There are good reasons for that in details of which one would not like to go in this space.
KE has escaped sectoral reforms which acknowledged separation of functions as a basic tenet disbanding the monolith of Wapda. Why make an exception to KE. Perhaps, privatization complications did not let the decision makers do the same with the then KESC, although KE was asked to keep separate accounting section for generation.
There would be other complications that would develop with the passage of time and are already at a whispering stage. Currently, Karachi gets 600MW which Power Division often threatens to discontinue. People are asking, why Karachi should not benefit from CPEC and other nationwide investments in the sector. What is the share of Karachi in it and thus of Sindh? Is it advisable to leave the fate of the industrial city of Karachi to the vagaries of one private party? Let us face it, private sector would not be able to attract or make heavy investments required in utility sector. It would always need government support. Imagine, what could have been done without CPEC framework. In any case, load-shedding or sharing can be more effective during a country-wide pool than of an isolated city. The network should be at least regional or provincial, in lieu of the partial present one.
Let us do away with the anomaly without losing further time. Take the generation function away from KE. It may run it independently or sell it as it may like to do so. And this should be done before the sell out to Chinese. Although, it is not the subject of this article, I must express my reservation to the proposed sell out. Karachi has so many socio economic and political problems. It would not be wise to involve Chinese in a distribution company which involves close contact with people. A recent brawl between police and Chinese workers in Punjab should be a good indicator. Chinese investors should themselves consider the pros and cons of this deal.
Before closing let me draw the attention of the readers to some institutional issues. There are some coordination issues which one had hoped that with the combined Ministry of Energy, the issues would be better handled. This has not happened. Except for the Ministry of Energy being handled by the PM, nothing seems to have changed. At least some common cell or consultative mechanism could have been created. The height is that Nepra has sent its own singular mission. SSGC would not listen to Nepra. A combined Nepra-Ogra mission should have been sent to be effective. It is appropriate here to remind the reader of a pending proposal to merge Nepra and Ogra. However, the present mission could have been a combined one even without such a merger. Finally, an Energy Tribunal should have been in place. It is Electricity Tribunal currently which should be broadened to contain the entire energy sector as a direct corollary of a unified Ministry of Energy or even otherwise. As more energy comes in along with more actors, institutional mechanisms would become even more important which should be heeded by the decision makers. And finally, there is a free for all in the payable-receivable system due to the circular debt. It can be better managed if some working rules are established.
(The writer has retired recently as Member Energy Planning Commission)
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