Pakistan Electric Power Company (Pepco) has acknowledged that last one year's increase in power and gas tariffs had made these utilities unaffordable, which led to riots in different parts of the country except Karachi where the situation is corporately better than other industrial cities.
"The present power tariff and circular debt scenario demands of the authorities continued gas supply to Pepco's power plants throughout the year so that affordable power should be provided to the masses," said Tahir Bashrat Cheema in a letter to the federal government.
This is also evident from the fact that consumers are paying heavy electricity bills despite massive load shedding. "Energy crisis has resulted in repeated increase in gas and power tariffs during the past one year making it unaffordable for everyone," he added.
Cheema is apparently behind energy summit held in the Prime Minister Secretariat, which concluded on Wednesday. The decisions of the meeting were expected to be announced by Prime Miniser Yousaf Raza Gilani on Thursday. He said that in the best national interests, all parties should get together for the assistance of Pepco to rein in the energy crisis that has resulted in manifold raise in tariffs.
Key decisions which are expected to be taken by the energy summit are as follows: (i) mandatory energy efficiency measures for Captive Power Plants (CPPs); (ii) refusal of gas to new CPPs; (iii) continuation of gas load management plan throughout the year for diversion to power sector; (iv) transfer of 90 MMCFD gas from SSGC to SNGPL, exclusively for power generation throughout the year; (v) generation of power through RFO in fertiliser plants and diversion of gas to power; (vi) monitoring of CNG sector for over-consumption/theft; (vii) refusal of gas to new CNG stations; (viii) allocating a certain quantity from additional supplies of gas from existing fields; (ix) all new gas finds should be allocated to power sector; and (x) mandatory energy conservation measures in domestic sector.
According to Pepco, domestic sector load needs to be managed through appropriate energy conservation measures on war footing. Increase in domestic load by 3 to 4 times during winter is understandable, but Pepco's position is that during summers, when domestic load is normal, SNGPL can manage to supply much more gas to Pepco power plants than being done in the past specially during the last 12 months.
Pepco's power plants have agreements with SNGPL similar to other industrial consumers. However, Pepco is not being treated at par with them and is always the first to be curtailed by SNGPL. Curtailment of gas to power sector is done by SNGPL for its own convenience as one big consumer is worth the hassle of handling hundreds of small consumers.
Other proposals which have been discussed by the energy summit are as follows:
Gas supply to Kapco: Pepco understands that supplies to Muzaffargarh power plant and Kapco located upstream of Multan during earlier period was not only due to availability of extra gas but because of transportation constraints of SNGPL downstream of Multan. SNGPL had no other option but to provide gas to power plants upstream of Multan.
This availability of gas made power affordable to the masses. The logical question is that why did SNGPL sign GSAs with new IPPs when Kapco was being supplied 70 MMCFD gas under a GSA and the same was to be extended as a routine exercise. The act of cutting gas to Pepco through non-extension of a running GSA after December 2007 is so serious that it merits extensive investigation into the whole affair.
"Whole financial dynamics of the power sector has been adversely affected by the gas constraints. Now the situation is that most costly fuel in power sector ie LSFO, is being consumed at Kapco because of non-supply of gas by SNGPL," Cheeman said. According to him, all new IPPs namely Orient, Sapphire, Saif and Halmore are not presently taking 152 MMCFD gas allocated to them and are also being subjected to imposition of harsh LDs.
Pepco is of the opinion that out of the 152 MMCFD, SNGPL can easily provide substantial quantity of gas to Pepco, at least till such time (as) these plants are fully operational. The fact that this is not being done is in direct negation to ECC decision of September 12, 2006.
With regard to Zamzama gas for Guddu, Pepco has reiterated that the additional 40 MMCFD Kandhkot gas being presently supplied to Guddu over and above the allocated 50 MMCFD Kandhkot gas is not a replacement of 40 MMCFD Zamzama gas specifically allocated to Guddu through ECC decision. SNGPL is simply trying to grind their axe both ways.
On the one hand, according to their own understanding, SNGPL have assumed 40 MMCFD Kandhkot gas as replacement of the same quantity of Zamzama gas and on the other they have injected 40 MMCFD Zamzama gas allocated to Guddu into their system in the garb of high loads.
Had Kandhkot gas been of pipeline quality, SNGPL would not have hesitated to take it into their system to meet their own load without the slightest consideration to the fact that how much of this action of theirs may cost Pepco, in the form of using high priced furnace oil, thereby increasing the price of per unit generation cost from Rs 3.63 to Rs 9.19.
The use of costly alternative fuels in power generation has resulted in 40 percent increase in power tariff during the last one year. If this situation continues then another hike in power tariff would be inevitable, while also having serious socio-political consequences for the country. World Bank has advised the government that existing GSAs should be redone on commercial basis.
"We agree with SNGPL that to execute commercial GSAs, it is imperative to have committed volumes available to gas companies. However, Pepco is of the view that when SNGPL did have gas available, it did not dispatch draft commercial GSAs for negotiations with Pepco," Cheema said.
Certainly, the intention of SNGPL was to keep possession of the available gas to meet the demand of its ever-expanding consumer base. Moreover, the GSAs forwarded to Pepco are totally one-sided in favour of SNGPL and against the advice of World Bank. SNGPL has available committed volumes for Pepco plants in the form of existing GSAs (GTPS Faisalabad = 26 MMCFD, SPS Faisalabad = 5MMCFD, NGPS Multan 15 MMCFD).
SNGPL is even not ready to enter into commercial GSAs in place of existing GSAs. It is also a fact that under the prevailing industrial GSAs, the gas listed quantities are committed by GoP and SNGPL for Pepco and this should not be subjected to cuts, he added.
According to Pepco, once again, the draft GSA for TPS Guddu under negotiation between SNGPL and Pepco includes Take or Pay (ToP) and makeup gas clauses in favour of SNGPL, but reciprocal clauses for the seller in terms of default gas and fuel compensation charges are not included. SNGPL point of view that "gas supply to TPS Guddu is being made from dedicated fields from where gas availability is beyond SNGPL's control" is only partially true.
SNGPL has not made any reference to the 40 MMCFD Zamzama gas allocated to TPS Guddu. Pepco is of the view that the clauses of default gas and fuel compensation charges should be included and limited to 40 MMCFD Zamzama gas. "We request that SNGPL should not consider taking over possession of allocated Zamzama gas but should come forward and assist Pepco and the country in the time of dire need of gas,"Cheema said.
Pepco still believes that if SNGPL carries out an exercise on CNG sector, they will definitely come across cases of over consumption. In this regard, a reference is made to the utterances of the Chairman of Ogra during SNGPL/SSGC presentations to the Prime Minister on March 12, 2010 to the effect that there was large-scale gas theft and indiscipline in the CNG sector and that instances had been brought to the notice of both gas companies. Consequently, a little monitoring and seriousness would result in huge savings for diversion to the power sector.
Pepco said that it is not in a position to comment on the working of SNGPL in providing connections to CPPs. Pepco is of the view that during these days of acute shortage of gas, the efficiency criteria for CPPs should be applied to all the existing units on SNGPL system. The gas quantity saved should be diverted to Pepco.
Moreover, Pepco plants, being ranked above CPPs in gas allocation and management Policy 2005, need to be supplied gas before meeting a single MMCFD gas requirement of CPP. Pepco has reiterated that as per ECC decision, during winter months 90 MMCFD gas should be transferred by SSGC to SNGPL system for Pepco power plants.
Pepco appreciated SSGC for providing 111 MMCFD gas against commitment of 100 MMCFD, requesting that this gesture of co-operation should continue in the future as well. For operational flexibility, the committed quantity needs to be placed at the disposal of Pepco for use at Kotri/Jamshoro/Quetta wherever required.
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