Nepra proposes ‘key’ structural changes in Discos

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has proposed significant structural changes in power distribution companies (Discos) to improve their performance as low recovery has inflicted Rs 268 billion loss to the national exchequer in 2023.

The power regulator issued its Performance Evaluation Report (PER), 2023 along with a comparison with the previous four years, i.e. 2018-19, 2019-20, 2020-21, and 2021-22.

According to the report, Discos have to realise that maximum collection of revenues is the only reason to maintain their financial health. The same can also play an effective role in reducing the burden of circular debt.

Recovery from Discos thru account attachments: IHC seeks names of LTO officers

While considering the data submitted by Discos, it is noted that only Iesco, achieved the landmark of 100 per cent and even crossed the same by recovering the debts of previous years whereas Fesco and Gepco are close to the target of 100 percent.

Similarly, Pesco, Lesco, Mepco, and K-Electric have made collections of more than 90 percent. However, Qesco, Sepco, and Hesco are lagging far behind in achieving their target recoveries in FY 2022-23.

The Qesco’s performance remained worst in this regard as its number is the lowest among all. It is relevant to state that the low recovery ratios have effectively crumbled the revenues beyond acceptable levels, which has resulted in a loss to the national exchequer of around Rs263 billion.

The regulator said that it is alarming that power demand is not being generated despite the availability of ample generation in the country and non-provision of new connections to the eligible consumers within the prescribed time frame is one of the factors contributing to this less power demand. It is important to note that more than 95 percent of the applied connections must be given connections within the time frame defined in PSDR 2005. Whereas the data submitted by the Discos is concerning and, in this regard, the performance of Gepco, Fesco and Qesco remained poor as they failed to achieve the set targets with a huge margin. However, Pesco, Mepco, Sepco, and K-Electric are closer to the target of 95 percent.

Further, Iesco, Lesco, and Hesco have submitted that they have provided more than 95 percent of applied connections in the year 2022-23.

The non-provision of new connections to the consumers within the prescribed time frame causes huge financial loss to the national exchequer and pushes the public of Pakistan in the dark despite the availability of sufficient generation and payment of capacity charges. If we talk about the non-provision of connections in numbers, there are around 278, 815 ripe connections as on June 2023 which were not connected within the prescribed timelines, meaning thereby, this much number of consumers made payment but not get the connection.

“It is an undeniable fact that Discos are deliberately drawing less power than their demand, despite being provided with an adequate quota on account of load shedding based on Aggregate Technical & Commercial (AT&C) losses policy, which is in direct contradiction with the Nepra Act, 1997 and the Performance Standards Distribution Rules, 2005. Consequently, Nepra being regulator has decided to initiate legal proceedings against Discos (Pesco, Qesco, Hesco, Sepco & K-Electric) due to their blatant violation of Nepra laws. The proceedings are underway,” said the report.

On AT&C-based load shedding, Nepra has stated that it was started back in 2013 with the purpose to improve revenue collections through a strong governance mechanism and the same will be gradually reduced. Contrary to this, the AT&C based load shedding is still being carried out for more than 10 years and Discos particularly, Pesco, Qesco, Sepco, and Hesco have considered it an easy path for them to manage the recovery rather than to put the efforts and ensure maximum collection. In this regard, a sample of 20 feeders of these Discos was selected and examined the trend of AT&C losses on these feeders. Upon subsequent analysis of four years’ data i.e., from July 2018 to June 2022, it was found that no significant reduction in AT&C losses has been made and the feeders are in the same category of load shedding. The Nepra is of the opinion that due to AT&C-based load shedding, the good paying consumers connected on the same feeder also badly suffer and it is highly unjustifiable that they face collective punishment due to some non-paying consumers.

In addition, the Nepra firmly believed that Discos should establish their writ, and discontinue such AT&C-based loadshedding by disconnecting each and individual connection in case of default, meaning thereby, reducing losses and increasing collections. Discos can achieve this by taking concrete measures, including identifying high-loss areas, surveillance and control of illegal activities, installation of Aerial Bundled Cable (ABC) systems, and the implementation of Advanced Metering Infrastructure (AMI)/Automated Meter Reading (AMR) systems at PMT level.

The Nepra has maintained that since K-Electric has installed more than 50K AMI/AMR meters on all PMTs in its service territory, therefore, the Nepra has issued directives to carry out load shedding (if necessary), at the PMT level rather than the feeder level.

The Nepra laws explicitly state that Discos cannot conduct loadshedding on their own until and unless there is a generation shortage or transmission system constraints in the country. The Nepra vigorously monitors the situation of loadshedding on a daily basis by examining Disco’s demand, allocated quota, and their actual power drawl.

“Performance of distribution companies (Discos) throughout this period remained subpar, and the expected power sector reforms were not achieved. Given this ongoing poor performance, it is apparent that, under the existing circumstances, the current DISCO setup is unlikely to be able to deliver the desired results,” said the regulator.

In light of these challenges, the Nepra is of the view that significant structural changes on a large scale are needed. These changes could include the division of large Discos into smaller units/entities, the provincialisation of Discos, privatization or corporatisation of Discos on public-private partnership mode, reduction in the influence of unions within the power sector, discontinuation of AT&C losses policy by using modern technology, outsourcing of high loss feeders, demand side management, and customer-oriented business approach. Such reforms are necessary to address the systemic issues and improve the overall performance and efficiency of the power distribution system in Pakistan.

Copyright Business Recorder, 2024