ISLAMABAD: Terming the “backtracking on power sector reforms as disastrous”, Nepra on Thursday said the government has been blocking the benefit of lower electricity prices approved by the power regulator to the electricity consumers and circular debt remains a major power sector challenge.

This has been observed in State of Industry Report and Annual Report 2015-16 of the National Electric Power Regulatory Authority (Nepra). It also appreciated ‘definite signs of recovery’ in the power generation sector but expressed concern over rolling back of governance reforms and centralisation of powers.

The reports noted with concern that all distribution companies including K-Electric were behind efficiency targets. It held that lack of investment by KE was a key reason behind 2015 power breakdown in Karachi and loss of lives. The reports also observed that the government despite 26 per cent shareholder of KE did not attend its board meetings and failed to protect rights of the consumers.

The regulator said the tariff determinations for ex-Wapda distribution companies (Discos) for fiscal year 2015-16 onward were issued by Nepra in the months of Feb-March 2016 but were not yet notified. The result that previous higher tariff was being charged by the Discos to consumers.

Even the tariff of ex-Wapda Discos for 2014-15 was intimated by Nepra to the federal government for notification but the government asked for reconsideration of amount of surcharges and subsidy for certain consumers which was accepted and surcharges were imposed in June 2015.

The high courts’ held the recovery of these surcharges as “unconstitutional”. The government has challenged this in the Supreme Court of Pakistan.

The Nepra noted that power generation was showing definite signs of recovery due to policies of the government. “Power generation projects on conventional fuels and renewables in general and CPEC projects in particular are going to ease electricity supply shortages for quite some time in the future”, it said.

There was a big if, too. “While the take-off in the generation sector is on cards, a lot now depends on the transmission and distribution entities to strengthen their systems and make the delivery of uninterrupted power to end-consumers a reality”.

It said the transmission and distribution companies had prepared elaborate plans, however with the exception of some projects, where the federal government has taken the lead, major challenges still exist for the transmission and distribution entities to meet critical time lines.

Capacity issues, lack of financial support due to centralised control, procedural delays and setting of wrong priorities were noted as the major factors resulting in continued below par performance.

It said that unless quantum improvement

The regulator noted with concern recent opinions on the state of power sector that have put into question the very fundamentals of power sector reforms initiated some twenty years ago.

“Such proposals without the backing of comprehensive analyses are uncalled for and certainly add to the uncertainties about stated policies. Any back tracking from the reform process would be disastrous, as even today, over 75pc of the sector is directly controlled by the ministry. “Going further to centralised control (by the ministry) would be reinforcing the failure.”

It said circular debt was still a major issue confronted by power sector and was created when licensees do not meet the relevant targets set by the Nepra. Generation companies have been unable to meet the efficiency levels and O&M (operations and maintenance) costs. In the distribution sector, the Discos are not able to meet the recovery ratios and transmission and distribution loss targets set by the Nepra, resulting in shortfall in revenue, than the desired levels.

The impact of this shortfall on loss reduction was estimated at Rs29 billion while failure to achieve billing recovery was estimated at Rs53bn. Non-recovering the billed amount is due to poor performance of some Discos which has resulted in total receivables of Discos amounting to Rs638bn as on June 30, 2016.

Published in Dawn, June 23rd, 2017