THE circular debt in the power sector has become an un-slayable dragon for the authorities. It seems to me that there are manipulations by some to increase their income by illegal means. The solution to the problem, however, is not that difficult. Since Pakistan cannot pay for electricity, it needs to reduce expensive electricity. And since 70 per cent electricity is produced using thermal energy plants, with some of them having been established in the 1990s, it would make sense to shut down the oldest and inefficient thermal units immediately.
Further, all those plants whose contract period is completed should be asked to sign new contracts without fixed capacity charge. In fact, the fixed capacity charge should be banned for all future contracts and the National Electric Power Regulatory Authority (Nepra) should be asked to work out a new mechanism within a month as it should have been the one to highlight the high capacity charges and future high costs that the government would have allotted to avoid the current circular debt issue.
A similar issue might also develop in the future with net metering for solar power as Nepra has not worked out what will happen when people start installing huge solar power panels, much higher than required for their own use, like the bagasse power plants of sugar mills have done in the past.
The government will face litigations for payments by individual citizens and a new circular debt will appear.
Nepra should put a cap on individual solar power capacity that can get net metering, while it should also clarify that no cash payment will be made and only an equal number of electricity units will be provided to the net meter users.
Published in Dawn, March 8th, 2021