ISLAMABAD: Having paid commitment charges for a $456 million loan and despite facing heavy system losses, the government has decided in principle to shelve over Rs30 billion smart metering project for Lahore Electric Supply Company (Lesco) and adopt a similar Rs17bn advance metering infrastructure (AMI) for Islamabad Electric Supply Company (Iesco).

The Rs47.2bn AMI was approved by the Executive Committee of the National Economic Council (Ecnec) in July 2017. This envisaged enhancing load control and management up to the interface of the electricity distribution system operated by the distribution companies (Discos) as a least cost solution to reduce losses and efficiently balancing supply in the specific areas of Lesco and Iesco to cover 2.6 million consumers.

The government had also arranged a $455.5m loan from the Asian Development Bank (ADB) and was later to be extended to all Discos.

CDWP directs action against officials for causing monetary loss, 4-year delay

“The project, since its inception has been facing difficulties in implementation. These include the problems in terms of procurement. The project is included in the list of problematic foreign-funded projects and has been discussed in the National Coordination Committee on Foreign Funded Projects (NCC-FFP),” said the Planning Division.

It also recommended to the Central Development Working Party (CDWP) to direct the Power Division to “fix responsibility against officials/officers” for causing over four-year delay in implementation of the project and continuously paying commitment charges to the lender for unutilised loan.

The CDWP on Monday agreed to go-ahead with implementation of Rs16.9bn project for Iesco and allowed Power Division to cancel Rs31bn similar project for Lesco. The meeting was informed that an ADB review mission on delays had also met Energy Minister Hammad Azhar and former special assistant to Prime Minister Tabish Gohar in May this year.

The government team wanted to change the scope of the project from one circle each in two Discos to the entire distribution companies and not installing meters for each consumer but only on Pole Mounted Transformers (PMTs). “The ADB mission indicated that at this stage such a change would not be acceptable to their board and given the little time available, the financing for the project would have to be dropped”.

The Planning Commission told the CDWP that the government was continuously paying commitment charges on the undisbursed amount, which till now had added up to $2.2m. The procurement process for AMI project in Iesco and Lesco was based on International Competitive Bidding (ICB) in line with ADB guidelines but award process was “halted due to afterthoughts in the Power Division”.

Mr Tabish had proposed that instead of Iesco and Lesco, the project should be implemented in other Discos with higher losses and lower collections and smart meters be considered for replacement with pre-paid meters and instead of ADB loan, the project should be adopted in public-private partnership mode.

On the other hand, Prime Minister’s Task Force on Energy considered these views and recommended that the current project may continue in its present form.

On yet another side, the managements of both Iesco and Lesco demanded that the metering tree should be complete, not only from feeder level to each distribution transformer level but also further down to end consumer premises as per the scope approved from Ecnec.

It was reported that ADB’s sponsored AMI project in Uzbekistan that also covered household consumers, receipts increased to 100pc, number of residential consumers increased by 9.6pc, receivables decreased by 91pc and the subscribers with arrears decreased by 66pc. In highly efficient grid systems like that of Texas USA, Centre Point Energy AMI Project in Texas saved $61.54m of cost and enhanced revenue by $4.79m over three years.

The change in scope to restrict it to AMI installation at PMT level and industrial and commercial consumers would need cancellation of bidding results and project would not be completed within the time-frame of the loan of ADB which ruled out any extension. Also, financing from ADB would not be possible for such a project and $2.2m commitment charges would go completely waste.

The Cabinet Committee on Energy had last month to make up its mind on firm basis and then Planning Ministry should decide if the entire project be scrapped. Power Division has now taken the position that the lowest bidder of Iesco had extended its bid for 9th time while bidding in Lesco had not been successful so far and the time remaining under ADB’s financing is not sufficient to re-invite bidding.

Therefore, Power Division proposed that Ecnec may allow the change in scope of the project to extent that it may proceed as per already approved plan for Iesco and drop Lesco’s component. The CDWP approved the recommendations with the addition that responsibility be fixed for delays and strict monitoring should be ensured for successful implementation.

Published in Dawn, October 26th, 2021