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Study finds fault with KESC privatisation

August 18, 2012


KESC’s head office — File Photo
KESC’s head office — File Photo

ISLAMABAD: With its one of the highest system losses in Pakistan and continued injection of huge subsidies, the objective of privatisation of the Karachi Electric Supply Company (KESC) has failed, according to a latest research by a private think tank.

Arshad H. Abbasi, adviser at Sustainable Development Policy Institute (SDPI), the author of the research, said the only way to resolve the energy crisis was to invest and buy affordable electricity from hydropower, improve fuel efficiency of power plants and introduce ‘smart grid’ with advanced metering system.

The report ‘Pakistan Power Outlook: Appraisal of KESC after Privatisation’ underpins the causes of the energy situation in Pakistan while taking KESC as a case study.

It said KESC had been granted huge subsidies which defeats the purpose of privatising the utility, which is to reduce the fiscal burden of the government of Pakistan.

The report illustrates that thermal power plants in Pakistan, particularly of KESC, operate at extremely low efficiency and consume very high quantity of fuel to generate per unit of electricity.

“The KESC takes 11 to 18 cubic feet of gas to generate one KWh of electricity whereas plants of other companies such as Uch Power, Saif power and Orient Power take only 7.37, 7.47 and 7.56 cubic feet of gas respectively for generating one unit”, it said that these plants had been denied gas supplies while KESC’s gas consumption per unit was almost double that of Bangladesh.

The report said that dams such as Bunji, Dasu, Lower Spat, Kohala and Tarbela fourth extension were capable of adding 15,631 MW into the system, for which feasibility studies are ready but their development was stalled or slowed down due to lack of funds and inefficiencies within the departments.

The report called on KESC and concerned authorities to invest and buy electricity from these hydro power plants at minimal cost instead of purchasing it from IPPs at very high costs.

Currently KESC is purchasing electricity at Rs8 to Rs16 per unit which is very high compared with paisa 37 per unit from hydropower plants.

“Increased dependency on fossil fuel is the fundamental cause of present energy crisis," he said.

The study noted that thermal plants were the backbone of Pakistan’s current electricity system with capacity of generating almost 70 per cent electricity through furnace oil and gas.

“The efficiency of the thermal power plant is abnormally low, consuming high quantity of fuel to generate per unit of electricity”, he said adding that enhancing fuel efficiency would not only help to generate more electricity from the available fuel, but also help to reduce prices of electricity by bringing down the cost of generation.

Likewise, line losses, technical and transmission, are one of the highest in Pakistan. Owing to these losses, the legal consumers are not only facing electricity shortage but also have to pay for these losses.

To solve this chronic issue, the report recommends application of ‘smart grid’ option, for all electricity distribution companies of Pakistan.

This may include construction of shielded networks for electricity supply and application of remote metering at each customer connection and also at the transformer point.

“KESC can refer to the experience of Lahore Electric Supply Company (LESCO), which successfully implemented smart meters in the old walled city of Lahore and brought down line losses from 17.8 per cent to 3.5 per cent within 10 months,” the report adds.

While criticizing the National Electric Power Regulatory Authority, the report said that in all successful privatizations, the regulator played a vital role in post privatization period. But in the case of KESC, which was privatised in 2005, the regulatory role of NEPRA and non-existence monitoring mechanism at ministry of water and power became one of the main causes behind the prevailing energy crisis.

It said the role of NEPRA has been curtailed only to tariff determination and called upon it broaden its role from tariff determination to formulating standards, regulating energy sector and giving incentives for improving fuel efficiency.