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The culture of over billing

November 26, 2012

While the narrative around power crisis has been revolving round shortages — non-recovery of dues, circular debt and inefficiencies — widespread corruption, over-billing and chaotic affairs of utility companies have seldom figured in the official and public discourse.

All this happens when public complaints of over-billing and excessive parking of electricity units in consumer bills against utilities are rising. The regulators are pointing out corruption by, and underperformance in, power companies and even ministers remain perplexed over what is actually happening in the power sector.

According to an internal report of the water and power ministry, the distribution companies were charging 35 extra days to consumers every year through wrong cycle of meter reading and billing, forcing the common people to pay for over 13 months instead of 12 months of a year. This, apparently, takes place with full knowledge and consent of the management who try to camouflage their system losses.

This increases the cost of electricity raises the circular debt and that, in turn, again increases the tariff in a on- going vicious cycle. “Further, the power system is afflicted with corruption and inefficiency”, according to annual report (2011-12) of the National Electric Power Regulatory Authority recently submitted to the Council of Common Interest (CCI).

As member of the CCI, the Sindh government has a record of disputing electricity bills and, in some cases, has gone to the extent of getting relief through an independent arbitration. In the process, over Rs75 billion remains outstanding against the province where 16,000 out of 28,000 public sector consumers are reported to have connections without meters, if distribution companies are to be believed.

In recent months, two other CCI members — Punjab and Khyber Pakhtunkhwa — have followed suit by questioning the billing and meter reading process of the distribution companies. Unresolved in the absence of any credible mechanism, such disputed amounts are ultimately declared by power companies as trade debts and unrecoverable and hence passed on to the federal government for parking as circular debt.

Complaints of over-billing and overcharging by common consumers are widespread to such an extent that the ministry of water and power had to issue a public notice early this month advising the electricity consumers “to compare their monthly bills immediately on receipt with their meter readings in order to check over-billing”. The problem with the proposed comparison is practically serious. The digital meters, mostly having time-of-day tariff mechanism now, are illegible to most of the consumers, even the well-educated ones. The power ministry, however, believes that although such an exercise may not bear 100 per cent results, it could be helpful in reducing the chances of errors in the future.

The step was taken following a number of complaints that later led to a law and order problem. Last month, thousands of farmers in Arifawala took out a rally against over-billing by Multan Electric Supply Company. They alleged that Mepco had had issued them inflated bills.

Similarly, leaders of 15 industries and trade association including textile manufacturers, industrialists, printing mill owners, exporters, power loom owners, hosiery manufacturers, sizing industry, foundry and engineering groups on November 4 criticised the Faisalabad Electric Supply Company for over-billing, wrong preparation of bills and overcharging the consumers.

President Faisalabad Chamber of Commerce and Industry (FCCI) Mian Zahid Aslam accused FESCO of indulging in frequent over-billing and overcharging not only to business, trade and industry but also to domestic consumers, forcing consumers to spend most of their time in getting their bills corrected. Consumers and small industry owners waste so and lose their daily earnings in the process.

That’s not all. Nepra is already seized with a complaint against Karachi Electric Supply Company for an alleged over-billing exercise under which it had billed eight million extra-units to consumers in September this year. The privatised utility has been issued a 14-day notice to come up with its explanation.

The secretary water and power, while expressing ‘most unsatisfactory performance’ of the board of directors of Lahore Electric Supply Company (Lesco) had written to the chairman of Lesco board that its “failure to exercise supervisory control tantamount to connivance with the management”.

The response from the Lesco chairman was more revealing who accused the ministry of interfering into the affairs of the company and providing undue and illegal support to the Lesco management.

He reported incidents of excessive billing in one of the circles that led to an order by the board for audit which concluded that “consumers were over- billed but instead of affording credit through adjustment notes, the amounts were set aside” on the instructions of the senior officials of the Lesco. “It was done to cover line losses at first instance and latterly to reduce arrears and also redress consumer complaints temporarily”.

He said such excessive billing, when exposed, are declared as trade debts that are never recovered and passed on to the circular debt. But the question remains how many consumers suspect their bills and actually follow up for correction and relief. In one instance, the government of Punjab had refused to pay Rs4.6 billion to Lesco, disputing the amount as excessively billed due to defective meters and other reasons.

An audit across the Lesco system could not be completed to determine the actual loss or over-billing. He said the trade debts were regularly reviewed by the power ministry which sets targets for recovery and the board of directors were never provided with such information.

As if that was not enough, two key federal ministers have brought on record the complete chaos that prevailed in the power sector. At a recent CCI meeting, finance minister questioned the utilisation and output of the four-times increase in furnace oil supplies to the power sector and claimed, “It is not clear whether this oil is actually utilised, stocked or sold further”. He feared that the government was perhaps “losing oil and money both without making a fairly proportionate addition to power generation”.

Over Rs1.4 trillion had been paid to address power problems in four years but the circular debt is not going anywhere because “we have been treating symptoms of the circular debt and not the causes of the disease”.

At the same time, Prime Minister’s adviser Dr Asim Hussain told the CCI that “Nepra and Ogra had miserably failed in discharge of their responsibilities” and insisted that there should be zero load shedding if generation capacity, fuel supplies, and actual power demand were fairly taken in to account.

That means the corruption, over-billing, mismanagement and unfair means in the power sector were more to be blamed for power crisis( an entrenched culture) rather than questions over capacity additions at public expense. Unless the corrupt and inefficient system is not rooted out, half-hearted and politically motivated reforms will not work.