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Power Economics and Management

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2nd Semester, 3rd Year (13EL)

B.E Electrical Engg. Program

Nayyar Hussain
Assistant Professor
Lecture No. 36 MANAGEMENT PROBLEM OF PAKISTAN’S
Department of Electrical Engineering POWER SECTOR
Mehran University of Engg. & Technology,
Jamshoro

Management Problems of Power Sector: Circular Debt in Power Sector

Background
3
1000
 The Economic Survey of Pakistan recognizes that during 2014 900 872
around 2 percent of gross domestic product (GDP) was lost due
800
to the power sector outages.
700
 The petroleum crude and products contributed to a one third of
total imports of Pakistan. 600 538
PKR Billions

 The transmission and distribution (T&D) losses were valued at 500

PKR 140 billion. 400 366

 Issues being currently faced can be categorised into policy, 300 236
governance, technical and cost issues 200 145 161
111
100
0
2006 2007 2008 2009 2010 2011 2012
Source: Planning Commission 2013

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Steps that were promised 3 key causes

Consolidate
Integrated fragmented Build capacity of
Energy Policy energy regulators Unwillingess to
governance pay the price of
energy
Deregulate Reforms for
energy sector attracting Make generation
further investment in efficient
energy sector
Political
Administrative stubbornness
Reduce and line losses to maintain
transmission Hydro, Coal and subsidies
losses other sources

1.Unwillingness to pay for power

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 Recoveries of some very large power distribution companies Will households pay if power cuts are
have deteriorated over time eliminated and tariff is increased by 10%
 In Hyderabad, for example, only 60% of the power supplied in 2012
was paid for – in a city of over 6.5 million people Don't Yes,
 DISCOs are unable to adopt the normal commercial practices in Know, 6% 12%
other countries of disconnecting customers for non-payment
because of unclear legislation and political pressure.

No , 82%

Source: SDPI Survey Unit 2013

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2. Political stubbornness to maintain

subsidies

 The fundamental rationale for subsidising electricity tariffs is to Subsidy by the government on power consumption (Rs/kW)
augment the paying capacity of the poorest of poor LESCO GEPCO FESCO MEPCO HESCO SEPCO QESCO PESCO
 However once subsidies are provided across the board, people
1. Residential, <700 units 0.4 1.4 1.4 2.9 3.9 3.9 1.4 4.4
start to demand them as their right and politicians feel
2. Industrial, (66.132 KV & above) -
compelled to maintain this distortive fiscal burden to win TOU (Peak) 2.1 2.1 2.1 3.1 6.6 6.6 4.0 7.1
popularity. 3. Agricultural, 5 KW & above -TOU
 Do poor really get power subsidies in Pakistan (Peak) 1.5 1.5 1.5 2.5 6.0 6.0 3.5 6.5
 Domestic lifeline consumers (1-100 units) only get 0.3% subsidy Source: Economic Survey of Pakistan, 2013

3. Administrative & Line Losses (Theft) Power T & D Losses (% of output)

 In August 2013, the Secretary of Water and Power Ministry

informed the Senate Standing Committee that 40
 Pakistan loses annually PKR 150 billion (USD 1.7 billion) in line 35
losses and power theft.
30
 Until August, 2013; 23770 cases of theft were registered and
under trial 25
Percentage

 But only 3 cases were punished. Moreover, the fine imposed was 20
under PKR 5000 in each case. 15
10
 Lacunae in the accountability mechanism. This requires 5
amendments in Pakistan Penal Code so that there is certainty 0
of effective punishment in cases of power theft
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010

Pakistan Bangladesh

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Hopes from National Power Policy

Do you know of power theft in your area?

59%
Tariffs and
Subsidies
35%

6% Creating
Competition Curbing
Yes No Don't Know in power Theft
sector
Source: SDPI Survey Unit 2013

Way Forward 1. Tariffs and Subsidies

• Tariff and Subsidies

• Curbing Losses
• Creating Completion in Power Sector
All subsidies (including hidden and cross subsidies) -
except a 100 unit lifeline block - should be phased out over
the next 24 months.

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2. Curbing Loses 3. Creating competition in power sector

• Performance contracts for grid stations under National
Transmission and Dispatch Company.
• Performance contracts should also be introduced for DISCOs.
Such a contract should have specific clauses on reduction in
distribution losses and full collection of receivables from
consumers.
• Accountability at XEN-level
• Role of provinces
• Social accountability tools
 Creating competition on distribution side is important
 Creating competition in generation sector?
 The allocation of fuel to generation companies (GENCOs) should be
linked with their efficiency levels
 If the Independent Power Producers (IPPs) are better performing in
efficiency terms then fuel allocation may be in favour of IPPs
 According to Ministry of Water and Power’s own estimates a 4000mtoe
shift from GENCOs to IPPs will save PKR 77 billion annually
 The current generation comparison reveals that PKR 13 billion per month
for GENCOs allows production of 650 MW and only PKR 10 million per
month in case of IPPs produces 1150 MW.

CHAPTER NO. 6
MANAGEMENT OF POWER SYSTEM

 Concept and Theory of Management

 Methods and Process of Management

THANKS
 Management Information System, IT
 Project Management
 Reliability of Power System and Optimization
 Safety Regulation in Power System
 Management Problem of Pakistan’s Power Sector
 Service to Power Consumers