Discos passing Rs131 bn power sector loss on to consumers 

ISLAMABAD: The electricity distribution companies (Discos) intend to pass the impact of the inefficiencies in power sector amounting to Rs131 billion on to power consumers to obviate the re-emergence of the liquidity crisis to make the bleeding sector sustainable and functional, a senior official of the Energy Ministry confided to The News.

He said, “they (Discos) want to pass the late payment surcharge (LPS) of Rs62 billion and capacity charges of power houses amounting to Rs69 billion to the end consumer in the power tariff, and the ministry is also agreed with Discos to this effect.

“The power sector is currently sustaining the loss of Rs100-105 billion a year just because of the flawed tariff structure which results in the appearance of the head of monster of the circular debt every time.” 

The tariff is currently carved out on the basis of 100 percent recovery of the billed amount of electricity which is far from the reality and the tariff should be based on the actual recovery. Nepra makes the tariff based on 100 percent recovery knowing the fact that the recovery stands at 94 percent. One percent loss means Rs10 billion damage and the power sector sustains the loss of 6 percent in the head of recovery meaning by that it sustains loss of
Rs60 billion in this account.  

The Joint Secretary Power, Muhammad Zargham Khan, when contacted, said that the power sector cannot be made fully functional unless and until the actual losses of 16.7 percent are included in the tariff instead of 15.2 percent losses which are currently permissible, and structural flaws are removed. Mr Khan confirmed that LPS (Late Payment Surcharge) and capacity charges have become the headache as it is the consumers, who do not pay the bill on time, and electricity distribution companies face the punishment for the crime they do not commit, but they are forced to pay the LPS as fine at the rate of Kibor plus 3 or Kibor plus 4 which is sheer injustice to them. Mr Khan also pinpointed in the tariff of electricity generation companies, capacity charges are allowed, but in Discos’ tariff, the capacity charges are not permissible.  He also said that the existing tariff structure is flawed and causing the re-appearance of the circular debt.  

Now the PM has given the task to the committee comprising official of Central Power Purchase Agency (CPPA), Pakistan Electric Power Company, DISCOS and Government Power Holding Limited Company (GHPL) to first know the impact of the policy decisions taken by the government from 2013 onward in reducing the growth of circular debt. The committee will also identify the mechanism to arrest the buildup of the cash flow situation in the power sector. The committee members will also come up with the solutions which will bar the appearance of the growth of delta of the circular debt.  

Mr Khan said that system losses are at higher side in the Peshawar Electricity Supply Company (Pesco), Quetta Electricity Supply Company (Quesco), Hyderabad Electricity Supply Company (Hesco) and Sukkhar Electricity Supply Company (Sepco) and even in Multan Electricity Supply Company (Mepco). 

When asked as to why the Discos are hell bent upon punishing the consumers for the inefficiencies in the power system instead of making the power sector efficient, he said that the committee will also come up with the road map to make the bleeding power sector efficient, but the flawed tariff structure needs to be made practical. 

The committee will come up with a set of recommendations to this effect within a week time that will be tabled before the prime minister for  final decision. To a question he said that the payables of the power sector stands at Rs389 billion out of which the amount of Rs110 billion is needed to be paid to IPPs. However, the receivables of the power sector hover around Rs639 billion. To a question, he said that running defaulters owe to pay Rs63 billion. He also disclosed saying that the payment of huge amount of Rs371 billion rests with the permanently disconnected consumers.  

Mr Khan also unfolds that the government of Sindh needs to pay the electricity arrears of Rs3 billion, AJK Rs79 billion, the government of Punjab Rs1.3 billion, the KP government Rs4 billion and government of Balochistan Rs6 billion.