NEPRA advises empowering distribution companies


The power sector regulatory authority has advised the government to give autonomy to all the nine state-owned distribution companies like Peshawar Electric Supply Company (Pesco) and Sukkur Electric Power Company (Sepco) – which supply electricity to end-consumers – after their performance continued to deteriorate over the years.

Performance of distribution companies throughout this period (FY15-19) does not meet the objectives of the power sector reforms.

“The regulator observes that under the given scenario, the existing setup would not be able to deliver,” National Electric Power Regulatory Authority (Nepra) said in its report titled Performance Evaluation Report of Discos and K-Electric 2018-19. “Therefore, it is recommended that structural changes like independence of distribution companies with complete financial control may be given due consideration to save the sector.”

The distribution companies and K-Electric added a loss worth Rs210 billion to the national exchequer in fiscal year 2018-19, which is 200% more than the losses they gave to the government in the prior year, according to the report.

The losses are the primary cause of the ever growing ‘circular debt’, which has swelled to Rs2.2 trillion in 2020, and the single largest reason for prolonged power outages of over seven hours a day in the country.

Besides, power safety measures from the companies caused electrocutions of 175 people (distribution companies’ employees and general public) in FY19 that “is around 14% more than the last year 2017-18.”

K-Electric’s share remained high with the number of (deaths from electrocutions at) 54…followed by Pesco and Islamabad Electric Supply Company (Iesco),” Nepra said in the report.

Earlier, Engro Energy CEO Ahsan Zafar Syed held distribution companies responsible for the power crisis in the country and suggested the provincial governments to give ownership of the distribution companies in partnership with corporate entities.

“The governments should be given the task of recovering bills and law enforcement agencies should come into action against those who do not pay the bills,” he said.

At present, distribution companies are federal subject while law enforcement agencies remain provincial subject.

The federal government may link recovery of monthly bills from consumers with NFC award through which federal government transfers resources to provincial governments every year, he said.

The corporate entities should be given responsibility of operating the distribution companies on professional lines, he said.

The government of Prime Minister Imran Khan has recently tasked itself to fix the state-owned distribution companies.

Last month, it extensively discussed problems and their solutions with independent power producers (IPPs) to supply electricity at cheaper price and address woes of the end-consumers.

The breakdown suggests that distribution companies gave losses worth Rs171.5 billion to the national exchequer on account of low recovery of monthly bills from their respective consumers in FY19. This was “200% more than the last year ie 2017-18”.

In addition to this, the companies gave a loss of Rs38 billion to the national exchequer on account of higher power losses (like theft) during transmission than the one allowed to be recovered from end-consumers through monthly bills.

Pesco is allowed to incur line losses of up to 31.95%, while Sepco may book losses to the tune of 29.75%. The distribution companies recover the losses from those consumers who pay their monthly bills.

Pesco has, however, incurred 4.76% higher line losses at 36.6%, while Sepco line losses increased 7.25% to 37% compared to the benchmark allowed.

Similarly, six other distribution companies booked losses higher than the one allowed in the range of 8-29.5% compared to the one allowed at 8-23%. Gujranwala Electric Power Company (Gepco) and Faisalabad Electric Supply Company (Fesco) managed to book losses in their given limits below 10%, according to the report.

On the other hand, the distribution companies failed to receive payments against monthly bills. For example, Quetta Electric Power Supply Company (Qesco) recovered only 24.4% monthly bills in FY19 followed by Sepco at 63.9% in the year.

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