The rudderless energy sector

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The country’s print media this week brought to surface the prevailing state of affairs in the energy sector of the country, exposing the extent to which the sector has slid down. Some of the developments are rather very concerning — notably:

— “Large Taxpayers Office (LTO), Karachi has attached all bank accounts of Sui Southern Gas Company Limited (SSGC) to recover Rs 23 billion pending sales tax of which the tax department had successfully recovered Rs 312 million through bank account attachments.

— “The National Electric Power Regulatory Authority (Nepra) on Wednesday rejected a request of power distribution companies for the transfer of Rs28 billion burden to power consumers on account of quarterly adjustments and asked the petitioner to resubmit the data as Nepra doubted the correctness of the data provided.

— “M/s Pak Matiari-Lahore Transmission Company (Private) Limited (PMTCL) has approached key authorities of the federal government for clearance of pending transmission service payment amounting to Rs 12 billion to fulfil its debt servicing and other financial obligations.

— “National Electric Power Regulatory Authority (Nepra) failed to determine financial impact of quarterly adjustment of first quarter (July-September) of FY 2021-22 due to “flawed” figures presented both by the CPPA-G and Distribution Companies (Discos). The case officer informed the participants that a hearing was held on January 22, 2022 on QTA of first quarter of financial year 2021-22 in which Discos had sought a positive adjustment of Rs 17.851 billion but the Authority deferred its decision, after Central Power Purchasing Agency-Guaranteed (CPPA-G) raised doubts on the authenticity of the data submitted by the Discos.

When the hearing started this week Nepra’s Tariff Department team noted that Discos have changed their claims massively and apparently some “confused” adjustment has been sought which will affect different categories of consumers.

SSGC, not too far back, was a blue chip company providing healthy dividend to its shareholders and a sizeable revenue to the country. It is unimaginable that it could become technically bankrupt.

With the backdrop that Nepra doubts the data provided by CPPA-G and Discos and in turn CPPA doubts the data provided by Discos, the fairness and justification of the amount being passed on to the consumers to make good is unacceptable.

It is now a normal practice that the payments of contractors is held back and the projects are delayed. Chinese contractors have raised this issue many times at the highest level with our and their government — leading to bitterness and suspension of work.

Affairs in the energy sector of the country are indeed chaotic. It is not surprising that tariffs have to be increased every few months to subside the chaos and keep the system going and avert its collapse.

What is most concerning is that there are no viable solutions and strategy on the table to grip the sector and put it on a course of reforms. The energy managers, the ministry and the regulators all put together are clueless how to go about it. Professionals brought into the system to grip the sector and steer it failed — one after the other. Now it is a status quo.

The governance model of the energy sector with its dual control by the ministry and the professionals hired in shape of the CEOs of the company and advisors is flawed and not workable.

The interests of the two is diverse, way of governance poles apart and motivation to deliver on ground conflicting. Those at the helm of affairs need to bring around a dramatic change in the governance model of the sector. This means the Ministry is totally “OUT” and the professional managers are totally “IN”. This is a herculean task but the only option left to salvage the collapsing energy sector of the country.

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