NEPRA not to renew licences of inefficient power plants

KARACHI: The National Electric Power Regulatory Authority (NEPRA) has decided to not renew the licences of those power plants having lowest efficiency levels.

“The power sector with a circular debt of around Rs1.0 trillion by the end of December 2018, presents a major challenge for the government as urgent measures are needed for the revival of a collapsed sector,” NEPRA noted in its latest report issued on Friday.

The report noted that public sector generation companies (Gencos) are contributing to expensive energy production due to their inferior efficiencies. “NEPRA has decided to not renew the licenses of those power plants having worst performance levels.”

In order to lower the costs of expensive energy mix, the federal government is expected to take early decision on the fate of inefficient Gencos. “The regulator considers that inefficient power plants are needed to be retired on priority,” it said.

According to NEPRA State of Industry Report, after the addition of more than 10,000MW of new generation capacity over last five years, transmission sector has shown improvement to some extent, whereas the distribution sector has totally gone into failure.

Referring to K-electric Limited (KEL), NEPRA notes that till 2020, KEL can barely meet the expected demand at peak times and outage of a power plant or even, outage of a single unit of around 200 MW may result in breakdown of the system. “Even the surplus expected in 2021 would not be enough to operate KEL system with technically prudent margins.”

NEPRA notes KEL has significantly reduced its transmission and distribution (T&D) losses as compared to distribution companies (DISCOS).

Prior to 2009, KEL’s T&D losses of 35.9 percent were at par with HESCO’s and SEPCO’s T&D losses. “Through a combination of loss reduction projects and initiatives such as use of Aerial Bundled Cable (ABC), the company has mitigated these losses by 15.5 percentage points to 20.4 percent in 2018; whereas, T&D losses for HESCO and SEPCO by the end of 2018 continue to loom over the same range of 29.8 percent and 36.7 percent, respectively”.

Overall, DISCOS have experienced an increase of 1.62 percentage points in their T&D losses, from 16.7 percent in 2009 to 18.32 percent in 2018. In terms of Aggregate Technical and Commercial (AT&C) losses, KEL’s AT&C losses have reduced from 43.2 percent in 2009 to 27.5 percent in 2018 showing a decrease of 15.7 percent percentage points; while DISCOS’ AT&C losses have increased by 0.46 percent percentage points between 2009 and 2018.

KEL has been able achieve 9 percent growth in its consumer base from 2016 to 2017, while from 2017 to 2018 it achieved a 6.5 percent increase in its consumers. The DISCOS added 4.3 percent consumers from 2016 to 2017 while such increase was 5.6 percent from 2017 to 2018. It also reflects that since DISCOS are not able to increase their consumers; their energy base is not adequate to absorb incremental capacity costs due to addition of generation power plants in the system.

“Therefore, it pertinent that the government explores the option of privatization of Discos encouraging private investment, making them financially self-sufficient and thereby, reducing the burden on national exchequer,” the report said.

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