In NEPRA’s Performance Evaluation Report 2022-23, recovery ratios of DISCOs show 6.2% improvement in last 5 years (93.39% current) resulting in Rs.851.38 bn excess losses contributing circular debt escalation.
Why do we not learn from recovery success story of FESCO (100.39%), MEPCO (98.27%) IESCO (104.98%), GEPCO (98%), KE (92.76%) and LESCO (94.33%) or is enlisting services of military and intelligence agencies to enhance governance in the DISCOs by invoking Article 245 of the Constitution, Anti-Terrorism Act and establishment of Distribution Companies Support Unit (first DSU in MEPCO instead of QESCO 36.92%, SEPCO 66.5%, HESC0 74.42%, TESCO 85.15%) will mitigate losses and deliver results?
Net Receivables of DISCOs (06/2023) is Rs 1,727bn with increase of Rs 196,605m over last year, with K-Electric’s Rs 187bn and IPPs’ Rs 2.4bn total receivables are Rs 1,916.59bn. Out of this Rs 1,521.552 bn are private receivables (running defaulters of Rs 900.821bn and Rs. 143.388 disconnected) and Rs. 205.553 bn due from Government.
IESCO defaulters in June 2024 are primarily Government institutions and AJ&K. Why are those not being settled and reflects non seriousness in resolving outstandings?
Introducing performance-linked incentives and penalties to compel DISCOs to rectify operational inefficiencies has failed as “Authority determines consumer end tariff for DISCOs based on expectation of a 100% receivables basis”. Any shortfall in the amount billed is reflected on DISCOs’ balance sheets and ultimately contributes to escalation of circular debt.
Is our approach still correct, having failed repeatedly in reducing losses?
NEPRA and experts need to revisit and define an improved approach.
Similarly, T&D losses showed 1.25% improvement in last 5 years (16.4% current) and resulted in Rs. 442.94 bn excess losses contributing to escalation of circular debt (PESCO loss being Rs 77.35bn/37.4% units, LESCO Rs 21.785bn/11.29% units), HESCO Rs 15bn/27.49% units, SEPCO Rs 20.38bn/34.39% units and QESCO Rs 21.2bn/26.72% units).
Remedial measures and operational efficiency focus thus needs to be on PESCO, SEPCO, HESCO, TESCO, LESCO and QESCO to increase their recoveries and reduce their T&D losses.
Stakeholders unanimously agree that power sector woes necessitate timely reforms with strategic investments to lower energy losses, build efficient infrastructure, undertaking vigorous energy conservation and evolving a regional footprint.
These reforms hinge on a substantial improvement in DISCOs’ effective governance by its management led by a CEO being the PAO for performance deliverance.
That is not happening due to lack of ability, procedure, governance or funds availability?
During FY 2022-23, NTDC submitted its 3 year Investment Rs 369.2m Plan for Tariff Control Period from FY 2022-25
| Description | FY 2021-22 | FY 2022-23 | FY 2023-24 | FY 2024-25 |
| Requested by NTDC (Million Rs.) | 71,782 | 114,303 | 145,355 | 109,563 |
| Allowed by the Authority (Million Rs.) | 50,560 | Approval under process for Rs 369.2m | ||
With an investment of Rs. 781 billion allowed for the ongoing Multi-Year Tariff (MYT) control period, DISCOs can make significant strides in reducing Transmission and Distribution (T&D) losses, improving recoveries, and forecasting demand scientifically. We should have seen significant strides in reducing T&D losses, improving recoveries, and forecasting demand scientifically. Most DISCOs fell short of targets set by NEPRA.
Predictable tariffs play a pivotal role in attracting investments and to specific MYT framework for DISCOs provides a platform for anticipating regulatory conditions, setting performance benchmarks, and maintaining operational stability. During this period, the Authority undertook process of rebasing of tariffs for various DISCOs, along with revising their tariff rates in line with regulatory targets. Additionally, the Authority granted annual indexations and adjustments for three DISCOs already under the MYT framework, namely IESCO, LESCO, and FESCO for both FY 2021-22 and FY 2022-23
NEPRA has also sanctioned a five-year investment plan (from FY 2023-24 to FY 2027-28) amounting to Rs. 375 billion for IESCO, LESCO, and FESCO.
“It is imperative for NTDC to adopt and act upon a comprehensive, forward-thinking strategy prioritizing long-term resilience and financial stability for thriving power sector and was redirected to resubmit TSEP, ensuring it is aligned comprehensively with IGCEP 2023-32 as it has to serve as a strategic blueprint, outlining the necessary enhancements and expansion required to strengthen the transmission network, ensuring its efficiency, reliability, and capacity to meet energy demand of the nation”.
This is so obvious but what is limiting this to be corrected!
And they are not the only ones, as CPPA-G was mandated to conduct a six-month test-run of the Market Commercial Code in 2022 and was required to provide a comprehensive report of the test-run by November 07, 2022. CPPA-G failed to report within the specified time frame, has resulted in a delay in commencing CTBCM with NEPRA in the process of initiating legal proceedings against CPPA-G.
Talk of regulator having teeth!
“To prevent costly power plant operations for system security, an adequate transmission network is imperative. NTDC must submit its Rs 369,221m TIP by September 1st annually and was asked to resubmit its TIP submittal during FY 2022-23, being devoid of supporting data, documentary evidence, or cost-benefit analysis, for Tariff Control Period from FY 2022-23 to FY 2024-25 based on DISCO(s) demand forecasts, coupled with system requirements for stability, reliability, and power evacuation from various generation facilities as detailed below:
| S. No. | Project Category | Count of Projects | Total Investment Outlay FY 2023-25 (Million Rs.) |
| 1 | Constraints Removal Projects | 8 | 24,276 |
| 2 | System Expansion Projects | 29 | 133,520 |
| 3 | Power Evacuation Projects | 25 | 167,135 |
| 4 | Projects for Special Economic Zones | 5 | 23,590 |
| 5 | Other Development Projects | 11 | 20,700 |
| Total | 78 | 369,221 |
Source: NTDC
“Similar to TSEP, the TIP is also a long-awaited strategic blueprint essential for orchestrating the systematic investment needed in the transmission sector. There is an urgent requirement for capacity building within NTDC, either by attracting new talent or by enhancing the skills of existing professionals. This is essential for the timely development of vital documents, while maintaining a high standard of quality”.
Thus NEPRA believes it to be capacity of the concerned entities to efficiently develop planning documents that require regulatory approval but NEPRA nor NTDC are working on measures to improve the human capital highlighted by Tabish Gauhar earlier in April 2021 to Hammad Azhar.
Where is the accountability of the management team? What is limiting execution, as NEPRA has continued to approve investment funds for NTDC?
Introducing practical performance-linked incentives and penalties will compel DISCOs to rectify operational inefficiencies for ultimate benefit of consumers and the sector at large.
Not by NEPRA dictating T&D losses setting for IESCO, LESCO, and FESCO at 7.26%, 7.50%, and 7.24% respectively for last year of MYT control period FY 2027-28, in contrast to reference determined T&D loss levels of 7.8%, 8%, and 8.84% for the FY 2022-23 vs FY 2022-23 actuals of 8.06%, 11.29% and 14.22%.
Nor by only sacking the boards of power distribution companies other than two operating in Sindh (Rs 112 billion losses). And attributing Rs 589 bn losses this FY of the 12 DISCOs solely on to its independent directors while bureaucrats from the energy and finance Ministries, who also served on these boards, remain unaffected and will return as ex-officio members.
And this does not help deliver reforms essential for 2047 Pakistan, is repeat of past and continuum, will not facilitate merit based Governance, integrated Cross Functional planning, establish a Competitive Business Environment or a hands off GOP presence/role in business.
Pakistan’s electric power transmission system is a vital organ of the nation’s energy infrastructure meant for smooth flow of electricity from its generation sources to distribution networks.