The governance of public power sector entities is a major concern along with capacity issues, lack of financial support due to centralized control, which have resulted in such continued below par performance of the power sector, says a report of the National Electric Power Regulatory Authority (NEPRA).
The NEPRA’s flagship annual publications, the Annual Report 2015-16 and State of the Industry Report 2016 were released on Thursday. The reports are prepared for the consideration of the Council of Common Interests and after its review were made public.
There are obvious governance issues as the performance of GENCOs, NTDC and DISCOs have not shown real improvement needed to take the sector to higher levels. The regulator sees the centralized control of Ministry of Water and Power over these entities, as one of the major reasons for continued deterioration, says the State of the Industry Report.
In spite of persistent directives and monitoring by the regulator, performance of public sector generation, transmission and distribution companies remained unsatisfactory as their efficiency levels either did not show any improvement or went further down relative to previously reported results. Operation of new power plants like 747MW Guddu Power Plant and 425 MW Nandipur Power Plant are also glaring examples of poor governance by the public sector.
The governance of public sector entities is a major cause of concern for the regulator, it notes adding that the role and performance of power sector under public control is critical, for the efficient operation of the entire sector. The regulator is of the view that while the Federal and Provincial Governments are striving for the improvement in the sector, continuation of the centralized control of day to day operations of public sector entities, has led those to unacceptable levels of technical and financial performance.
The Ministry of Water and Power, the report says, has a 26 percent share and representation in the K Electric (KE) Board of Directors, however, it overlooked some of the major milestones to be met by KE under the Implementation Agreement, resulting in negligible investments by KE in the critical areas of transmission and distribution which was the primary cause of the major network breakdowns and loss of life in Karachi in June, 2015 and other issues relating to the quality of service.
On NEPRA’s detailed inquiry in the incidents, KE was fined Rs 10 million for violations of the NEPRA Act, its Distribution Licence and other applicable Rules and Regulations. It was noted that the power ministry hardly participated in the KE Board Meetings, thus failing to meet, its primary responsibilities and safeguarding the interest of K-EL consumers.
The report reveals the confrontation between the regulator and Ministry of Water and Power by disclosing that as per NEPRA record, a large number of notifications (79) in respect of NEPRA’s determinations and decisions, are pending with Ministry of Water and Power since July, 2015, either for notification or if notified, latest status thereof, have not been provided to NEPRA despite a series of NEPRA reminders.
Delay in notifications of NEPRA approved tariff, not only slows down the pace of setting up new power projects in the country by diluting the efforts by the government to attract foreign investment, it will also have legal repercussions in many instances.
About the circular debt it says it is still a major issue confronted by power sector. Circular debt is essentially created, when the licensees do not meet the relevant targets set by NEPRA. It is noted that in the generation sector, GENCOs have been unable to meet the efficiency levels and operations and maintenance costs as determined by NEPRA, as a result, GENCOs have higher costs on account of fuel and operations and maintenance than they are allowed to recover through their determined tariffs. In the distribution sector, the DISCOs are not able to meet the recovery ratios and transmission and distribution loss targets set by NEPRA, resulting in shortfall in revenue, than the desired levels.
In order not to pass on imprudent costs to consumers, the authority had earlier advised all the GENCOs to carry out performance tests, so that degradation in their operational capabilities, efficiencies and administrative factors like manpower and overhauling and maintenance schedules are set afresh. The performance tests for two of the GENCOs (TPS Jamshoro and TPS Muzaffargarh) have been completed and the Authority while deciding on the tariff petitions of Jamshoro Power Company Limited and Northern Power Generation Company Limited, have determined tariff components using the latest results. At the same time concerns of GENCOs have also been addressed by allowing certain parameters which were not part of their tariff earlier.
