Discos, K-Electric inflicted Rs429 billion loss on national exchequer in FY2022-23

Majority of Discos have not adhered to Nepra given targets, except Fesco, Gepco, and K-Electric

ISLAMABAD  -  The public exchequer has in­curred a loss of Rs403 billion in the fiscal year 2022-23 due to higher than Nepra approved losses and less recoveries which have declined by almost 4% as compared to previous fiscal by the ex-Wapda power distribu­tion companies (Discos) and K-Electric, as the regulator has not­ed that given the ongoing poor performance the current DISCO setup is unlikely to be able to de­liver the desired results.

The fiscal year 2022-23 por­trays the dreadful picture with respect to number of fatalities which has reached 161 in all distribution companies, with PESCO’s share remaining high, followed by K-Electric, IESCO and HESCO, noted the performance evaluation report of the distribu­tion companies for the FY2022-23 issued by Nepra here Monday.

It is evident that the perfor­mance of distribution companies (DISCOs) throughout 2022-23 remained subpar, and the expect­ed power sector reforms were not achieved. Given the ongoing poor performance, it is apparent that, under the existing circum­stances, the current DISCO setup is unlikely to be able to deliver the desired results, said the re­port. In light of these challenges, significant structural changes on a large scale are needed, the re­port observed and recommend­ed that these changes could in­clude division of large DISCOs into smaller units/entities, the provincialization of DISCOs, privatization or corporatization of DISCOs on public private part­nership mode, reduction in the influence of unions within the power sector, discontinuation of AT&C losses policy by using modern technology, outsourcing of high loss feeders, demand side management, and customer-ori­ented business approach. 

No significant improvement has been witnessed on part of some DISCOs in this regard. Dur­ing FY2022-23, the overall actual losses of DISCOs were 16.38% against the actual loss of 16.69% in FY 2021-22. The actual T&D losses are much higher than the allowed T&D losses for FY 2022-23, which is 12.21%. Unfortu­nately, the majority of DISCOs have not adhered to the NEPRA given targets, except FESCO, GE­PCO, and K-Electric which have managed to keep their losses be­low the levels or equal to targets set by NEPRA. However, other DISCOs have exceeded these lim­its, which contributed to a sub­stantial loss of over Rs. 166 billion to the national exchequer. 

It is an undeniable fact that DISCOs are deliberately draw­ing less power than their de­mand, despite being provided with an adequate quota on ac­count of loadshedding based on Aggregate Technical & Commer­cial (AT&C) losses policy. The AT&C based loadshedding is still being carried out and DIS­COs particularly PESCO, QESCO, SEPCO and HESCO have consid­ered it an easy path for them to manage the recovery rather than to put the efforts and en­sure maximum collection. 

On recoveries, the report said it is observed that only one DIS­CO i.e., IESCO has significantly achieved the target of 100% re­covery in fiscal year 2022-23. Moreover, GEPCO, FESCO, and MEPCO are nearest to the target and achieved the recoveries of 98 to 99%. Similarly, PESCO, LESCO and K-Electric have crossed the figure of 90%. Moreover, HESCO and SEPCO remained the same as in previous year, somewhere in middle with reported values of 75.9 and 68.2%. However, QESCO has been witnessed as worst per­forming DISCO among all with the reported position of 36.9%. 

NEPRA determines the con­sumer end tariff for the DISCOs on a 100% collection basis and does not allow any inefficiency on this account. During FY2022-23, it has been observed that the overall recovery remained 86.26% as compared to 90.51% during 2021-22, which is almost 4% less than the previous finan­cial year. It is relevant to state that the low recovery ratios have ef­fectively crumbled the revenues beyond acceptable levels, which has resulted in a loss to national exchequer of over Rs. 263 Billion.

On System Average Interrup­tion Frequency Index (SAIFI), the report said that none of the dis­tribution companies have been able to meet the SAIFI standard of 13. Regarding System Aver­age Interruption Duration In­dex (SAIDI), the report said that almost all DSICOs are far away from the set Standard of 14 min­utes. On the issue of pending con­nections, the performance report said that a total of 278,815 con­nections were not given to the el­igible consumers despite the fact that they made payments due to which more than 1100MW de­mand/load could not be served, which is a serious matter of concern as the ample genera­tion capacity is available.

It’s noteworthy that IESCO, LESCO, MEPCO, and HESCO have claimed that they have surpassed this requirement by providing new connections to over 95% of their eligible consumers, meet­ing the specified standard. In contrast, SEPCO, and K-Electric did not achieve the target but remained nearest to the target. However, PESCO, GEPCO, FESCO, and QESCO, fell short of the set limit, as they did not provide new connections to 8.33%, 15.01%, 34.8%, and 9.27% of eligible consumers, respectively, within the specified time frame, despite these consumers having made their payments on time. 

Taking a closer look, the ma­jor part pertains to domestic in terms of number & load (MW), however, the share of industrial category is also on higher side. Nonmeeting up of industry de­mand by DISCOs particularly LESCO & MEPCO knowing the fact that they are good paying consumers clearly indicate the seriousness of DISCOs to make themselves profitable. On one side, LESCO & MEPCO have claimed that they have provided more than 95% of new connec­tions to the eligible consumers as per requirements of PSDR 2005, whereas, on the other side, the number of pending connec­tions of both the entities are on top among all the DISCOs. In this regard, serious observation was raised and both the utilities were asked through written notices.

Loadshedding for an average of 2 to 3 hours daily is being carried out in IESCO, FESCO, GE­PCO, LESCO, MEPCO and SEPCO. In contrast, PESCO, QESCO, HES­CO and K-Electric have reported loadshedding duration hours 4.5 to 10.25 hours, said the report. It is further observed that dis­tribution companies especially PESCO, QESCO, SEPCO, HESCO and K-Electric are carrying out loadshedding as per AT&C loss­es criteria which is not in line with the requirements Perfor­mance Standards (Distribution) Rules 2005 and has never been recognized by the NEPRA.

Regarding complaints, the re­port said that the data provided by the DISCOs indicates that a to­tal of 3,694,861 complaints were received in the fiscal year 2022-23, related to different issues. It is noteworthy that some DIS­COs received a lower number of complaints, which suggests that there may be deficiencies in the complaint handling mechanisms, reporting systems and develop­ment of database in these DISCOs. Moreover, it is noted with con­cern that SEPCO did not receive a single complaint on any given day in each of its complaint centers and NEPRA has expressed seri­ous reservations regarding the data reported by DISCOs.

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