NEPRA has said that existing power system of Pakistan has a potential to decrease the electricity cost by making efficient decisions in the power sector.

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National Electric Power Regulatory Authority (NEPRA) has said that existing power system has a potential to decrease the electricity cost by making efficient decisions and maintaining good governance in the power sector.

According to State of Industry Report issued by NEPRA here Tuesday, the existing higher prices of electricity can be lowered by taking various measures, including operating the most efficient plants at optimal load, retiring the inefficient power plants specifically the ones operating in public sector GENCOs, improving the supply chain for RLNG, displacing expensive electricity with cheap electricity generation options, allocation of cheapest gas (pipeline quality) to the most efficient power plants and minimum operation of combined cycle power plants in open cycle mode.

The other measures included discouraging use of pipeline quality gas in open cycle steam turbine thermal power plants, inducting small and medium size solar power plants near existing grid stations, avoiding operation of most efficient power plants on part load, ensuring the availability of transmission line to evacuate electricity from most efficient power plants, executing Transmission Service Agreement, decreasing the transmission and distribution losses and retiring the circular debt.

The cost of electricity could also decrease by ensuring the timely payments of subsidy amounts, avoiding load-shedding on feeders on the basis of Aggregate Technical & Commercial losses, improving the billing collection ratio, revisiting the use of two basket system in the country, decreasing the levies on primary energy being used for power generation, avoiding recoveries of various taxes/fees/levies through electricity bills, adopting effective Demand Side Management, introducing Time-of-Use (TOU) tariff in off-peak hours for optimum utilization of ‘Take or Pay’ electric power generation capacity, inducting peak load power plants in the system, and encouraging Merchant plants to supply electricity in the country, the report further said.

The Report said the power sector of Pakistan, already challenged by the high cost of electricity generation and inefficiencies of transmission and distribution system, was further affected by the Pandemic COVID-19. The negative economic growth during FY 2019-20 also translated into a decrease in electric power demand in the country, resulting in a reduction of electric power generation.

The negative growth of electric power demand caused under-utilization of the electric power generation capacity of power plants operating under the ‘Take or Pay’ regime, causing a higher per-unit cost of electricity for consumers, it further said.

The unprecedented crisis emanating from the COVID-19 pushed the Government into a perplexing situation to strike a balance between social and economic compulsions.

The decision to give relief to consumers for bill payments in installments, though justified to mitigate the masses’ woes, reflected badly on the recovery position of DISCOs.

The overall recovery of DISCOs during FY 2019-20 remained at 88.77% of the billed amount whereas it was at 90.25% of the billed amount during the FY 2018-19.

The overall recoveries of DISCOs during FY 2019-20 dropped by 1.48% in comparison with the recoveries during FY 2018-19. Given the cyclic nature of payments, the low recovery of DISCOs hampered the ability to make payments to generation and transmission companies through CPPA-G.

As on 30th June, 2020, an amount of Rs1,042,075 million was payable by CPPA-G to power producers and NTDC. The availability of sufficient electric power generation capacity is necessary to meet the load requirement.

After facing a long period of electric power generation capacity shortages, Pakistan reached a position where the installed power generation capacity was more than sufficient to meet the total demand in the country in FY 2019-20.

From 2016 till June 2020, a total of 13,298 MW electric power generation capacity was added to the power system of Pakistan. The total installed power generation capacity of Pakistan, excluding the K-Electric (KE) System, as on 30th June, 2020 was 35,735 MW.

The total installed power generation capacity of KE’s own power plants is 2,294 MW. In addition, some IPPs and CPPs with a total power generation capacity of 690 MW are also connected to the KE system.

Acknowledging the importance of RE power plants, the Federal Government has set a target of 20% RE capacity by 2025 and 30% by 2030 in the national grid.

Although the induction of electric power generation capacity on large scale has catered for the longstanding electric power shortfall, the obligation of capacity payments has increased due to the ‘Take or Pay’ Power Purchase Agreements (PPAs).

Originally published at Urdu point