Power Sector Inside Out (Part-1)

Year 2013-14 was another addition to more than decade old power crises in Pakistan. Despite the maximum demand only being 81% of the total installed capacity of the country, domestic, commercial and industrial consumers are looking for electricity minimum one third of the day time. The pundits of the industry are pointing all the exertions to add more capacity to bring the nation out of darkness, however only 2,600 MW could be added to national grid during last five years. In fact meditation on installed capacity is misleading the common people because the generation is not improving despite addition of new power plants. For example during the last five years there has been an increase of 12% in the installed generation capacity of country, however there was only 6% increase in the production of electricity during the same time period. Megawatts are therefore not helping the consumers if they cannot bring Megawatt-hours with them.

This inside out of power sector is a guide to resolve the queries of laymen who ask these questions through emails and direct messages on our Facebook page. We have been drafting an annual report “Inside Out of Power Sector” since last four years with our clients, however we have decided to publicize some parts of it through our blog from this year. We will be sharing it in parts and this post is first part of this series.

Before we explain the reasons of power outages in the country we need you to understand following basic concepts about capacity and generation;

Nameplate Capacity:
The maximum amount of electric energy that a power plant can produce under specific conditions, as rated by the manufacturer.

Capacity Factor:
The ratio of the net electricity generated, for the time considered, to the energy that could have been generated at continuous full-power operation during the same period.

The concepts above are simple but necessary to understand the problems prevailing in the industry. We will be providing details of all power plants, both public and private, as provided by different entities through publicly available data. You can cross check the data through following reports;

• NEPRA State of Industry Report 2014
• Power System Statistics 2014
• Energy Yearbook 2014

Electricity Cycle?

Electricity in Pakistan is generated by 89 different power plants, owned by Public and Private Sector. Out of these 89 projects, 32 are owned and operated by government of Pakistan (Public Sector Projects), 3 projects are owned by Pakistan Atomic Energy Commission aka PAEC, while the remaining 54 power plants belong to private sector aka IPPs. All the electricity generated is not available for transmission because there is some internal consumption by these power plants aka Auxiliary Consumption.

The Power Purchasing Companies purchase the electricity from these power plants and sell to Distribution Companies aka Discos. There are two power purchasing companies in the country. One (Central Power Purchasing Authority aka CPPA) is owned by government of Pakistan and other (Karachi Electric Supply Company, aka KESC aka KEL) is owned by private sector. Power Purchasing Companies hire the services of Transmission Companies to deliver their product to Discos.

Transmission companies are responsible to evacuate this electricity from power plants and deliver it to distribution companies aka Discos. There are two different transmission companies in the country to deliver the generated electricity to Discos. One of the transmission company (National Transmission and Despatch Company aka NTDC) is owned by government of Pakistan and the other (Karachi Electric Supply Company, aka KESC aka KEL) is owned by private sector. The total evacuated power is greater than the electricity delivered to Discos, because of some losses during the transmission of power from power plant to Disco. This loss of electricity is known as Transmission Loss.

Figure 1: Power Distribution & Billing Cycle

Distribution Companies are responsible for further delivery of electricity received from transmission companies to domestic, commercial and industrial consumers. There are 12 distribution companies in the country out of which two are owned by private sector and 10 are owned by government of Pakistan. There are 10 other small distribution companies owned by private sector, however the scope of their license is limited to small and captive power producers. The energy delivered to consumers by Discos is always less than the energy received from Transmission Company due to theft, line losses and other pilferages during distribution. This is known as Distribution Loss.

Distribution Companies are responsible to send bills/ Invoices for electricity sold by them to consumers. From the amount collected from customers, Discos pay the Power Purchasing Company’s bill for the electricity purchased from them. The price of energy delivered to consumers is not fully recoverable because of some customers who do not pay their bills. This loss is known as Collection Loss.

Power Purchasing Companies pay the Power plants for the bills raised against the electricity evacuated from these power plants, who further pay the amounts to Fuel Supplier, Lenders, and Investors as dividend etc. The price of electricity charged to consumer include the electric generation cost of power plant, costs of transmission, distribution, losses and other administrative costs. Following is the synopsis of electricity cycle in Pakistan during year 2013-14.

Table 1: Electricity Cycle Statistics

From the table above its evident that more than 30% of the electricity is lost during the cycle which is much above than the world average losses (8%). These losses are the main reason for the most popular issue in Pakistan known as Circular Debt.