Featured Articles, News — May 16, 2013


As per PMLN’s Manifesto launched few months earlier, the Energy Security policy is highlighted in second chapter after the economic policy.

PMLN has summarized some key problems in the current system and has proposed short, medium and long term solutions to resolve the energy crisis and they are highlighted in the 16 points below:

l) Creation of a Ministry of Energy and Natural Resources through the merger of Ministries of Water and Power and Petroleum and Natural Resources

2) Reforms of National Electric Power Regulatory Authority (NEPRA):

a. Upfront / Feed-in tariffs for wind, solar, small hydel, and biomass projects.
b. Mandatory wheeling of electricity by DISCOs and the NTDC.
c. Net metering (sale guarantee) for small producers/consumers.
d. NEPRA determined tariffs to be the notified tariffs.
e. Deregulating and decentralizing the energy sector by allowing small power producers to sell power directly to consumers through the distribution systems of DlSCOs. NEPRA (or regional regulators) to allow and regulate prices.

3) Reforms of Distribution Companies (DISCOS):

a. Corporatization and privatization of DISCOs.
b. Ending of cross subsidy among DlSCOs.
c. Transmission and Distribution losses to be progressively brought under 10%.
d. Collection of electricity bills to be brought as close to 100°/o of billing as possible.
e. Introduction of prepaid billing system to improve bill collection and reducing bad debts.

4) Reforms of Generating Companies (GENCOs):

a. Corporatization and privatization of each GENCO under an independent Board.
b. Retrofitting of all equipment to ensure that thermal efficiency is raised to the original specification and where required converting all simple cycle plants to combined cycle technology. This will cost US$ 300 to USS 400 million only but increase production capacity by 600 MW, thus giving more than 3,000 GWh (or 3 billion units) of electricity at zero marginal cost. Payback period of this investment is about one year.
c. Replacement of all furnace oil boilers by coal fired boilers. This will cost around US$ 2 billion (for all GENCOs and IPPs furnace oil fired boilers) and again the payback period is less than two years. This will result in substantial reduction in the cost of energy production even if, at first, imported coal is used.

5) Permanent elimination of circular debt.

It is important to understand that what is called “circular debt” has very little circular component and much of the debt is due to system-wide losses incurred by GENCOs and DISCOs. Therefore we will take the following immediate measures:

a) Narrowly target tariff subsidies only to lifeline consumers who consume up to l00 units per month, and provide for this subsidy in the federal budget.
b) Notify electricity tariffs according to the average system wide cost.
c) Power dispatch to be strictly according to plant efficiency and generation cost.
d) Supply gas to all power plants that can run on natural gas to minimize generation on expensive fuels.
e) Convert all furnace oil-fired power plants to coal-fired boilers.
f) Reduce distribution and transmission losses and improve collection rates.

6) Rationalization of energy tariffs in line with international prices across all fuels.

7) Reforms of Oil and Gas Regulatory Authority (OGRA):

a) Blanket ban on the setting up of new CNG stations until the gas crisis is resolved.
b) Priority to public transport in the use of CNG.
c) Narrowly targeted subsidy for the poor for natural gas and LPG.
d) Tariff rationalization in gas sector.

8) Aggressive wellhead pricing for Oil and Gas exploration companies in order to substantially increase production of oil and gas.

9) High priority to import gas through pipelines.

10) Expeditious setting up of coal and LNG import terminals, and coal transportation facilities.

11) Development of Thar coal fields and setting up of at least 5,000 MW of new coal fired power plants under the lPP mode in Sindh. This will both create employment in rural Sindh and help solve our energy crisis. The plants to be designed on lignite quality coal and at first to be run on imported coal and when Thar coal is available, the plants to be switched to domestic coal.

12) Developing consensus among the various stakeholders to facilitate setting up hydropower projects by the Federal and Provincial Governments. This will augment and conserve our water resources and also generate less expensive and clean electricity.

13) Developing alternative renewable energy sources, such as solar, wind, bagasse, biogas, and biomass projects, especially for off-grid and micro-grid applications.

14) Setting up national energy efficiency standards.

l5) Introducing solar-thermal water heaters for domestic and industrial use.

16) Decentralizing and creating a wholesale market for electricity.

What we envisage is to tackle circular debt and system losses on priority in order to end load shedding in minimum time and in 5 years there will be a market for wholesale trade of electricity and most importantly consumers, using the distribution network of the local DISCOs and the transmission network of the national grid will be able to buy electricity from their preferred producer. And once there is enough competition in the market, neither government guarantees nor government subsidies will be required and prices will start to go down as they have in the mobile telephone market.

These measures will not only solve our lingering energy crisis but also shift the focus of the energy sector from high cost imported fuels to indigenous energy resources and reduce the total energy import bill and add at least 3.5% to the annual GDP. At the same time investment of about US$ 20 billion to generate 10,000 MW of electricity in the next 5 years will stimulate overall growth of the economy.