Power Sector Planning:

Issues, Challenges and

Recommendations
Engr. Salahuddin Rifai
Senior Energy Expert AEAI
October 22, 2014

Outline
Overview of the Power/energy sector
Facts and Analysis

Issues originating and surrounding

the sector for consideration to
arrive at right proposals/ policy
decisions
Recommendations

HISTORIC DEMAND & SUPPLY

POSITION
(2001-02 2013-14)

(All Figures in MW)

Fiscal
Year

Computed Peak
Demand

Corresponding
Supply

Surplus/
Shortfall

2001-02

10459

10894

435

2005-06

13847

12600

-1247

2010-11

19230

13163

-5581

2013

20016

16100

3916

2014

24500

15600

8900

Power Generation by Source

1985

2%

52%

14%

32%
Nuclear; 2%

Hydel; 32%

Furnace Oil; 41%

Gas; 25%

2012

Evaluation of Five year

Plans

Analysis of 5 year plans

Myths vs RealityGrowth through Self Financing120,000

120,000

100,000

100,000

80,000

80,000

60,000

60,000

Rs.Million

MkWh
40,000

40,000

20,000

20,000

Revenue

PSDP

Units Sold

Unit Sold, Revenue and PSDP Allocation

Year
1960
1965
1970
1975
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
1998

Units Sold
(MkWh)
630
1,822
3,600
5,212
8,160
13,756
24,121
26,585
29,267
31,272
32,131
35,032
36,925
38,529
39,422

Revenue
(Rs.Million)
69
204
440
963
3,586
8,780
25,502
30,975
37,112
39,451
45,232
56,955
76,870
89,771
107,029

PSDP
(Rs.Million)
240
405
1,448
2,699
6,394
15,831
16,053
21,786
23,550
26,672
23,544
30,356
20,570
19,725

USAID ENERGY POLICY PROGRAM

POWER FUEL MIX AND TARIFFS PEER

COMPARISON
Fuel Mix
Gas

Oil

Consumer Tariff (PKR/kwh)

Coal

HNO**
India

India

12%

1%

69%

18%

Bangladesh

82%

13%

2%

3%

US*

19%

1%

49%

31%

UK

44%

0%

29%

27%

Pakistan

27%

35%

0.1%

38%

7.36

Bangladesh
US

5.47
8.59

UK

13.23

Pakistan
Pakistans Nepra determined
tariff -PKR 13.8/kwh

* FY10 Data

**HNO Hydel, Nuclear and others

13.8

Cost of Generation
Sources

Hydel old (new)

Cost (Rs / KWh)

1.30 (7+)

Gas

5.55

Coal

10.00

Thermal (HSD)

23.00

RFO

18.00

Nuclear

6.50

Wind

14.00

Solar

22 .00

11

Transmission Network in
Pakistan

Ex WAPDA Discos areas

INCREASED GAP BETWEEN NEPRA

DETERMINED AND GoP TARIFF
NEPRA Determined Tariff and Govt Notified Tariff
16.00

40%
Rs. 6.00/kwh

14.00
12.00
10.00 NEPRA Determined Average Tariff

25%
35%
Rs. 3.00/kwh
Rs. 4.17/kwh

8.00
6.00
4.00

34%
Rs. 2.83/kwh

35%
Rs. 3.52/kwh

24%
Rs. 2.28/kwh

17%
Rs. 1.57/kwh

2.00

GOP Notified Average Tariff

0.00

GOP Notified Estimated Avg. Tariff

Nepra Determined Estimated Avg. Tariff

Energy Sector a biggest public policy

challenge: What is Public Policy
Defined in many ways
Policy is decision making
Policy is agenda setting / directing
Policy is realizing values

An intentionally created plan

to guide decision making
towards achieving rational
outcomes

Policies related to Electric

Power
Formation of WAPDA as a consolidated body- 1958
Development of Hydropower
GOP Focus on Power sector

Tri-Partie Agreement-1985(GOP,WB,WAPDA)
Introduction of Private Power-HUBCO (LOI-1985)
Power Sector Restructuring Plan approved-1992
Private Power Policy-1994
Private Hydropower Policy-1995
Enactment of NEPRA/NEPRA Act-1997
Power Policy-2002
R.P.Ps of 2006, 2009-10
18th Amendment and Power Generations development-2011
Power Policy-2013

WAPDAs Development and

Issues
WAPDA started at 118 MW installed capacity, 70 GWH generation, 70 Mln
Revenue, 270,000 consumers
Power Sector made Self Financing
WAPDA increased to about 5700 MW I/C of its own out of profit
despite 17-18 % compound interest charged
GOP loans stopped for P/S development-1985
Load growth was tremendous-up to 18% annually
WB undertook to finance whole P/S Dev. On condition of 40 % S/F by WAPDA out
of profits
Private Power generation resorted to by FG-1985
1st. MOU in 1988 for one HUBCO out of tens of offers
Hubco was 1292 MW, away, too large, on F.Oil, LOI-1988
Against FC committed in 1989, it happened in 1994, price increased many times
in between, BOOT changed to BOO without tariff impact
PPA one sided in favor of HUBCO entailed high capacity cost, fuel pass thru with $
indexations of tariff items
Pakistan- the first country in 3rd. World to have Priv. Power

Private Power contd.

Fixed charges: $ 20/KW/month with US CPI
75 % of capital cost to be paid back with 14 % interest in $ terms in
Ist. 10 years
KAPCO privatized -1996 with tariff 2.6 times higher both started being
paid in July 1996
Cost of 10 MKWH from both cost 39 bln while 38 MKWH of WAPDA cost
was lesser
WAPDA started going to deficit finding difficult to operate satisfactorily
IPPs of 1994 policy based on HUBCOs style though somewhat better
NEPRA enacted in 1997, empowered to regulate and to approve tariff,
with some +ve effect, but not adequate
IPPs of 2002 Policy somewhat better for CPP but mostly approved on
F Oil , which increased tremendously.
Fuel cost in 94 policy: Rs. 0.60/KWH increased to Rs. 15 in 2013, might
go to Rs. 100- in 2025

Continued..
Restructuring made in 1991/2 for corporatized P/S with 4 GENCOs, NTDC, 810 DISCOs/WAPDA
Thermal generation construction banned for WAPDA and KESC wef 19992
Generation cost increased form lesser than 50 Bln in 1996 to 900 Bln
annually.
NEPRA determined tariff based on COS not charged, instead GOP notified
lesser tariff wef 2007 promising subsidies, but could not pay in full nor intime, Circular Debt menace started
Tariff remained same during 2001-2006 at Rs. 4.05/unit
Tariff then increased Rs. 9/unit (2007-2-12)
Tariff raised to Rs. 15/unit in 2013 under 2013 P/Policy
Circular Debt cleared in June 2013, generation increased by 1700 MW
quickly but the sustainability of this increase is ?
Circular debt again grew to over 215 bln for less recovery and high line
losses, somewhat inefficient operations , significant theft.

Continued

R.P.Ps resorted to with exorbitant rental values

RPPs on gas contracted without gas availability
Numerous Scandals/Court cases
S/Court got all RPPs rescinded
ADB audit report was an important reference
Development of power stations got delayed
Result-A Big shortfall-Demand Supply Gap
GOP did give subsidies wef 2010 but came to be insufficient
Supply of fuel is insufficient-Energy Security hampered
Hydropower development delayed
Kalabagh P/S: 3700 MW not built despite work since 1953
on it.

Plannings Role
Load Forecast and generation Planning on Least Cost basis
by NTDC
Development of Generation by WAPDA, GENCOs and PPIB
In view of huge Demand Supply Gap, PC has now task of
Prepn. of 5 years Plan 2013-2018 and Vision 2025, to
bridge the gap
The capital costs requirements are very huge
PC been consulting experts thru its officials,
MoWP has set on a path of reforms, tariff Increase,
expedite recovery, Electricity theft Control, L. Losses
reduction, increasing efficiency, with some success
The deficit is still very large like 400 blns and subsidies
limited to 180-280 blns/annum

Break up of CIRCULAR DEBT- Pre

2013 settlement
Court Cases

108,000

Determination & Notification Delays

Uncovered FATA non-payment
Non-collection by DISCOs
Losses at GENCO level
Interest on late payment to IPPs
Difference in actual & target losses
KESC subsidies/non-payment
Inter-Disco Differential Subsidies
Tariff Subsidies
0

50,000
150,000
250,000
100,000
200,000

Category Wise Consumption

domestic
Annual Electricity Consumption (Gwh)

industrial

agriculture

40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
2004

2005

2006

2007

2008

2009

2010

2011

Observe the Pattern -Load Demand Curve

(Reference: Maximum Load Day)

28

INSTALLED CAPACITY FOR GENERATION

Price of Imported Oil

60,000

54,606
48,627

50,000

40,000

Price (Rs / Ton)

35,748

30,000

22,96221,177
20,000

23,425

12,79613,989

10,000

2004 2005 2006 2007 2008 2009 2010 2011

USAID ENERGY POLICY PROGRAM

Exchange rate
90

PKR / $ Exchange Rate

80

70
PKR / $
60

50

40
2004

2005

2006

2007

2008

2009

2010

2011

Tough Choices- Where to allocate

gas??

Gas prices- Sector

Comparison

Comparative Analysis- IF we switch

from normal to efficient bulb
Energy Usage Per hour
(KWH)
One Bulb consumption
Monthly( KWH
10 bulbs Consumption KwH
Estimated bill in rupees
Estimated Consumption for
20 million consumers
(assuming 5 bulbs per
household) in KwH
Estimated Bill in PKR ( per
month)
Approximate in PKR

Normal Bulb
0.06

Energy Saver
0.013

10.8

2.34

108
1296

23.4
280.8

1,080,000,000 234,000,000

12,960,000,00 2,808,000,00
0
0
12.96 billion 2.81 billion

Losses of DISCOs

A PRE-REQUISITES FOR POWER

Fact: NTDC Data fixes PLANNING
PEPCO demand for 2013 at 23,000 MW (including
depressed/suppressed demand), while same for PEPCO, KESC + self generation is
29,000 MW. Hence, the present shortfall (keeping PEPCO max generation of 16000
MW) is 7,000 MW

Present & yearly demand to be based on low

growth scenario of NTDC planning upto 2013 then upgraded to align with GDP targets.
GDP viz 6% growth for the next three years
and so on.
Planning to cater for additional 7,000 MW in
the short run and then add yearly growth etc.
( on the basis of GoP targets etc.)
National Power Policy 2013 to be re-visited
and re-drafted considering all national goals.

PRE-REQUISITES FOR NATIONAL POWER

PLANNING

Fact:

No Figures available for Planning, but for the

maximum shortfall of 2013.

GDP goals (growth Projection)

MDGs if to be followed
Additional goals if any
Future(s) viz. depletion OR availability of
resources including fuel e.g gas, coal,
nuclear fuel
Cross-cutting considerations by
incorporating targets for industrial
growth, agriculture production, defense
needs etc.

BPower Sector Planning

Fact:

Ad-hocism is the rule- no integrated plans

exists- all entities operating in a void and re-acting to
every day requirements- Fire Fighting on whims
Integrated Demand Forecast by the NTDC (As per NEPRA license) to be
accepted for Planning
Integrated national level planning for hydro-power required
encompassing both federal and provincial areas of jurisdiction.
Nuclear Power to be developed and its management system be studied
and emulated by power sector entities.
Power planning to be undertaken while considering both the present
depressed & suppressed demands.
Sites for generation plants to be fixed by NTDC for offer to
PPIB/AEDB/PPDB etc. for further allocation to sponsors on ICB basis.
National Energy Conservation Plan (includes EE) to be re-hashed for
implementation along with changed mandate of ENERCON (as
regulator), NPO, EDB, PSQCA etc. Roof Solar thermal/PV to be
mandatory for big houses/commercial buildings.
National goals/targets be set for both Conservation & EE gains thru
efficient gaddets, labelling

Power Sector Management

Fact:

The Present management is below par, based

on ad-hocism and primarily in the hands of nontechnical civil servants in the MoW&P.
Recommendation for technical resource to manage the power
system right from the advisory resource of the PM to the
leadership of related SOEs/PSCEs
FIRE-walling of Power Sector operations from outside influence
including political and governmental.
Serious HRM/HRD initiatives to be taken special consideration at
NSPP entities.
Future leadership program be launched in line with the
requirements & covenants to attract latest technologies,
including emerging sciences.
Technology offices to be opened up in all PSCEs tasked to
attract latest technologies etc.

GENERATION

Fact:

GENCOs operating below par / No incentives for

efficiency improvements/ new technologies not being attracted.

GENCOs operating below capacity.

Technology upgrades needed to increase
capacity by extra 1000 MW in addition to
recovery of lost capacity.
A techno-economical analysis required for
conversion to coal.
Futures study of coal pricing to be
undertaken.
Incentive based management needed.
Integrated policies required to encourage
Private Sector investment under one window.

continued
BASE LOAD POWER PLANTS to be ensured for affordable
energy.
Environmental issues and long term vision of the WORLD
to be dove tailed in the study.
PPPs be formulated for sites of redundant / retired GENCOs
power plants.
DISTRIBUTED GEN:/CAPTIVE POWER/MICRO-GRIDS be
encouraged.
RE-Visit of IPPS PPAs for adherence to present ground
realities. BOOT< > BOO
Increase expeditiously the RE up to certain %age of the
total generation capacity Indigenous production
Technology upgrades for IPPs under an incentive based
plan to be encouraged.

TRANSMISSION

Fact:

Decrepit, mired in 1980s, 500 kv/220 kv less than

need maximum capacity 17,000 MW on sustainable basis.

Transmission system/grid stations to

be developed/upgraded thru proper
load Flow studies
Uncovered Rural areas to be covered
thru RE generation.
Baluchistan Rural areas to be
covered thru 33 KV distribution lines
rather than 11 KV.

continued
Connect-up of AJK and GB to the National Grid
in an integrated manner as per suitability
Legislation to support availability of Right-ofway for transmission lines.
Private sector to be included only through PPP
concept under NTDC with solid safeguards
transparently, for all the parties
Formulation of SAARC Grid capable of
allowing cross-border trade with Iran, CASA
and beyond against set time lines.

DISTRIBUTION

Fact:

Dilipated, unable to cater to needs of people

, mired in 1960s technology, automation and latest
technologies not available.

DISTRIBUTION system to be developed on

demand but Benefit-cost Analysis
Innovative methodologies, including
privatization of some operations, may be
adopted to ensure full revenue recovery
and theft control.
Energy loss to be looked into in detail
theft to be quantified and not misused to
hide technical loss
National Loss Reduction Program to be

continued
Bring about Customer Discipline to ensure
up to mark power sector operations.
Role of provincial governments/local
administration to be legislated/provided-for
in the updated Electricity Act.
Electricity Act, 1910 to be
updated/legislation of comparative
economies to be emulated.
Provision for Conservation & EE to be made
in updated Electricity Act.

CORPORATE & REGULATORY AFFAIRS (CORA)

Fact:

CORA in non-professional hands, legislation

unable to support utility operation, DISCOs unable to
recover revenue or control losses.
NEPRA to be strengthened technically, commercially
and legally as per original NEPRA Act 1996 and
made responsible for an efficient Power Sector.
PNRAs Regulations to be considered for
improvements
Electricity Act 1910 to be immediately updated by
adopting such legislation of comparative
economies.
BODs of the PSCEs to specifically comprise of
sectoral professionals during the next 3-5 years,
where after others too could be considered.

continued
Amalgamation of all existing policies into one
document ( all encompassing )
Conservation and EE to be adopted as per
regulations.
Reasonable and well worked out Upfront tariffs for
renewable generation and coal plants, as initial tariff
and award of SITES on the basis of ICB/ lowest
tariff /option/ bids fairly.
Energy trading and full conversion from the single
buyer to the multi-buyer model of power market by
2018/20.
Electricity Trading & Wheeling to be supported as a
National Policy gradually
Weaning-off of industry from the DISCO systems and
strengthening of Captive Power portfolio fairly

G TARIFF FORMULATION CHANGES

Existing plain energy suppression model of power tariff

needs to be changed to Two Part Tariff, Load-based
Fixed monthly charges+ Reduced energy charges
Cross tariff subsidies to be reasonable.
Better calculated and Targeted subsidies
TOU tariff/ to be improved while incorporating new
usage trends .
Tariff for CP/SPP operations to be rationalized to cater
for private sector to enhance generation at DISCOs
level fairly
Ability of DISCOs to buy from SPP plants on the as and
when required basis.

H PUBLIC-PRIVATE PARTNER SHIPS

Fact: No concept at all, both the public and the
private sectors operating at different levels no
liaison at all.
PPPs to be structured after road shows etc.
Management contracts too can be structured for the
PSCEs success stories to be emulated.
Lease-out of existing GENCO plants to private sector.
Experimental Lease-out of Distribution sub division for
DISCOs, which are at lower rungs of privatization.
Out sourcing of specific operations of the PSCEs.
WAPDA has developed its generators and Network
through Bonds issued at 18-19 % interest Rate.

FINANCING

Fact: Budgetary outlays stopped long ago. MLDAs

finance available on re-lent basis through the GoP,
Concept of SOEs garnering private finance nonexistant, Sector cash starved.

Financing of at least Rs. 400 billion be

provided from the national budget each year
for Power Sector projects
Interest on Relent Loans to be reduced to 7 %
like KESC
Similar provisions be made by
provinces/AJ&K/GB their own or again from
the National budget.
A long term FIP be formulated to cover
Transmission and Distribution system gaps.
The same to carry-on even after privatization.

INDEGINIZATION OF PLANT
EQUIPMENT/FUELS

Fact: No national policy for the Power Sector against set

policies e.g. for car manufacturing etc. Heavy Industries
working below capacity etc. Country loosing in big way.

Indigenization of power plants and allied

equipment be encouraged for affordable energy
against a time bound plan with clear-cut road
map & milestones.
Ministry of Production to be dove - tailed for the
effort.
Development of indigenous fuels to be
encouraged.
Heavy Industries (HI) to enter into technology
access agreements and offer power plants.

continued
Ministry of production to spear-head such
efforts in conjunction with the MoW&P.
Import Regime for generation plants etc. to
be re-visited.
National Directory of engineering
companies (discipline wise) to be
formulated.
Merger of organizations like NPO and EDB
Re-visit of their current covenants for
alignment with the National goals.

K POWER SECTOR MONITORING

Fact: Lack luster , non-professional, way ward,
fluid with changing goals on whims. Present MoW&P
with multiple tiers of control best example of the rot.

Role of Planning Commission be made

clear
No role to be assigned to temporary OR
make- shift arrangements e.g. monitoring
cell in the PMs office.
Role of Ministry of W&P
Policy making
Policy implementation
Monitoring and Evaluation

Change in Existing Architecture of

Power Sector
Fact: Original Covenants/Charter of MoW&P/ Line
Departments/PSCEs diluted/ changed with creation of new
superfluous entities.

WAPDA to be given lead in implementation of mega Water

and Power projects.
Possible placement of NTDC under WAPDA (as the only
PSCE to remain in the public domain)?
WAPDA and NTDC to be fire-walled from outside influence
as per WAPDA Act, 1958.
GENCO holding Co to be made effective and efficient
Privatization only for the good of the organization/people
ENERCON to be made effective and efficient and to
collaborate with DISCOs closely
WAPDA, NTDC and DISCOs to remain as a public sector
entities made to operate efficiently to achieve set goals.

Continu
ed
PEPCO could be rejuvenated with changed
mandate from management and holding company
to the National Power Authority(NPA) on the same
lines as WAPDA with National Power Planning its
important pillar. It should help in Recovery and
reduction of losses, besides monitoring and
evaluation of all ongoing projects, and to speed
track implementation of the same through
WAPDA/NTDC etc.
The NPA would act as the coordinating and policy
drafting body for the Power Sector. MoW&P to
restrict itself to policy making only.
Reform process can continue with independent
GENCOs, NTDC and the DISCOs reporting to the NPA
etc. the things can change once a few entities get
privatized. DISCOSImprovement?
WAPDAs earlier motto of providing , continuous,

Continu
ed

ENERCON can be placed

under PEPCO revived with
a re-done charter acting as a
coordinator/ implementation
body of the GoP ( on behalf
of the MoW&P)
PPIB/AEDB to be restructured New BODs to be
formulated.

CONCLUSIONS

A paradigm shift has to take

place.
Change of present thinking a
must.
Planning to be based on Technoeconomic considerations alone.

Short Term Interventions

Short Term Interventions Proposed Copy.docx

THANKS