No Improvement in the Performance of DISCOs

The average distribution losses in Pakistan are 20% as none of the electricity distribution companies (DISCOs) are performing up to the mark in terms of performance criteria defined by the regulatory authority. These include both technical and non-technical losses (power theft). Except minor improvements, DISCOs haven’t improved their overall performance in the last five years. As a matter of fact, some of the companies have shown deteriorated performance.

Amongst the DISCOs, IESCO has the lowest distribution losses (9.47%) followed by GEPCO (10.97%) and FESCO (11.26%). PESCO and SEPCO are the worst performers with reported losses of 34% and 39% respectively. Punjab located companies are better performers of the lot.

Screen Shot 2017-07-17 at 5.04.07 PMSource: State of Industry Report

The government, instead of making concerted efforts to reduce distribution losses, passes on these losses to the consumers through tariff surcharges. The consumers, therefore, not only have to pay for the electricity they consume but also for the inefficiencies of these DISCOs. This distorts incentives for the inefficient DISCOs as they are being rewarded for their bad performance through these surcharges. What is needed is for the government to impose strict penalties on the DISCOs incurring losses above the NEPRA allowed rate.

Having said that, it is important to acknowledge that some of these distribution companies operate in regions where it is politically challenging to improve collections or reduce power theft.  In such regions, the DISCOs should be divided into several companies (like SEPCO was carved out from HESCO) to serve fewer areas. This would help improve efficiency as day-to-day management would become easier.

Additionally, the government should consider utilizing army (as was done for polio vaccination drives and census) for accompanying linemen/meter readers for recording readings or disconnecting electricity connections of defaulters, as in the past several workers lost their lives while performing their duties. As the defaulters in most cases are politically influential, the company officials are hesitant to take action against them.

Lastly, the government should install smart meters on the distribution lines to reduce losses and power theft. With the smart meters the DISCOs can accurately monitor demand and connected devices, allowing improved system operation and control. Most importantly, it can enable them to connect or disconnect a consumer remotely, precluding the need to send linemen over.

Improvement in the performance of DISCOs is as important, if not more, for resolving the electricity crisis as is adding generation. Injecting more power into the system, without reduction in line losses and theft, is only going to increase the circular debt. Thus, it is high time that priority is also given to fixing Pakistan’s distribution network.

 

 

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