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Inefficient power producers cost Rs14bn to national exchequer

The power producing capacity of years old plants is a major issue as inefficient use of power generating resources has cost the national exchequer a staggering amount of Rs14 billion from January to September, said sources in the power sector.

Experts said that the country is facing worst-ever gas shortage but the policymakers are insisting to use gas in the least efficient power generating plants that are running on less than 20 percent efficiency level.

The difference between furnace oil-based independent power producers (IPPs) of 2002 policy and government power generation units (Gencos) is around Rs6.94 per unit, as furnace oil-based IPPs cost Rs14.09 per unit, while the cost of Gencos is Rs21.04 per unit. Similarly, the cost of gas-based IPPs also remained much lower at Rs3.74 per unit as against public sector gas-based Gencos that produced electricity at Rs6.10 per unit, they said.

The available capacity of IPPs is not used by the government due to default and nonpayment of the existing dues.

The idle capacity of furnace oil-based IPPs stood at 1,512,692MW and gas-based IPPs at 1,609,789MW. With the available cost saving of Rs6.94 per kWh from the furnace oil-based IPPs and Gencos and Rs2.36 per kWh from gas-based IPPs not utilised by the government’s economic order, the national exchequer suffered a staggering amount of Rs14 billion from January to September, said experts.

Intazar Mahdi, a power sector expert and corporate lawyer, said that there are different models regarding energy mix worldwide and the nations adopted cheapest solutions.

For example, hydro-based power generation is the best option worldwide followed by coal-based solution and then gas and furnace oil, he said.

The most efficient power generation plants on gas and furnace oil are given priority, he said. “In our country, most of the furnace oil-based public sector power generation plants are being given preference that are running on less than 20 percent efficiency, producing electricity at huge rate of over Rs20 per unit,” he said.

And the country is wasting costly gas and fuel to generate less power from these plants at a time when it is facing worst-ever gas shortage, he added.

Mahdi suggested that the most efficient power plants should be given priority in dispatch order, as well as in payments. Once the most efficient plants are fully utilised, the dispatch order should be given to the next level of less efficient plants accordingly so that the country could get cheaper electricity, while using the same volume of natural gas.

Meanwhile, the eight IPPs involved in litigation with the National Transmission and Dispatch Company (NTDC) over nonpayment of dues have no solution in sight.

An executive of one of the affected IPPs said that despite the Supreme Court orders, the existing dues of these IPPs are still not being fully cleared.

The National Transmission and Dispatch Company still owes Rs37 billion to the eight IPPs for the power supplied after July 13, the cutoff date between the amount of arrears and the existing billing as per the order of the Supreme Court, he said.

In Pakistan, most of the public sector power generation plants have less than 20 percent efficiency. The independent power generation plants are running at around 50 percent efficiency level, he added.

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