KCCI urges KE to shut down inefficient power generation plants

KCCI urges KE to shut down inefficient power generation plants

KCCI urges KE to shut down inefficient power generation plants
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KARACHI: Businessmen Group (BMG) chairman Zubair Motiwala and Karachi Chamber of Commerce and Industry (KCCI) president Muhammad Idrees have expressed concerns over high production cost of electricity being generated by the K-Electric (KE), and urged the power utility to shut down inefficient power generation plants, while the power generation mix must also be improved to reduce the tariffs.

In a letter sent to the National Electric Power Regulatory Authority (Nepra) chairman prior to Nepra’s hearing scheduled for November 2 and 3, 2021, the two leaders said if it was not possible for KE to bring down the cost of power generation, then it should depend more on external purchases.

The focus should be to develop more power plants based on renewable energy, while necessary transmission infrastructure has to be put in place to enable KE purchase more electricity from the Central Power Purchasing Agency (CPPA), as currently, the utility service provider was unable to do so due to inadequate transmission system, they added.

Referring to a news item appeared in the section of the press, they said Nepra itself has pointed out that the average fuel cost for KE’s own system in 2020/21 was Rs12.41/kWh, while the CPPA’s fuel cost ranged between Rs3.24 and Rs6.06/unit in 2020/21.

This situation was really alarming, as KE’s generation cost was more than double, compared with the purchased power.

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Both leaders said that the KE share was just in the range of 5 per cent to 10 per cent of the country’s total power generation. Since KE’s own generation was more than two times expensive because of mainly being thermal-based, the consumers, particularly industries of Karachi suffer more due to fuel price hikes.

Lately, KE has demanded an increase of Rs3.454/kWh for September 2021 under monthly fuel charges adjustment, increasing the electricity rate by around 16 per cent, which was an exorbitant surge, considering the fact that during the quarter (July-September 2021) the average CPI inflation was 8.58 per cent; Pak rupee has devalued 9.68 per cent and the price of Brent inched up 3.53 per cent.

Hence, the BMG chairman and the KCCI president demanded that the FCA should not be increased or if absolutely necessary, it should be within Rs1/kWh and in future, KE should be barred from passing on the cost impact of inefficient power plants.

The Karachi Chamber also demanded shifting away from the dollar pegged power generation in favour of solar, wind and hydel power generation sources, as electricity tariffs are mostly dollar indexed and the Pakistani rupee has depreciated steeply.

The high cost of electricity in the KE system was due to low efficiency of its newly-inducted gas-based power plants, as well as generation through furnace oil/re-gasified liquefied natural gas (RLNG) from low-efficiency steam turbine thermal power plants.

Moreover, generation via the costliest high-speed diesel, as well as purchases of electricity from the furnace oil-based power plants also results in KE’s high cost of electricity, they added.

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Reviewing the reported monthly fuel cost component, they said the difference between power generation by KE and external purchases has been constantly widening every month, as it stood at Rs6.8654/kWh in June 2021 and subsequently furthered to Rs6.9391 in July, Rs7.346 in August and Rs9.784 in September, which was too high, compared with the fuel cost component for external purchases, which is at Rs4.0267, Rs4.642, Rs4.3072 and Rs4.562 from July 21 to September 21. This burden was being passed on to the consumers in the form of higher tariffs.

Both the business leaders said KE has been generating and purchasing electricity from higher-cost power plants even though the cost-effective take-or-pay generation capacity in the CPPA system remained underutilised.

Motiwala and Idrees said that it was totally unfair for the legitimate consumers to bear the burden of inefficiencies of the distribution companies, imprudent energy policies, deplorable composition of energy mix and electricity thefts.

The business and industrial community was already facing immense problems due to the high cost of doing business. Since electricity is a major component of production, they strongly argued against adding an otherwise avoidable burden of costlier electricity.

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