Data Collection Survey on Energy Sector Reform in the Islamic Republic of Pakistan
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Islamic Republic of Pakistan DATA COLLECTION SURVEY ON ENERGY SECTOR REFORM IN THE ISLAMIC REPUBLIC OF PAKISTAN Final Report March 2014 Japan International Cooperation Agency (JICA) Nippa Tech Co., Ltd. 4R JR 14-023 DATA COLLECTION SURVEY ON ENERGY SECTOR REFORM IN THE ISLAMIC REPUBLIC OF PAKISTAN Table Contents List of Tables List of Abbreviations Summary Comment of the Survey Team Head Chapter 1 Background and Circumstances of the Survey 1.1 Outline of the Survey 1-1 1.2 Background of the Survey 1-1 1.3 Purpose of the Survey 1-2 1.4 Survey Regions 1-2 1.5 Survey Period 1-3 Chapter 2 Energy Condition in Pakistan 2.1 History, Structure and Organization of the Energy Sector 2-1 2.1.1 Political Climate in Pakistan 2-1 2.1.2 History of the Energy Sector in Pakistan 2-2 2.1.3 Institutional Organization of Pakistan’s Power Sector 2-4 2.2 Present Situation and Development of Energy Sources 2-6 2.2.1 Primary Energy 2-6 2.2.2 Present Situation of Energy Sources in Pakistan 2-9 2.2.2.1 Generation Plan Developed in 2008 2-20 2.2.2.2 Generation Plan Developed in 2010 2-21 2.2.2.3 Issues in Energy Development Plans 2-24 2.2.3 Gadani Project 2-26 2.2.3.1 Outline of Gadani Project 2-26 2.2.3.2 Issues of Gadani Project 2-29 2.2.4 Thar Coalfield Project 2-30 2.2.5 Import of Power 2-31 2.2.6 Renewable Energy 2-32 2.2.6.1 Small Hydropower 2-32 2.2.6.2 Hydropower 2-33 2.2.6.2.1 Dasu Dam 2-33 2.2.6.2.2 Bhasha Dam 2-34 2.2.6.3 Geothermal Energy 2-34 2.2.6.4 Biogas 2-35 2.2.6.5 Biomass 2-35 2.2.6.6 Wind Energy 2-35 2.2.6.7 Solar Light Energy 2-35 DATA COLLECTION SURVEY ON ENERGY SECTOR REFORM IN THE ISLAMIC REPUBLIC OF PAKISTAN 2.2.7 Nuclear Energy 2-35 2.3 Present Situation of and Development Plans for Transmission Lines 2-36 2.3.1 Outline of Transmission and Transformation Grid 2-36 2.3.2 Outline of Five-Year Expansion Plan for Transmission and Tranformation Facilities 2-38 2.3.3 Technical Problems of Transmission and Transformation Grid 2-44 2.4 Energy Supply-and-Demand Situation 2-45 2.4.1 Energy Supply-and-Demand Situation 2-45 2.4.2 Load Curve 2-45 2.4.3 Supply-and-Demand by Region 2-47 2.4.4 Transmission and Distribution Loss/Power Outage 2-48 2.4.5 Operating Rate of Major Generation Plants 2-53 2.4.6 Energy Supply Cost 2-56 2.4.7 Local Electrification 2-57 2.5 Present Situation of Energy Tariff System (Including IPP-related System) 2 - 5 8 2.5.1 International Comparison of Energy Tariff Level 2-58 2.5.2 Tariff Table 2-59 2.5.3 NEPRA Determined Tariff and GoP Notified Tariff 2-61 2.5.4 Subsidy to Energy Tariff 2-63 2.5.5 IMF Recommendation on Revision of Energy Tariff 2-64 2.5.6 NEPRA Suggestion on December 2012 2-65 2.5.7 Multi-Year Tariff 2-67 2.5.8 Fuel Adjustment System 2-67 2.5.9 Bulk Utilization 2-68 2.5.10 TOU 2 -68 2.5.11 Distribution Code 2-68 2.5.12 Issues in Energy Tariff System 2-69 2.5.12.1 Analysis of Issues in Energy Tariff System 2-69 2.5.12.2 Suggestion for Improved Energy Tariff System 2-70 2.6 Present Situation and Challenges of Energy Distribution Business 2 - 7 1 2.6.1 Outline of Energy Distribution Companies 2-71 2.6.2 Issues in Managing Energy Distribution Companies 2-73 2.6.3 Tariff Collection Rate 2-75 2.6.4 Return on Business 2 -7 5 2.6.5 Loss Reduction Program for DISCOs (IMF Report) 2-78 2.7 Energy Conservation 2-79 2.7.1 Organization of Energy Conservation 2-79 DATA COLLECTION SURVEY ON ENERGY SECTOR REFORM IN THE ISLAMIC REPUBLIC OF PAKISTAN 2.7.2 Present Situation and Potentiality of Energy Conservation 2-80 2.7.3 Issues in Promoting Energy Conservation Policy 2-81 2.7.4 Energy Conservation Bill 2-81 2.7.4.1 Previous Circumstances of Draft Energy Conservation Bill 2 - 8 1 2.7.4.2 Characteristics of Energy Conservation Bill in Pakistan 2 - 82 2.7.5 Building Code 2-85 2.7.6 Energy Conservation Project by International Institutions 2 - 86 2.7.7 Future Energy Conservation 2-86 2.8 Performance Evaluation of the Energy Sector in Pakistan 2-87 Chapter 3 Present Situation of Institutions related to Energy Sector in Pakistan 3.1 Circular Debt Situation in Energy Sector 3-1 3.1.1 Present Situation and Issues of Circular Debt 3-1 3.1.1.1 Present situation of Circular Debt 3-1 3.1.1.2 Structure of Circular Debt 3-2 3.1.1.3 Breakdown of Circular Debt 3-4 3.1.2 Occurrence of arrears 3-9 3.2 Energy Subsidy 3-12 3.3 Financial Condition of Generation, Transmission and Distribution Companies and CPPA 3 - 15 Chapter 4 Outline of Institutions Related to Energy Sector 4.1 Functions, Organization Control and Business Performance of NEPRA, NTDC/WPPO/CPPA, Generation, Transmission and Distribution Companies 4-1 4.1.1 NEPRA 4 -1 4.1.1.1 Business Overview of NEPRA 4-1 4.1.1.2 Primary Task of NEPRA 4-1 4.1.1.3 Problem of Financial Independence of NEPRA 4-3 4.1.2 NTDC/WPPO/CPPA/GENCO 4 - 5 4.1.2.1 NTDC 4 - 5 4.1.2.1.1 Business Overview of NTDC 4-5 4.1.2.1.2 Financial Condition of NTDC 4-5 4.1.2.1.3 Wheeling Charge 4-9 4.1.2.1.4 Investment Decision Mechanism at NTDC 4 -11 4.1.2.1.5 Issues at NTDC 4-11 4.1.2.1.6 Personnel Affairs at NTDC 4-11 4.1.2.2 WPPO 4 -12 4.1.2.3 CPPA 4-13 DATA COLLECTION SURVEY ON ENERGY SECTOR REFORM IN THE ISLAMIC REPUBLIC OF PAKISTAN 4.1.2.3.1 Organizational Structure 4-13 4.1.2.3.2 Business of CPPA 4-14 4.1.2.3.3 Accounts Receivable(AR) and Accounts Payable(AP) 4-15 4.1.2.4 GENCO 4 -15 4.1.2.5 PEPCO/WAPDA 4 - 17 4.1.2.5.1 PEPCO 4-17 4.1.2.5.2 WAPDA 4 -20 4.1.3 Investment Promotion 4-20 4.1.3.1 PPIB 4-20 4.1.3.1.1 Task Overview of PPIB 4-20 4.1.3.1.2 Main Income of PPIB 4-21 4.1.3.2 AEDB 4 -22 4.1.4 Energy Conservation 4-23 4.1.4.1 ENERCON 4 - 23 4.1.4.1.1 Organization Summary 4-23 4.1.4.1.2 Business of ENERCON 4-24 4.1.4.1.3 Energy Conservation Fund 4-24 4.1.4.2 PSQCA(Pakistan Standards and Quality Control Authority) 4 -25 4.1.5 Private Sectors 4-29 4.1.5.1 HUBCO 4 -29 4.1.5.1.1 Overview of HUBCO 4-29 4.1.5.1.2 Conversion of Fuel to Coal 4-29 4.1.5.1.3 LNG 4-30 4.1.5.1.4 Circular Debt 4-30 4.1.5.2 KESC 4 -30 4.1.5.2.1 Overview of KESC 4-30 4.1.5.2.2 History of KESC 4-32 4.1.5.2.3 Financial Condition 4-35 4.1.5.2.4 Generation Facilities and Capacity of KESC 4-36 4.1.5.2.5 Conversion of FO to Coal 4-38 4.1.5.2.6 Transmission and Distribution Network of KESC 4 - 38 4.1.5.2.7 Reasons for successful privatization of KESC 4-40 4.1.6 IPPs 4-41 4.1.6.1 Japan Power 4-41 4.1.6.1.1 Business Overview of Japan Power 4-41 4.1.6.1.2 Present Situation of Business 4-42 4.1.6.2 Kohinor KEL: Kohinoor Energy Limited 4-43 DATA COLLECTION SURVEY ON ENERGY SECTOR REFORM IN THE ISLAMIC REPUBLIC OF PAKISTAN 4.1.6.2.1 Business Overview 4-43 4.1.6.3 Nishat Chunian 4-43 4.1.6.3.1 Overview of Group Business 4-43 4.1.6.3.2 Energy Business 4-44 4.1.6.3.3 Circular Debt 4-44 4.1.6.3.4 Joint Negotiation 4-44 4.1.7 Distribution Companies 4-45 4.1.7.1 IESCO 4-45 4.1.7.1.1 Business Overview of IESCO 4-45 4.1.7.1.2 History of IESCO 4-47 4.1.7.1.3 Customer Profile of IESCO 4-47 4.1.7.1.4 Distribution Loss 4-48 4.1.7.1.5 Tariff Collection 4-50 4.1.7.1.6 Financial Condition 4-50 4.1.7.1.7 Marketing for Consumer 4-52 4.1.7.1.8 Investment 4-52 4.1.7.1.9 Future Challenges in managing IESCO 4-52 4.1.7.2 LESCO(Lahore Electric Supply Company) 4-53 4.1.7.2.1 Business Overview and History of LESCO 4-53 4.1.7.2.2 Distribution Loss 4-55 4.1.7.2.3 Present Situation of Facilities 4-55 4.1.7.2.4 Consumer Center 4-55 4.1.7.2.5 Tarif Collection 4-56 4.1.7.2.6 Financial Arrangements 4-56 4.1.7.2.7 Performance Contract 4-57 4.2 Governance Issues 4-58 4.2.1 IMF’s Governance, Regulation and Program for Improved 4-58 Transparency 4.2.2 Performance Evaluation Standard 4-59 4.2.3 Performance-based Contracts 4-59 4.2.4 PMO 4 -60 4.2.5 Structure for Dealing with Energy 4-60 Chapter 5 Support Situation of International Donor Institutions 5.1 Outline of Support Trends of International Donor Institutions in Pakistan 5 -1 5.2 World Bank Donation for Energy Sector in Pakistan 5-1 5.3 ADB Donation for Energy Sector in Pakistan 5-2 5.4 USAID Donation for Energy Sector in Pakistan 5-2 DATA COLLECTION SURVEY ON ENERGY SECTOR REFORM IN THE ISLAMIC REPUBLIC OF PAKISTAN Chapter 6 Feasibility Analysis of Japan’s Support for Energy Sector Reform 6.1 Challenges and Recommendation in Energy Policy 6-1 6.2 Organizational Issues 6-1 6.3 Challenges and Recommendation in Technical Aspects 6-2 6.3.1 Low-loss Transmission Lines 6-2 6.3.2 Training Institute for Electric Power Technology 6 -3 6.3.3 Training Center for Energy Conservation Technology 6-4 6.3.4 Dispatch of experts based on a mid-term generation plan 6-5 Chapter 7 Reference Materials 1.