Power generation on the NTDC system increased by 7 percent year-on-year for October 2020 at 10.2 billion units, taking the 4MFY20 generation higher by 3 percent year-on-year. As anticipated and flagged earlier in this space, furnace oil is gradually being withdrawn as the demand cools down. Recall that FO and HSD based power generation has increased by a massive 34 percent year-on-year in 4MFY20, taking 6 percent of the pie.
While 6 percent of the pie may not be huge, considering FO used to be north of 20 percent till three years ago, it needs attention. The economic merit order of dispatch continues to get ignored and violated month after month, and that compounds the problems in what is already a very complex web of problems in the energy chain.
For the third month running, the power regulator has raised concerns on FO and HSD based generation and has allowed lesser than requested amount in terms of monthly fuel charges adjustment. Nepra has disallowed Rs9 billion in lieu of monthly FCA for August and September, out of a total Rs22 billion requested. Previous adjustments were also provided on provisional basis and are subject to revisions. This adds more to the tariff adjustment mismatch, but little to nothing seems to be done in this regard.
Nepra has observed that al this while, options to generate electricity from cheaper fuels were available but not taken, which leads to disallowance of the entire amount. Now the problem is age-old and the blame lies fair and square on the previous government for not being able to put in place the required transmission mechanism to evacuate power from the cheaper fuel alternatives.
But more than two years in the government, the current administration cannot go on forever lamenting the ills of the predecessors. While there is enough meat in the argument that the capacity to evacuate power from the RLNG plants is limited as the plant is not connected to 132 KV lines, the needle has to move beyond the blame game. The fact that RLNG power plants, while available at most times, do not run at full throttle, puts immense pressure on the overall generation cost cannot be downplayed.
The risk of putting the entire transmission system in jeopardy in an effort to run RLNG plants at full steam is real, hence the lesser evil of opting for FO-based generation is chosen, to keep up with the load. But there also appears to be complacency on part of the authorities, as FO keeps making a comeback year after year for one reason or another. The very fact that the local refineries continue to pump FO in huge sums, and the need for that to be procured remains, puts a question mark on the entire dealing of the issue.
It is winters again, and the fuel cost and fuel mix issues will soon be sent to the backburner, as winter demand does not put pressure on the system to go beyond a level which puts the RLNG power evacuation at a transmission tripping risk. There have been all sorts of efforts going around aimed at the revenue side of reforms, be it tariffs or negotiations with the power producers. Little to no effort, seems to have bene put in on the transmission side. While capacity payments and base tariffs do need the most attention, ignoring the generation side of things will have consequences.
