RESTRUCTURING OF K-ELECTRIC

Poor performance of K-Electric over the years is characterized by low quality and low reliability of power supply to Karachi. Prolonged power supply interruptions and load-shedding, high plant un-availability is common in k-electric over the years. There are huge losses and pilferage (theft of electricity), protracted delays in projects implementation/improvements in T&D System, distortions in tariff structure, leakage and delays in revenue collection. Apathy towards consumer dealings and an organizational culture with bureaucratic inertia and corruption are characteristics of k-electric. Further evidence of poor performance of k-electric has been high-lighted by the Asian development Bank (ADB) from time to time but all in vain. According to many other Studies and Reports, k-electric has now reached such a size that the organizational arrangements are beginning to show signs of serious strains. The k-electric management swamped by a tide of operational concerns and can for that reason devote little time to policy and strategy matters. There are following main reasons, out of many, for the poor performance of k-electric in Karachi for providing reliable and consistent supply of power to the Consumers, both Residential & Industrial Consumers.

1. The lack of emphasis on efficiency has led to k-electric as a whole becoming a very high cost Utility due to absence of prudent Utility practices.
2. Depressed motivation / moral within the Management and workforce tiers.
3. Slow and arbitrary decision-making resulting from long chain chains of command.
4. The total cost of each operating activity is not known, hence accountability is very poor and pressure to reduce cost of Electricity is lacking.
5. An absence of constructive conflict and hence innovative thinking within management levels.
6. The overall efficiency is much below the level achieved by developing countries in Asia, due to K-electric High Heat Rate/low efficiency power plants, most of them are too old to operate.
7. Sign of excessive centralization with too many problems in decisions being referred up to hierarchy for resolution.
8. Delays in decision making which interfere with the effectiveness of the operation departments. Such delays are the result of vertical chain of command, because k-electric is vertically integrated monopolistic Utility, and the actions of the staff functions that are required to examine many of the requests made by the operating departments.
9. Decisions appear to be inconsistent and arbitrary, particularly in reliable and consistent supply to the Consumers.
10. Many believe that they have responsibility, opportunity for achievement and recognition because of insufficient Delegation. Further non-performers are never punished.
11. Proliferation of rules and regulations has made it more and more difficult to do anything without contravening some regulations, some established practices or some officer’s essential permission.

A lot has already been published on k-electric through newspapers, journal, magazines and seminars and MEDIA but unfortunately most of the articles published so for have not worked out and unscheduled load shedding continued on one pretext or the other since years in Karachi. It is of little use to discuss anything until and unless it’s real cause is not addressed.

Corporatization/Commercialization of K-Electric and its Restructuring.

Karachi is a Mega metropolitan city and its population is more than 20 Million, bigger than a country of Singapore, both in size and population. It has hundreds of Industries and residential load increasing day by day therefore k-electric cannot cope with the increasing load of the city hence load-shedding may not be eliminated on permanent basis, rather the system may collapse entirely any time . The Government of Pakistan must plan to expand and increase K-electric’s Generating and its T&D system by implementing a program for the restructuring of k-electric in the light of strategic plan approved by the cabinet committee on Privatization commission during the next 5 year . According to strategic plan, the program involves the corporatization and commercialization of existing facilities in to operating subsidiaries of k-electric under a foreign loan of World Bank or ADB. A 3rd party consultant must be engaged for undertaking consultancy services for Corporatization /Commercialization of k-electric and its existing asset blocks as the following :

1.     Corporatization of thermal units:

All the thermal power plants of K-Electric may be converted in to public limited company, namely GENCO under corporate Law Authority and its board of directors be approved as per law by the competent Authority and company act of Pakistan. Further Wind power and Clean Energy such as Garbage power plant must be included to extend the capacity of GENCO. NEPRA shall act as a Regulator.

 2.      Corporatization of transmission & distribution system:

In line with the objectives of Strategic plan , a wholly owned government company may be established to manage the corporatization and commercialization of Generation, transmission and distribution companies after restructuring k-electric into 4 corporate entities(unlisted Public limited companies) for 4 Districts of Karachi . Each of these companies may start its operation independently as a corporate entity under the management of its respective Board of Directors. NEPRA shall act as a Regulator as usual. The Electric Supply Agreement, Business Transfer Agreement, and Operation & development Agreement must be signed by a wholly government Company with the Chief Executives of all the Distribution companies as per law. National power Regulatory Authority(NEPRA), which would regulate all the activities in the re-organized k-electric under NEPRA ACT 1997.It is a Brief on the Re-structuring of K-electric, but Detailed Strategic Plan may be approved by the Government of Pakistan to over-come the terrible Load shedding in Karachi by improving the working and increasing the capacity of k-electric with improvement in the T&D system by 4 DISCOS.

BY: SULTAN ZAFAR