The provinces are currently unprepared to take control of loss-making power distribution companies (Discos) and have not responded to the federal government’s offer. The financial advisors for the Discos’ privatization process are expected to assess their value by mid-March, according to Secretary Power Division Dr. Fakhr Alam during a briefing to the Senate Standing Committee on Power.
Letters were sent to the chief ministers and chief secretaries of all provinces regarding the transfer of control over Discos, but no responses have been received. The committee, chaired by Senator Mohsin Aziz, directed the Power Division to appoint new boards of directors for the Sindh-based Sukkur Electric Power Distribution Company (SEPCO) and Hyderabad Electric Supply Company (HESCO) within a month.
Dr. Fakhr Alam stated that the Privatization Commission will appoint a financial advisor for Discos by the end of January, with the valuation process taking 45 days. He added that the private sector will begin purchasing more than one megawatt of electricity starting this year. In the initial phase, LESCO, FESCO, and GEPCO will be privatized.
Senator Faraz suggested bundling both performing and underperforming companies to attract investors. The secretary mentioned efforts to clear the balance sheets, transfer Disco properties to their names, and shift shares from WAPDA to the government. He assured that Disco employees are likely to be retained post-privatization.
Dr. Fakhr Alam highlighted improved company performance, with bill recovery reaching 95%. However, concerns were raised about delays in appointing new boards for HESCO and SEPCO. The committee ordered the Power Division to replace the current boards within a month and halted implementation of decisions made by the existing boards.
The secretary outlined recent cost-saving measures, focusing on the renegotiation and termination of contracts with Independent Power Producers (IPPs). Five IPPs have been shut down, resulting in savings of Rs411 billion, while revised agreements with eight bagasse-based power plants have cut Rs238 billion by eliminating dollar-based contracts. Additionally, the Cabinet approved the termination of agreements with 15 take-or-pay IPPs, leading to projected savings of Rs802 billion. These plants will now only receive payments for actual operational use, significantly reducing the financial burden.
Senator Shibli Faraz criticized the lack of strategic planning within power sector institutions and called for the establishment of a dedicated think tank to address systemic inefficiencies. He emphasized the importance of planning to avoid repeating past mistakes, particularly with IPPs and rising energy costs. Faraz also criticized the government for penalizing small-scale solar energy producers, questioning its claims of providing the cheapest electricity in the region. He stressed that reducing electricity costs is crucial for export growth. Additionally, Faraz expressed frustration over the lack of follow-up on a previous report he submitted on circular debt, urging the committee to revisit the report for actionable insights, asking, “Was it a fairy tale or nonsense? We need clarity.”
The committee discussed a petition regarding the restructuring of the National Transmission and Dispatch Company (NTDC). The Power Division secretary outlined plans to divide the NTDC into smaller, more efficient units. Engineers will remain with the national grid company, while a new energy company will handle project execution and infrastructure development. The government has established the Energy Infrastructure Development and Management Company to address inefficiencies in the power sector, overseeing feasibility studies, grid station assets, and project execution with donor involvement.
The Board of Governors for this company will be appointed from the private sector. The government is also introducing a power market by merging the CPPA’s market operations and NTDC’s system operations to create the Independent System and Market Operator (ISMO). NTDC Chairman Fayaz Chaudhry is tasked with submitting a plan by March. The committee also approved the introduction of the Competitive Trading Bilateral Contracts Market (CTBCM), where multiple buyers and sellers will independently trade energy contracts, initially in a limited manner.
The committee emphasized merit-based appointments for CEOs and management in DISCOs, and requested a report on the removal of SEPCO’s executive engineer due to corruption allegations, with findings due in 15 days.
