Energy Experts Hail K-Electric’s Privatization as a Role Model for other DISCOs

Islamabad: K-Electric’s privatization has led to significant improvement in operational efficiency, reduction in transmission & Distribution losses and infrastructure as well as technological upgrades.

This was the conclusion reached by energy experts at a report launch ceremony by SDPI and Network for Clean Energy Transition (NCET) titled “Privatization of Pakistan’s Power Utility Sector: Opportunities & the Lessons Learnt”.Discovery of hydrocarbons in Tal Block at Razgir-1 Exploratory Well (Lockhart Formation)

Highlighting the imminent need to curb burgeoning circular debt and introduce innovation in the power sector, experts urged that privatization of power utilities is the only way forward.

The opening remarks were given by Qasim Ali Shah – Deputy Executive Director at SDPI who highlighted that the Government was striving to privatize the power sector utilities as a solution to sector’s woes which include hikes in tariffs, rising circular debt and unreliable electricity provision in the country. He also said that the session has been convened to benefit from the lessons learnt from K-Electric’s privatization.

Dr. Khalid Waleed – Research Fellow SDPI while presenting the report, revealed that there is troika of economic turmoil, energy crisis and climate change woes unitedly driving the mix issues in the country. In the power sector, he said there are inefficiencies in infrastructure, transmission and generation system, whereas privatization is seen as a solution to reduce inefficiencies in the power sector. He also cited the global best examples of power sector privatization like in Chile and UK that reaped convincing results.

He said in KE’s case also there have been considerable benefits to the organization, consumers as well as to the economy. He added that since privatization, K-Electric has cut its Transmission & Distribution (T&D) losses in half, doubled its power consumed and consumer base. Khalid further added that K-Electric has also revolutionized its customer engagement through digital platforms which provide real-time updates on billing, power outages, and other services. Citing the report, he said that KE has over 1.88 million consumers digitally connected with it today unlike any other DISCO in the country.

K-Electric has also been endorsed by the World bank for saving 900 billion rupees for consumers and Government, through its privatization.

“There is a dire need of regulator’s role as a facilitator to allow more private entities to enter a competitive process, improve demand and industrialization support, increased market competition and effective wheeling reforms,” Dr Khalid said.

In his keynote address, CEO K-Electric, Syed Moonis Abdullah Alvi said privatization of power sector is the cornerstone of every sustainable development initiative for Pakistan. Before privatization, he said, K-Electric (which was KESC at that time) was receiving operational subsidy from the government to fund its operations which was reduced to zero after its privatization.

He said since privatization, KE has invested about USD 4 billion across its valuechain. With regards to Tariff Differential subsidy (TDS), Moonis underscored that TDS was being provided to consumers of Karachi and not to K-Electric.

He also added that KE’s success as a private entity was also evident from 15 bids that it received for its renewable projects because the producer had confidence in KE meeting its expectations. He added that KE was able to attract the lowest bid of 3.88 cents for its renewable projects very recently.

Ali Khizar – senior economist while agreeing to Moonis highlighted that the biggest benefit of privatization was that KE had no addition to circular debt, had there been other discos privatized as well, the circular debt would either be too low or non-existent. He highlighted that while the focus should be on the privatization of distribution companies, immediate focus was also required on demand stimulation for power sector as it would reduce the menace of capacity payments.

Asad Mahmood – Principal Consultant at Arzachel and renewable energy consultant said that the future of the electricity distribution companies (DISCOS) hinged on their ability to adapt and thrive in an increasingly competitive and regulated market. “One of the most pressing needs is to increase electricity sales, which is essential not only for revenue growth but also for the broader expansion of our energy sector. Every DISCO stands to benefit from selling more, but achieving this requires a shift from the status quo.

To navigate this transition effectively, DISCOS must embrace a business-as-usual scenario that involves reimagining their operations. This means considering what value-added services can be introduced to enhance customer satisfaction and loyalty where K-Electric stands out,” he said.

The seminar concluded with a robust endorsement of privatization as a pivotal strategy for the power sector’s future. Experts collectively emphasized the significant improvements witnessed in K-Electric’s operations post-privatization, advocating for a similar approach for other DISCOs to enhance operational efficiency and financial independence.