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Part3-Chp%208 Assignment for load shedding

The main state owned utilities are the water and

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Unformatted text preview: ion program is reportedly underway. The main state-owned utilities are the Water and Power Development Authority (WAPDA), and the Karachi Electricity Supply Corporation (KESC), which serves only Karachi and surrounding areas. Together, WAPDA and KESC transmit and distribute all power in Pakistan -- over half to household consumers, about one third to industrial consumers and the rest to commercial and government consumers. Rates are determined by the National Electric Power Regulatory Authority (Nepra) and disputes over adjustments to rates are common within the industry. For example, Nepra announced in July 2004 that electricity rates would be lowered for domestic, industrial and agricultural customers in the three distribution areas of Hyderabad, Peshawar, and Quetta. The distribution companies affected complained that due to the lower rates, they will be unable to cover their operating costs. Nepra has advised the federal government to subsidize the providers at a cost of around $24 million. WAPDA and KESC too blame low rates on weak earnings and enormous debts to fuel suppliers. WAPDA is at the center of a public sector "circular debt" problem, in which state firms and government ministries have failed to pay power bills, and WAPDA has failed to meet obligations to them and to private sector creditors, especially state-owned PSO. Power theft is a pressing issue in Pakistan. While it is impossible to precisely measure theft (as opposed to line loss), it is obvious that it constitutes a sizable proportion of Pakistan's overall 30% loss rate. The situation was so severe by early 1999 that the Pakistani government assigned army units to look for illegal connections to transmission lines and rigged meters. Power theft is just one part of the financial problems for WAPDA, however. Growth in power generation in recent years has come primarily from new independent power producers (IPP's), some of which have been funded by foreign investors, and a few WAPDA 125 hydroelectric dam projects. The two largest private power plants in Pakistan are the Hub Power Company (HUBCO) and the Kot Addu power company (KAPCO). HUBCO is owned by a consortium of International Power (UK), Xenal (Saudi Arabia), and Mitsui Corporation, and has a 1,300-MW capacity. The Kot Addu plant, with a 1,600-MW capacity, was privatized in 1996 (from WAPDA), and International Power holds a 36% equity stake, while the government holds a soon-to-be divested 64% stake. Both of these plants, as well as a few other small private operators, sell power to the national grid currently run by WAPDA. By May 2004, International Power cut its holdings in HUBCO from 26% to 16%, after the plant saw a drop in profits. This is reportedly part of International Power's overall global strategy and not a comment on the Pakistani energy sector. In April 2003, the Ministry of Industries and Production announced that it was planning to build coal-fired power-generation plants in export processing zones and in special industrial states to...
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