THE debate on Pakistan’s power sector has mostly focused on the macro-fiscal issues plaguing it: electricity shortages, circular debt, and expensive power purchase agreements with private producers. These are often cited as factors responsible for making electricity unaffordable. Structural issues at the retail electricity distribution stage such as exorbitant transmission and distribution losses, power theft, unrecovered bills, corruption, and bad management seldom find space in the overall power-sector reform discourse. Nor is the chronic issue of overbilling by distribution companies (including the privatised K-Electric) to cover up their losses and inefficiencies, and inflate their revenues, considered a serious matter. The practice continues despite widespread complaints of inflated billing by consumers. Even repeated warnings by the power regulator Nepra have failed to convince distribution companies to end this practice. Past attempts to instal smart meters to resolve the issue of overbilling have been resisted by the distribution companies. A smart-meter project funded by the ADB in Lahore and Islamabad had to be discontinued two years ago, and has only recently been revived.
In its State of Industry Report 2019, Nepra has once again highlighted the issue of overbilling. Expressing its concerns over the pathetic performance of Discos, it says: “The overbilling issue … still haunts the consumers of electricity. Discos are still involved in systematic manipulation of the electricity units to manage their distribution losses which are factually higher.” It further points out the inability of the retail electricity sellers to cut their transmission and dispatch losses, which is one of the main reasons for overcharging consumers. Another reason for overbilling is the inability of the distribution firms to fully recover their bills. Instead of improving their recovery ratios, Discos have been allowed to resort to revenue-based blackouts in high-loss areas. This practice has, in turn, proved a disincentive for them to improve bill recoveries. Besides, it has stifled sales growth and increased electricity prices. It is believed that the practice of overbilling is in the knowledge of the management of the Discos. Macro-fiscal issues afflicting the power sector need to be tackled to prevent its total collapse. But these are more like the symptoms of a deep-rooted disease, which cannot be cured without treating the causes — retail-level structural problems that are eating their way through to the top of the power sector. No reforms will succeed without fixing distribution companies and ensuring competition at the retail level.