Operational Inefficiency of Power Plants Cost Power Consumers Rs. 24 Billion in FY22

System constraints and operation of inefficient power plants due to the unavailability of Liquefied Natural Gas (LNG) have resulted in an additional financial burden of more than Rs. 24 billion on the power consumers during 2021-22.

The power sector faced a shortage of RLNG during most of the year which compelled generation from expensive power plants, said NEPRA State of the Industry Report 2021-22 released here on Friday.

During FY22, due to the unavailability of the RLNG, comparatively inefficient power plants have been operated having a financial impact of Rs. 19,332 million. This issue can be resolved by better supply chain management of RLNG including enhancement of gas transmission and distribution infrastructure, development of storage facility for RLNG, and implementation of hybrid general services administration (GSA) models to optimize the utilization of RLNG.

Plant Operation in violation of Economic Merit Order

During FY22, the operation of various power plants in violation of merit orders was witnessed. The main reason for out-of-merit operations of power plants was non-utilization or underutilization of efficient power plants either due to non-availability of fuel i.e. RLNG, or transmission and/or distribution constraints.

The financial impact on these accounts is as under

  • Due to the RLNG shortage, expensive plants were operated which have an impact of Rs. 19,332 million
  • Due to system constraints, the financial impact is Rs. 3,670 million
  • Due to the underutilization/non-utilization of efficient power plants, the financial impact is Rs. 260 million.

The out-of-merit plant operation is an old issue, which the Authority has been highlighting for many years for improvement. To assess the performance of the System Operator and the financial impact of out-of-merit plant operation from FY18 to FY22, a contract has been awarded to a third-party consortium to carry out a comprehensive study and present its findings and recommendations for Authority’s consideration.