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Lesco fails to achieve Nepra-determined 2 percent loss reduction target

  • April 27, 2023

ISLAMABAD-Lahore Electric Supply Company (Lesco) has failed to achieve 2 percent loss reduction target that was determined by Nepra in its previous MYT, due to its inability of materialising Rs30 billion ADB funds for the AMI meter project, as the regulator approved Rs107.307 billion new five years investment plan for the company.

In its determination in the matter of Investment Plan filed by Lahore Electric Supply Company Limited (Lesco) for MYT Tariff Control Period from FY2023-24 to FY2027-28, NEPRA has allowed an investment of Rs 64,130 billion from the LESCO own resources, while Rs 43.177 billion through consumer financing. LESCO has sought approval for investment requirement of Rs. 16,184 million for STG (Expansion Rehabilitation) project, which was allowed by NEPRA.

The regulatory has demanded Rs. 19,998 million in the head of Energy Loss Reduction (ELR) including 1,425 million for Airiel Bundle Cable (ABC) programme. The claimed amount was allowed by the regulator in the investment plan. The company claimed Rs. 46,713 million under the head of Distribution of Power (DOP) programme, which includes Rs. 43,177 million related to consumer financing while Rs. 3,536 million will be financed from own resources. The Authority is of the opinion that DOP programme is very important because its purpose is to meet the future load growth and provision of electricity services to new consumers. The consumer growth rate forecasted by LESCO is around 5%.The regulator has allowed investment of Rs. 46,713 million as claimed by LESCO for DOP programme and it is being allowed to ensure timely service delivery to new consumers.

On the LESCO claimed cost of Rs. 8,906 million in the head of AMI/Smart Energy Meters, the Authority observed that AMI project with remote disconnection features at consumer level aiming 50 feeders having highest losses is essential for LESCO to achieve the NEPRA determined targets of TD tosses. Moreover, LESCO was allowed an investment of 30 billion rupees for AMl project in MYT redetermination dated 18-9-2017, however, LESCO was unable to materialize this ADB funded project. This 30 billion project was aimed at achieving 2% loss reduction. Keeping in view the importance of AMI project in modernization of LESCO’s infrastructure thereby bringing commercial improvements in company, the claimed investment of Rs. 8,906 million for AMI project is being allowed to LESCO. As per the LESCO claim the investment will bring a saving of 162.62 GWh.

LESCO claimed cost of Rs. 17,553 million in the head of others Functional Improvement. Under this head, LESCO had presented a plan to provide 526 vehicles (700CC to 1800 CC) to its grade 17 and above officers. The overriding purpose of this policy is to facilitate the officers by providing them vehicles under joint ownership for official and personal use. This initiative will be an attraction for the officers for getting vehicles, enabling them to serve the company efficiently and effectively. The officers will use vehicles for official use as first priority while for personal use as well. It will apply to all officers (BPS-17 and above) except consultants and deputationists. However the claim was rejected by the Authority saying that the regulator is of the opinion that under prevailing economic situation such costs need to be avoided. 

As far as TP/safety equipment, Transformer Workshop and operational vehicles are concerned these are very important for ensuring safety of staff and carrying out routine works as per safety standards. Moreover, SCADA, GIS Mapping, ERP are also important for system operations and asset management especially in view of Market Opening under CTBCM regime. Further, the Authority noted that the historic utilization of investment in others head which included TP for safety, ERP, operational vehicles, Offices furniture, buildings and civil works is more than 90 percent. It is important to note that for FY 2022-23 the loss target allowed to LESCO is 8%. Moreover, it is noted that by Authority that the actual losses of LESCO for FY2021-22 are 11.52% against the approved number of 9.08%. LESCO explained to the Authority that the reason for deviation from Authority’s approved TD loss targets is non-implementation of AMI project as 2% reduction was envisaged by implementation of AMI project. Furthermore, the loan approved for AMI project of LESCO has been cancelled by ADB.

The Transmission Losses allowed to LESCO during FY 2022-23 are 1.75%. The transmission loss target for 1 year of MYT control period i.e. FY 2023-24 is taken same as 1.75% with overall decrease of 0.3% in preceding years of the MYT control period in line with the submissions of LESCO. The Distribution Losses allowed to LESCO during FY2022-23 are 6.25% which include 4.10% of H.T/11 kV loss and 2.15% of L.T tosses. This target also contained the 2% reduction in distribution losses on account of the AMI project. However, due to scrap of project, the proposed reduction of 2% could not be achieved. Therefore, the Authority has taken starting point of 8.25% rather than 6.25% for distribution losses on account of non-implementation of AMI project.

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