Load-shedding returns to Karachi

FOR many people in Karachi, load-shedding was becoming a receding memory. An even larger number may not agree, since load-shedding in areas designated as ‘high loss’ never really went away. Industrial areas and those localities where recoveries were better, however, are now used to virtually uninterrupted power supply, except for the occasional technical fault.

But all that changed towards the end of March, when a sudden dispute erupted over provision of natural gas to the power utility, which runs most of its power generation fleet on gas. The dispute broke out in the midst of a heatwave, when demand for electricity had spiked, and K-Electric put in a request for enhancement of gas supplies by a minimum of 120mmcfd for a few days, and an average of 190mmcfd through the summer.

The request was refused and almost immediately load-shedding returned to the city that was largely unprepared for it. Since then it has been a relentless bout of blackouts that remind everyone of the bad old days of the late 2000s. What happened to reverse the situation so fast, and why is it persisting? And almost immediately, a rather unseemly public spat broke out between the gas supplier and the power utility.

Since K-Electric bore the brunt of the public ire, it went first with accusing SSGC of reducing the supply of gas, which meant the company could not run one of its newer turbines to meet the additional demand. SSGC responded that the supply of gas “has not been reduced or increased, despite what K-Electric says”.

It went on to say that the company “is receiving less gas from fields and as per gas load management plan, it is providing gas to domestic consumers first and then to other customers with whom it has contractual agreements”. To conclude, it claimed K-Electric “has no such supply agreement and yet it continues to provide it with reasonable gas supply, just for the people of Karachi”.

Cutting off supplies to press for payment is tantamount to holding the entire city hostage to a single payment related dispute.

That’s when the confusion began. A quick check with the ministry of petroleum showed there were no problems at any of the gas fields that supply SSGC, and all supplies were in fact normal. When it was pointed out to SSGC that the matter is not of “reduced supply” but rather of failure to entertain a request for increased supply due to onset of summer and increased demand for power, their response brought a new element into the picture: they were demanding payment of outstanding arrears from K-Electric before entertaining the request.

The next day another tweet from the company added this new element. KE should, the company said from its official account, “clear all its outstanding dues and come on table [sic] to sign a valid GSA” (Gas Supply Agreement). Fair enough, but in a 24-hour period, the company had totally shifted its stance as to why it was refusing a request for increased gas supply. One day they claimed that their own supplies were limited, the next day they admitted the matter related to a payment dispute.

The payment dispute is a bit complicated. When K-Electric’s new management came in, SSGC served up a bill of almost Rs78 billion outstanding against the power utility for consumption of gas in years past, as well as late payment charges (which the company calculates as Rs48bn), interest and other billings added to it. In fact half a decade ago, both of these utilities reached an agreement that K-Electric will pay the amount billed for gas consumption, which was agreed at Rs10.8bn, while all monthly payments will remain current. Throughout these years, gas supply to K-Electric did not create a dispute large enough to disrupt the life of the metropolis, until today.

Outstanding payment disputes exist all along the power supply chain, but rarely if ever is a company allowed to stop the provision of fuel, or power, to another utility on account of lack of payment. There are two precedents worth recalling here. Sometime in 2008, then MD Pepco had made a decision to halt the supply of grid electricity to Karachi in a sudden move, also on account of lack of payment. The result was disastrous: the city ground to a halt instantly as all power fell out once its own generation plants tripped on account of the sudden jolt administered to it from the grid.

The second example was barely a year later, when then CEO of K-Electric announced that his company would be cutting the power supply to the Karachi Water and Sewerage Board (KWSB) which is one of its largest defaulters.

A short while after taking these steps, they were both removed from their position. The reason is that in the business of utilities, you cannot cut off supplies to press for payment. That is tantamount to holding the entire city and its residential, commercial and industrial life hostage to a single payment related dispute. Such disputes can sever business relationships between supplier and consumer in many other fields, but not between two utilities that serve millions of people.

Supplies can be cut for other reasons, such as a policy decision taken at the highest levels of government, but even here, there is no precedent ever to curtail supplies to an entire city just to press for payment. Policy decisions can also be taken to curtail supplies to specific sectors or categories of consumer, like the CNG sector, but they are never taken against entire utilities in this way.

Whatever the dispute is between these two companies, it must be settled between them without disrupting the life of the city’s residents and businesses. It is difficult to imagine what happened so suddenly to force SSGC to take such a radical step as curtailing supplies, but whatever it is, somebody in the petroleum ministry needs to issue orders to end this matter, and pursue outstanding claims through channels that have already been in play for years.

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