Monday, August 9, 2010

KESC on the way to improvement.

KESC is on the way to improve its performance.On February 26,201o P.M.Gilani inaugurated its 220 MW Combined Cycle Power Plant(CCPP) at Korangi,replacing the existing old and thermally inefficient power plant.The old Plant was a simple gas turbine with a heat rate of 16000 Btu per Kwh.The new plant, would be having a heat rate of less than 8000 Btu per kwh.This would reduce production cost tremendously, and will also reduce consumption i.e. more than double production with the same amount of gas.Part of the load-shedding is due to shortages of gas also.

Today ,the newspaper supplement announced the arrival of gas turbines for a 560 MW CCPP, termed Bin-Qasim-2.The Thermal efficiency of this plant is also very high(50%).The existing power plant is Steam Turbine based with a heat rate of 10,000 btu per kwh.The new plant is at least 25 % more energy efficient.The new plant configuration is 3 GT(129 MW) +3 HRSG=1 + ST(200 MW)= 560 MW.The plat ,however,would be commissioned gradually and would come on full steam by March 2012.Gas turbines are usually installed fairly quickly.However the steam cycle including Heat Exchangers and steam turbine consume quite some time.By continuing with this kind of BMRE,there is a potential to achieve energ efficiency improvements of around 30-60%. %.In today's energy economics,fuel cost has a predominant share ,often exceeding
60-70% of the total generation cost.If one saves even 1% fuel,one is able to save a lot of costs.

This is the kind of (thermal ) efficiency improvement that consumers and every body elase want KESC to acquire to reduce its losses and start making reasonable return on investment and not through unnecessary demands for increase in Tariff.Current losses are an opportunity. Convert these into profit.

KESC's Tariff system is different than what is applicable on other public sector utilities like LESCO ,FESCO and others.KESC works on a fixed multi-year tariff system with provisions for charging escalations in fuel and O&M costs.Thus any cost saving or increase on account of thermal efficiency improvement or changes are not passed on to the customers.Without such improvements KESC would and continues to run into losses which have passed beyond a level of Rs 100 billion, jeopardizing the financial viability of the company.Thus such improvements in KESC's operations indirectly benefit the users.Elsewhere,it is a cost-plus formula.Utilities are paid what they spend plus a fixed rate of return.NEPRA quarterly makes determinations in that respect.The freedom of charging all costs to the customers have not been given to KESC.It was feared that a private party may charge all kind of costs to the consumer,if it was given a free hand.Although there are comparable ratios,and extra-ordinary benefit cannot be extracted out of cost-plus tariffs.

KESC has also reported reduction in Transmission losses from 4.2 % in 2008 t0 2.4% now,which is again a good omen.There are obvious difficulties in reducing distribution losses which have a high degree of theft and pilferage.This has political and social dimensions.Still utilities own employees are reportedly in league and even force theft on the poor user.It is the middle man(KESC mafia) which makes bulk of the money. Fortunately Smart Distribution transformers have begun to be manufactured in Pakistan,installation of which would significantly help in cutting down on both technical and as well as theft losses.

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