Reforming electricity distribution companies

The energy value chain cannot be fixed without reforming electricity distribution companies. The inability to fix the chain and make electricity more affordable will continue to keep Pakistan stuck in a low-growth trap while accelerating de-industrialisation. The electricity distribution companies (Discos) are plagued with multiple problems, from governance and pricing to operations. For any reforms to be successful, the first step needs to be the elimination of a national uniform tariff — which basically penalises efficiency and high repayment propensity while incentivising inefficient processes and low recoveries. Through a national uniform tariff, well-managed Discos foot the bill for distribution companies with high losses. Disaggregating prices and, consequently, losses will remain critical for any reform. In such a scenario, incentives need to be aligned so that the Discos and respective provinces are motivated or forced to improve efficiencies and recoveries.