Pakistan Power Distribution Companies (DISCOs) Performance Improvement p Program (PDIP)

Ministry of Water and Power Government of Pakistan

Background
First Power Sector Reform Activity under the Pakistan-US E P ki US Energy S Sector S bili Stabilization and i d Development Program. US support for the Pakistan Power Distribution Companies (DISCOs) Performance Improvement Program (PDIP) was announced by U S Secretary U.S. of State in October 2009.

Key GOP Entities Supporting the Program

The DISCOs themselves Ministry f W t Mi i t of Water and Power (MoWP) dP (M WP) Ministry of Finance (MoF) Planning Commission National Electric Power Regulatory Authority (NEPRA).

Program Description
Basic purpose of the program is to improve the supply of electricity and operational and financial health and self-sufficiency of the entire power sector through major improvement of the performance of Pakistans Governmentowned Power Distribution Companies (DISCOs). It will be achieved through well targeted direct support of four or more of the DISCOs and indirect support of all others. PDIP will be implemented through jointly developed DISCO Performance Action Plans. The Performance Action Plans will be jointly developed taking into account the results of operational audit of each directly participating DISCO and other participating entities. i i i i i Purpose of these audits will be to establish baseline information required to measure achievements under PDIP and other related programs.

Program Description (continued)

The audits will cover managerial, operational, financial, and customer service situation of each DISCO and include the identification of opportunities and methodologies that will be used to reduce technical and non-technical losses and improve network, institutional and management and staff performance. Carefully selected hi-tech commodities, software and capacity-building support will be provided. PDIP will provide Pakistani and international experts and specialists to work collaboratively with designated counterparts of each participating DISCOs, NEPRA, MoWP and other entities. DISCO participation will be competitive. The basic prerequisites for participation include DISCO Management and Board of Directors and MoWP i i i i l d SCO d d f i d approval of the respectively jointly-developed Performance Improvement Action Plan.

Program Objectives
Goal of PDIP is to improve the overall commercial performance of the participating DISCOs to levels comparable to those of well-run distribution utilities in other progressive developing countries. Performance Improvement objectives and targets under PDIP will include the following and other s that will be identified jointly during implementation:
Improved DISCO Governance and Management Creation of legal and political space required for DISCOs to be able to operate in a commercially rational manner Establishment of Full-Cost Recovery Tariffs Introduction of Smart Technologies in areas with strong potential for performance improvement Substantial improvement of Human Resource Management including the introduction of performance based incentives

Program Objectives

(continuation)

Substantial reductions in Technical and Non-technical Energy Losses including reduction in energy theft and p power factor optimization. p Improvement in Energy and Power Factor at points of purchase, during flows through network, and end-user sales. The latter will focus initially on large consumption customers. t Improvement in Billings, Collections, and Revenue Management. Improvement in Customer Service including reduced planned and unplanned outages and voltage fluctuations. Elimination of dependence on/need for GOP subsidies. li i i fd d / d f GO b idi

Partners with the Donor agencies i

PDIP is grant-financed by USAID. Implementation will be done in close coordination with the activities financed by the ADB, the WB and other bi-lateral donor organizations. These other activities include: WB Electricity Distribution and Transmission Improvement, 2008 - $256 million, main focus on reducing technical losses. Includes key performance losses indicator agreements. ADB Power Distribution Enhancement, 2008 - $810 million, million main focus on reducing technical losses. losses

IMPLEMENTATION O
Implementation of PDIP began on October 1, 2010 and its first phase will have a duration of three years. y A special Implementation Start-Up Workshop will be held in early November, 2010.AID. y , Implementation will be done in close coordination with the activities financed by the ADB, the WB and other bi-lateral donor organizations. These other activities include:

LESSONS LEARNT SSO S

All reform programmes have to be homegrown in order to succeed. Despite funds having been available none of the DISCOs have procured smart metering so far. Funds are available for introduction of new technologies should the DISCOs require. Part f the l P t of th loss reduction programme should d ti h ld necessarily include new technologies which should be inducted ASAP.