Technical Losses, Overbilling, and How DISCOs Can Improve

Aging infrastructure contributes significantly to technical losses in Pakistan's power distribution system

Introduction

Electricity distribution is a critical component of the power sector, ensuring that electricity generated at power plants reaches end consumers. However, inefficiencies in the distribution system lead to technical losses and overbilling, causing financial strain on consumers and reducing the reliability of power supply.

Distribution Companies (DISCOs) face significant challenges in managing these losses, often passing the financial burden onto consumers through inflated bills. This blog explores the causes of technical losses, how they contribute to overbilling, and the reforms needed to improve efficiency in the power distribution sector.

What Are Technical Losses in Power Distribution?

Technical losses occur due to inherent inefficiencies in the transmission and distribution of electricity. These losses are primarily caused by:

• Resistance in Power Lines – As electricity flows through conductors, some energy is lost as heat due to resistance (I²R losses).
• Transformer Inefficiencies – Power transformers lose energy during voltage conversion.
• Poor Load Balancing – Uneven distribution of load across phases increases losses.
• Aging Infrastructure – Old and poorly maintained power lines and equipment lead to higher losses.
• Overloaded Distribution Networks – Excessive load on weak infrastructure increases energy dissipation.

According to the World Bank, technical losses in developing countries can range from 15% to 40%, significantly higher than the global best practice of 5-8%.

How Technical Losses Lead to Overbilling

When DISCOs experience high technical losses, they often compensate by inflating consumer bills. Here's how it happens:

1. Recovery of Lost Revenue

DISCOs are responsible for supplying a certain amount of electricity, but due to technical losses, a portion never reaches consumers. To cover this gap, DISCOs overcharge consumers to recover lost revenue.

2. Estimated Billing (Without Metering)

In many regions, consumers are billed based on estimates rather than actual meter readings. Since DISCOs cannot accurately measure losses, they impose arbitrary charges, leading to overbilling.

3. Non-Technical Losses (Theft & Fraud) Mixed with Technical Losses

DISCOs sometimes bundle non-technical losses (such as electricity theft and meter tampering) with technical losses, further inflating bills for honest consumers.

4. Lack of Transparency in Billing Systems

Many DISCOs do not provide detailed breakdowns of electricity consumption, making it difficult for consumers to verify charges.

Reforms Needed to Reduce Technical Losses & Overbilling

To improve efficiency and fairness in electricity distribution, DISCOs must implement the following reforms:

1. Modernizing Grid Infrastructure

• Replace old transformers and conductors with high-efficiency alternatives.
• Implement smart grids for real-time monitoring and loss reduction.
• Upgrade substations to minimize energy dissipation.

2. Implementing Advanced Metering Infrastructure (AMI)

• Smart meters eliminate estimated billing and provide accurate consumption data.
• Prepaid meters reduce revenue leakage and encourage energy conservation.

3. Improving Load Management

• Balance loads across phases to minimize losses.
• Implement demand-side management to reduce peak load stress.

4. Reducing Electricity Theft & Non-Technical Losses

• Use anti-theft technologies like tamper-proof meters.
• Conduct regular inspections to detect illegal connections.
• Enforce strict penalties for power theft.

5. Transparent Billing & Consumer Awareness

• Provide itemized bills showing consumption and losses.
• Educate consumers on how to read meters and detect billing errors.

6. Government & Regulatory Interventions

• Enforce performance-based tariffs to incentivize DISCOs to reduce losses.
• Provide subsidies for infrastructure upgrades.
• Introduce independent audits of DISCOs' loss figures.

Case Study: How Some Countries Have Reduced Losses

India (UDAY Scheme)

Reduced Aggregate Technical & Commercial (AT&C) losses from 22% to 18% through smart metering and infrastructure upgrades.

Brazil (Energy Efficiency Programs)

Cut losses from 16% to 12% by modernizing distribution networks and combating electricity theft.

Germany (Smart Grid Adoption)

Maintains 4-6% technical losses due to advanced grid management and renewable integration.

Conclusion

Technical losses in Pakistan's power distribution system contribute significantly to overbilling and unreliable electricity supply. While some DISCOs like LESCO and IESCO have made progress in reducing losses, others like PESCO continue to struggle with high loss ratios.

The solution requires a multi-pronged approach combining infrastructure modernization, smart technologies, theft reduction, and regulatory reforms. Consumers can protect themselves by:

• Regularly submitting meter readings to avoid estimated bills
• Verifying their consumption patterns for discrepancies
• Reporting suspected overbilling to NEPRA