Pakistan's energy crisis

15 July 2011 Last updated at 02:20 GMT By Shahzeb Jillani BBC News, Karachi The BBC's Shahzeb Jillani looks at the impact of power cuts in the country's industrial hub Karachi

Pakistan has a serious electricity problem. Ask Mohammed Yasin, who sells sugarcane juice from a small, rented shop in Karachi's Neelum Colony.

For months, his business has been suffering because of unplanned power outages, often lasting eight to ten hours.

"I got fed up and finally had to buy this run-down diesel generator," he says pointing to the noisy equipment that is helping turn the wheel of his cane-crushing machine.

"The costs of a diesel generator are a major dent in my earnings, but what else can I do?" he asks.

Mohammed is only one of millions who have been affected in Pakistan; a country where power cuts have become a national frustration, often overshadowing concerns about Pakistan's security situation.

Spontaneous protests by citizens fed up with power blackouts have become an almost daily occurrence in cities and towns across the country.

Television channels regularly show pictures of people setting tyres on fire and shouting slogans to vent their anger at the authorities.

Earlier this month, a demonstration in front of a nuclear power plant in the city of Mianwali, Punjab, turned into a riot.

Industry leaders say power cuts are slowing Pakistan's already struggling economy even further, forcing factory closures and putting thousands out of work.

Supply vs demand The main reason given for Pakistan's problems is simple; energy supplies have struggled to keep pace with economic growth.

Fawad Khan, an energy analyst with a leading investment firm in Karachi, says that in 2008 Pakistan used to cut power for an average of three hours a day to regulate supply.

However, by 2010 that downtime had grown to six hours on average.

Now, unless drastic action is taken, many fear the blackouts will just get longer and longer.

Analysts say another factor adding to the problems is Pakistan's reliance on oil-based electricity. This has grown from 16% of total output in 2005 to 38% in 2010.

Critics say Pakistan has so far lagged behind in developing cleaner sources of energy as an alternative to the more expensive imported fuel and its own limited gas reserves.

"Most countries in the region like India, Nepal, Bangladesh are facing energy shortages, but our problem is probably the worst," says Aziz Memon, a leading textile industrialist.

Mr Memon says a lack of planning and investment in new power generation has deepened the crisis.

"We have problems of infrastructure, inefficiency and decades of mismanagement," he says.

Internal issues

Karachi, a city of 18 million people and Pakistan's main economic hub, used to be known as "the city of lights".

Today, large parts of it are regularly plunged into darkness.

As well as the perennial problems of creaking infrastructure and a lack of investment, other factors are also conspiring to pull the plug on supplies.

Over the past few months, the city's main electricity provider, the Karachi Electric Supply Corporation (KESC), has been locked in a nasty industrial dispute with the unions over job cuts.

The corporation is trying to lay off 4,500 of workers in an attempt to cut costs and improve efficiency. The employees are fighting back by camping outside the company's head offices as part of an indefinite strike.

As the stand-off drags on, millions of Karachi residents are turning to less regulated ways of getting energy, not least because when they can get power they are often having to pay more for it.

With electricity costs on the rise, pushed up by higher global commodity prices and internal inflation, a growing number of people are stealing the power they need by rigging ad-hoc wires and power meters.

The KESC says it is working on generating and supplying more electricity, but admits it has not had much success in trying to curb distribution losses.

"Despite improvements in some areas, one problem still remains," says Ghufran Atta Khan, a spokesman for KESC. "And that is, we haven't been able to stop about 30% of our electricity from being stolen through illegal connections."

Back at the juice shop there is still no power and the expensive diesel generator is chugging along.

Mohammed Yasin is honest about the stark business choices he faces.

And while he says he will resist the temptation to steal electricity, many others seem unwilling to wait for Pakistan's energy revolution to arrive.

View the original article here

British Gas puts energy bills up

8 July 2011 Last updated at 11:31 GMT British Gas director Ian Peters said the rises were fair and justified

British Gas, owned by Centrica, is putting up its domestic gas and electricity prices from 18 August.

Gas bills will rise by an average of 18% and electricity bills by an average of 16%.

The change will affect nine million households with the average dual fuel customer paying an extra ?190 a year.

The company blamed the rising wholesale cost of gas, which has gone up by 30% since last winter.

British Gas managing director Phil Bentley said its bills were being driven higher by the fact that the company buys 50% of its gas on the international wholesale market.

"We are buying in a global energy market and have to pay the market rate," he said.

"Rising wholesale costs is an issue facing all energy suppliers," he added.

The company said it had been selling energy at a loss for the past three or four months.

"After we put these prices up we will be making a fair return," Ian Peters, a British Gas director told BBC News.

"We are investing in the future energy supply of the UK... and energy efficiency in our customers' homes," he added.

'Healthy profits'

Centrica had already warned that it was likely to raise prices this year.

In May, the company said its customers were not paying enough to reflect the increased cost of gas on the wholesale markets, and that this would depress its profits for the first half of the year.

But this argument was rejected by Mike O'Connor, the chief executive of Consumer Focus.

"Wholesale costs have gone up but they are still around a third lower than their 2008 peak," he said.

"Yet in this time British Gas' prices alone have risen by around 44% on gas and 21% on electricity and suppliers have made healthy profits."

Last year, British Gas' residential business made ?740m.

Spending squeeze

In June, Scottish Power became the first of the big-six energy suppliers to announce another set of price increases.

It said it would raise the cost of gas by 19% and the cost of electricity by 10% at the start of August.

The latest increase in energy bills, which is likely to be followed by other big energy suppliers, comes after a round of increases last winter which saw British Gas put its charges up by 7% in December.

"Average household bill for a dual fuel British Gas customer will now go up from ?1,096 to ?1,288," said the price comparison service Uswitch.

"In total, British Gas customers will have seen their bills shoot up by ?258 or 25% within a year, taking them from ?1,030 a year to ?1,288," Uswitch added.

Richard Lloyd, of the consumers' association Which?, said the energy firm's announcement was an unwelcome move.

"Many people are already having to cut back on essentials because of the rising cost of living, and with energy bills rising further, this could be a cold winter for many," he said.

The Energy and Climate Change Secretary, Chris Huhne, said the increasing burden of energy bills highlighted the need to move away from generating electricity by burning gas and coal.

"The UK electricity market has to change, so that we escape the cycle of fossil fuel addiction," Mr Huhne said.

"Alternatives like renewables and nuclear power must be allowed to become the dominant component of our energy mix. "

View the original article here

Japan imposes new energy limits

1 July 2011 Last updated at 13:00 GMT Boards in Tokyo tell office workers the current power use compared to supply Factories, shops and offices in Tokyo have been told to cut down on their energy use because of power shortages.

Large businesses in the Tokyo area will have to use 15% less energy than last year because of the closure of the Fukushima nuclear power plant.

The latest restrictions come as Japan's big manufacturers have turned pessimistic about business conditions, according to the latest Tankan survey.

The business sentiment index plunged 15 points to minus nine in June.

It is the first negative rating in 15 months, although manufacturers expect conditions to improve later in the year.

The sentiment index is derived by subtracting the percentage of respondents who say conditions are poor from those who say they are good.

No air conditioning Lights and billboards were first turned off shortly after March's earthquake.

The power restrictions came into force on Friday and will apply to big factories, office buildings, universities and department stores in the Tokyo area.

The new rules come as power use rises as a result of the summer heat.

Electricity use between 9am and 8pm on weekdays must be reduced by 15% compared with last year. The rules will be in place until 22 September.

Companies who use too much power could face fines of up to 1m yen ($12,400; ?7,750).

"We ask their co-operation so we can all overcome the energy crunch," said trade ministry official Satoshi Koyanagi.

Firms have announced plans to cut down on their energy use.

Sony says it will turn off the air conditioning after 6pm and start the business day an hour earlier than usual.

The Tokyo Stock Exchange has turned off its electronic price ticker and will not receive visitors until the end of September.

"We are turning off all the lights and air conditioning in the visitors' areas," said stock exchange spokesperson Yukari Hozumi.

The government has already advised office workers to wear casual clothing in place of jackets and suits rather than to turn up air conditioning systems.

The earthquake and tsunami that hit Japan on 11 March led to rolling power blackouts affecting factories around the country.

Positive outlook

While the damage caused by the twin natural disasters has hit Japanese manufacturers hard, companies say they expect conditions to improve in the second half of the year.

Continue reading the main story

A slowdown in the global economy would slow the recovery in exports, while power supply problems in the summer may put a lid on factory output”

End Quote Takeshi Minami Norinchukin Research Institute Analysts said that as conditions on the ground improve, businesses are likely to bounce back.

"The headline index was a little weaker than expected [in June], but big manufacturers' sentiment is seen as rebounding firmly," said Takeshi Minami of Norinchukin Research Institute.

"The data confirmed the view that the worst is over and the economy will return to a moderate recovery led by manufacturers later this year," he added.

Data released earlier this week showed that factory output in Japan was recovering at a faster-than-expected pace.

Industrial production in May rose by 5.7% compared with the same month last year, the second successive month of rising output.

Many manufacturers continue to face power cuts and supply chain shortages Stumbling blocks

However, though the supply chain conditions and industrial output have started to improve, analysts warned the recovery could be derailed by various factors.

"There are risks to such a recovery, which will be based on reconstruction demand and exports," said Mr Minami.

If a political impasse were to delay reconstruction projects in the country it would have a detrimental affect on the economy, he said.

Hiroshi Miyazaki of Shinkin Asset Management Company added that a lot of Japanese companies were anticipating increased demand due to reconstruction activity after the quake and tsunami.

"If this demand doesn't come through as expected, there is a risk of a sharp adjustment," he warned.

Analysts said a combination of other internal and external factors may also hit the Japanese manufacturing sector.

"A slowdown in the global economy would slow the recovery in exports, while power supply problems in the summer may put a lid on factory output," said Mr Minami.

View the original article here

Ofgem to probe energy firm offer

22 June 2011 Last updated at 11:53 GMT Gas prices will be going up by 19% and electricity by 10% Energy watchdog Ofgem has launched an inquiry into a "potentially misleading" offer promoted by Scottish Power after it announced 19% price rises.

The firm had guaranteed prices would remain a minimum of 1% per year below its standard monthly direct debit prices until 30 September, 2012.

But Ofgem insisted the small print did not match up to the promise.

Scottish Power said: "We believe that all figures that have been quoted by us are accurate."

The regulator said it also wanted to press ahead with radical market reforms and force the so-called "big six" energy suppliers to simplify tariffs.

British Gas, Npower, E.ON Energy, EDF Energy, Scottish Power and Scottish and Southern Energy have all signed up to the reform process.

Ofgem said it would be using its consumer protection powers to investigate the promotional offer which was announced by Scottish Power when it revealed it would be putting up prices in August.

Continue reading the main story

Under the Scottish Power Direct October 2012 Offer, the company guaranteed prices would remain a minimum of 1% per year below its standard monthly direct debit gas and electricity prices until 30 September, 2012.

The watchdog outlined that the investigation would focus on the claim of ?459 savings from the Direct October 2012 offer.

The increases, which will see the cost of gas go up by 19% and the cost of electricity by 10%, will affect some 2.4 million householders in the UK.

Scottish Power had blamed a 30% rise in wholesale gas costs for the increases.

In response to the launch of the inquiry, the utility company said: "We agree that information about all energy tariffs across the market should be as clear as possible and we will fully co-operate with the Ofgem investigation.

"The tariff in question was a very limited offer with considerably discounted prices, which is now fully subscribed.

Alistair Buchanan, the chief executive of Ofgem, says consumers must feel confident that energy companies are "playing straight" with them

"However, there are a number of similar products still available on the market from competitors. We believe that all figures that have been quoted by us are accurate. "

Consumer Focus said it welcomed Ofgem's announcement and added that the utilities market needed to change.

The body's chief executive, Mike O'Connor, said: "The fact that Scottish Power was trying to push a dubious product to cover for their price rise shows just how far the penny needs to drop.

"Energy suppliers have been in denial about their poor reputation, about the health of the market and about the scale of changes needed to put it right. This market needs to change.

"Ofgem has taken another step today and we welcome it."

Meanwhile it was confirmed the six energy suppliers will be questioned by the Scottish Parliament's economy committee next week.

Committee convener and Tory MSP Gavin Brown said he wanted to hear the justification for price rises, adding: "It is important the committee is convinced that the suppliers and the regulator are doing all that they can to minimise the impact of these price rises on low income families and not to prejudice a return to economic growth."

View the original article here

Huhne urges energy supply changes

12 June 2011 Last updated at 04:45 GMT Scottish Power's rise in prices could be followed by other major suppliers Consumers should vote with their feet and switch to a different supplier if their power company raises its charges, Energy Secretary Chris Huhne has said.

In an interview with the Observer, Mr Huhne said people did not have to take price increases "lying down".

He urged people to hit firms "where it hurts" by finding a cheaper supplier.

Scottish Power has this week announced big rises in gas and electricity prices and there are fears the other five major suppliers will follow suit.

Mr Huhne said: "Consumers don't have to take price increases lying down. If an energy company hits you with a price increase, you can hit them back where it hurts - by shopping around and voting with your feet."

Mr Huhne is expected to announce new measures this week to make it easier for smaller companies to compete in the energy market.

He said: "Right now, only one in five people switch suppliers. I want to see more switching, more competition and more companies in the market.

"The big six only have a few minnows snapping at them, who are kept artificially small. By scrapping red tape for small players they can become serious challengers and help keep bills down."

'Deep concern'

On Tuesday Scottish Power revealed price increases of 19% for gas and 10% for electricity from 1 August, affecting 2.4 million households in the UK.

The company blamed the rises on a sharp rise in the wholesale cost of gas.

Scottish Finance Secretary John Swinney has called for talks with the supplier over the move.

He said: "I am deeply concerned at the scale of Scottish Power's price increases and I am seeking an urgent meeting to hear why they think increases of this scale are justified.

"Any fuel price rises have an impact - yet these increases will leave many households, in particular vulnerable consumers, in real, real difficulty."

A spokesman for Scottish Power said the company always co-operated with parliamentary requests and it looked forward to the meeting with Mr Swinney.

View the original article here

Energy saving plan comes closer

2 June 2011 Last updated at 10:36 GMT The cost of the work will be added to electricity or gas bills The government has revealed more details of its Green Deal scheme to help people pay for home insulation and other energy saving measures.

The plan should be launched in the autumn of next year.

Under it, authorised companies will pay for the insulation work and homeowners will repay the money, plus interest, through additional charges on their energy bills.

The government hopes people will repay loans of up to ?10,000, over 25 years.

Climate change minister Greg Barker said: "The Green Deal is the government's flagship energy saving plan to transform the country's homes to make them warmer and cheaper to run.

"From next year, people will be able to access up to ?10,000 upfront to pay for energy efficiency work, repaying the costs through savings on energy bills."

Legal changes

The scheme still requires a lot of work before it is ready to start.

A few firms such as Marks & Spencer, B&Q, Tesco and British Gas have expressed an interest in marketing the scheme and providing the finance.

But the law will need to be changed so that energy firms will be obliged to collect the repayments from homeowners via their energy bills.

The law will also need to be altered so that anyone who buys after the work has been done, but before the bill has been fully paid, is obliged to take on the debt and repay it.

These legal changes are included in the current Energy Bill, which is going through parliament and should receive its Royal Assent this July.

It has also not yet been decided just how much interest will be added to the loans.

How will it work?

The firms who eventually market the Green Deal will employ assessors to estimate just how much a householder can save through various insulation or heating measures.

These may include loft insulation, condensing boilers, draught proofing, solar panels and double glazing.

Once the work is assessed and agreed, the installation work will be contracted out to accredited installers.

Then the homeowners will have to start paying.

A key feature is that homeowners must be able to save more on their energy bills than they pay back.

What is the attraction for the big firms that the government hopes will market the scheme?

"Companies will see it as a marketing opportunity to sell other things," said a spokeswoman for the Department of Energy and Climate Change.

Anne Robinson, of the price comparison website Uswitch, said: "People who have the Green Deal will be paying a lot less for their energy after a year or two."

But Richard Lloyd, of the consumers' association Which?, warned against the dangers of shoddy workmanship.

"Our latest research into cavity wall insulation uncovered inadequate inspections and poor advice," he said.

"For this scheme to be a success, Green Deal assessors need to be held to the highest standards."

View the original article here