This proposal has been made part of future roadmap of Pakistan''s power sector, which will also address the issue of circular debt, rationalization of subsidy and tariffs to clear base line for Competitive Trading and Bilateral Contract Market (CTBCM). The sources said the wholesale market will expand its functions by establishing a competitive market in accordance with international best practices. Till the full operationalization of CTBCM, all new power procurements will be done in accordance with the policy for procurement of electricity. KE will also be a market participant upon establishment of a wholesale market in mid-2021.
At present, the power system is being operated on the model of single buyer in which the CPPA-G purchases electricity on behalf of Discos who, in turn, supply it to end customers. The government has already amended the Nepra Act of 1997 (in 2018) to provide a legal framework for Competitive Trading and Bilateral Contract Market (CTBCM). "Opening of the sector to fully competitive conditions and open access to the power system requires creation of institutions of an independent market operator, independent system operator, seamless transmission and distribution infrastructure, separation of wire and retail businesses at Discos level and sale and purchase of electricity on purely competitive basis," the sources added.
The work on the separation of wire and retail business will be undertaken in parallel. The power Distribution Companies (Discos) will be structured as two businesses which can be easily converted into two separate entities at an appropriate stage. One of the key proposals for the future roadmap is that Discos may be transferred to provinces at the option of the provinces or private sector (through privatization process by the Privatization Commission) in a state where the two businesses can be separate entities. Possibility of privatization of the retail business, to begin with, will also be examined.
The sources said augmentation, rehabilitation and expansion of existing transmission and distribution infrastructure to provide seamless and reliable access meeting the requirements of the Grid Code/Distribution Code will be undertaken. Independent assessment of T&D will be carried out to ensure that the system becomes compatible for the open access of power producers and customers.
National Power Control Centre (NPCC) will be strengthened and transformed into an Independent System Operator (ISO). Pakistan will be looking for trade of electricity on competitive terms. Projects that promote the regional import and export of electricity for the socio-economic benefits of all the people who live in the region, especially in SAARC countries, and which offer a competitive market advantage, will be actively promoted.
Cluster-based mini-grid development will be encouraged to provide access of electricity to far flung areas which may not be connected to national grid for several years such a GB, AJK, areas in Balochistan and FATA. The off grid systems would be based on locally available energy resources such as solar, wind, hydro and bagasse. The mini-grid systems may be developed by private entrepreneurs, ESCOs and public sector T&D companies. Financing support may be provided through the following: (i) clean energy fund; (ii) concessionary resources provided by the federal and provincial governments; (iii) donors, large corporate enterprises (under CSR obligations), poverty alleviation fund, SMEDA and other microfinance institutions etc); (iv) interest free loans through commercial banks with markup picked up by the government only for deserving customers will be considered; and (v) tax cuts, or other market incentives.
In future, the threshold for subsidised customers will be further reduced. In the interim period, Nepra shall determine the tariff in the light of the Amendment in the 1997 Nepra Act (2018). In summary, the key features will be the following: (i) uniform tariff for distribution licensees wholly-owned and controlled by a common shareholder; (ii) cost of service except for poor class of customers; (iii) through pricing signals, promote energy efficiency, conservation and Demand Side Management (DSM); (iv) promote net metering; (v) promote use of surplus power by industries and commercial sectors; (vi) tariff for off grid, mini grid customers to be subsidized; (vii) in the long run, prices be determined by the market itself; and (viii) cross subsidies will be minimized.
