ISLAMABAD: Power Division has argued in relation to power distribution exclusivity of Karachi Electric (KE) that the regulator, Nepra, will violate its own existing law if it opens distribution rights for everyone, sources close to Minister for Energy told Business Recorder.
On September 11, 2020, Nepra wrote a letter to Power Division on proposed modification in licence of KE, wherein the former has sought comments on this issue.
The Power Division has strained relations with the regulator after the latter's incumbent Chairman met with the Prime Minister Imran Khan last year and shared some "controversial" information with him about power sector's performance, which highlighted the "poor" performance of the Power Division's top brass.
Power Division, which has a new SAPM on Power, Tabish Gauhar, former Chairman KESC and considered a close friend of Arif Naqvi of M/s Abrraj Capital, submitted comments on Nepra's letter. The sources said a letter signed by Syed Mateen Ahmed- Section Officer (Tariff) was dispatched to Nepra on October 19, 2020. "Secret" meetings of some top stakeholders from both sides are also the talk of the town.
Power Division, in its letter, stated that currently all distribution licence holders, i.e., Discos including K-Electric Limited (KEL), are allowed exclusive rights as per their respective distribution licences and operate under a regulated regime. The consumers are currently billed in accordance with the cross-subsidization policy of Federal Government. "With the proposed removal of distribution exclusivity of Discos high end/low loss consumers will be able to avoid cross-subsidy surcharge as well as fixed cost which has been incurred/committed by companies to meet demand, which will be passed on to remaining consumers or will have to be borne by GoP as subsidy, thereby increasing the burden on the taxpayer," the sources quoted Power Division as saying in the letter.
In this regard, Power Division clearly conveyed to the regulator that there is no direction included in the NEPRA (Amendment) Act 2018 to revise licence of distribution companies and remove exclusivity.
As per proviso to Sec 50(2), NEPRA is required to revise rules and regulations issued under the NEPRA Act 1997 to bring them into conformity with the provisions of the NEPRA Amendment Act 2018 within one year of issuance of the NEPRA Amendment Act 2018. Furthermore Section 14A of the NEPRA Amendment Act 2018 requires Federal Government to issue National Electricity Policy and Plan which should also include policy for development of power markets, which cater to the above issues, and is under approval/review of competent authority.
According to Power Division, in line with ECC directions, to bring in competition, CPPA-G has prepared a plan on Competitive Trading Bilateral Contract Market in the country. This model, while addressing the issue of exclusivity, also highlights policy matters requiring deliberation with NEPRA as well as the Government prior to opening up of the sector, provides roles and responsibilities of market participants, and therefore is aimed at a proper transition towards competitive markets instead of abruptly opening up the market for all consumer groups, which may otherwise have serious repercussions for the sector including but not limited to the price impact on domestic consumers and the subsidy/circular debt burden on the exchequer.
Copyright Business Recorder, 2020
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