ISLAMABAD: The higher cost of about Rs 26 per unit Use of System Charges (UoSC) to be recovered from key consumers under the long-waited Competitive Trading Bilateral Contract Market (CTBCM) may make the entire electricity trade market unfeasible.
The CTBCM is likely to be in place by May or June 2024.
This was the crux of background interaction with officials and as per the briefing given to the new Minister Sardar Awais Ahmad Khan Leghari on March 25, 2024.
Privatisation of Discos, various IPPs projects under study
The Minister asked for the reasons for not carrying out due diligence of new electricity business in the country and was informed that he would receive another briefing on it within a few days.
CTBM was scheduled to be operational in May 2023 but it is now hoped that it will be in place by May or June 2024 as it is part of a commitment made to the International Monetary Fund (IMF).
“By 2023, we succeeded only to the extent of getting CTBCM design approval from Nepra. CTBCM Act was in place which said that the Federal Government will define the rules of the approved seven set of rules to regulate private energy market and payment mechanism. We have formulated all regulations and now the institutional set up is in place,” the sources said.
At Discos’ level MIRADs (Market Implementation and Regulatory Department) have been established that will act like a tiny electricity trading instruments. Since private parties will have to be part of the trading system, the concerned officials of Discos had to be fully trained and they are fully trained now to run MIRAD system for electricity auction mechanism, payment and bilateral contracts implementation. Discos will have suppliers’ licence, distribution licence and supplier of last resort.
As the CTBCM system becomes operational, other participants claiming to be a competitive supplier, a trader, an independent auctioneer, system operator, market operator would require a licence; and they too have acquired requisite licences.
The sources said, a huge number of applications have also been designed for the electricity auctioneers, hourly basis forecast, sale and purchase. For this purpose, a Test Run Report has also been finalized which is now with the power sector Regulator; i.e., Nepra, which is in process of approving the Test Run Report.
The Act stipulates that all the prerequisite actions like Commercial Market Operation Date (CMOD) will be finalised by May 2023 to make bilateral trading of electricity ready in next five years.
“Nepra has to approve CMOD and Market Commercial Code (MCD) and sort out the trickiest issue of tariff for bilateral trading market,” the sources said, adding that these approvals will be conveyed by the end of May 2024.
“As the three key perquisites are on the table, first market participants will come forward and register as per their licence like buyer or supplier,” the sources said.
On wheeling charges issue being discussed by every market player at every forum the sources revealed that Nepra has already conducted hearing on Use of System Charges (UoSC).
There is a perception in government that industry does not want to share the financial burden while officials maintain that the government established power plants as per socioeconomic objectives to maintain a balance in society.
Private sector argues that the government should not recover stranded cost (capacity cost) from it nor charge industry a cross subsidy. The government simply does not have the resources to extend to such consumers as IMF has clearly stated that there will be no preference for any segment at all. This is the reason IMF rejected the winter package or any other package for industry, the insider added. Pakistan’s tariff is already non progressive.
“This will be a policy decision which the government can take as someone has to take the hit. Nepra is in a vicelike grip: between its two clients; i.e., government and the buyer,” said an insider.
The market structure followed in Pakistan has been a single-buyer model in which CPPA (as a single-buyer) purchases electricity on behalf of ex-Wapda distribution companies (Discos).
In November, 2020, Nepra approved a CTBCM model that provided a roadmap for opening the Wholesale Electricity Market of Pakistan, aimed to provide choice to the bulk power consumers (with 1MW or above load) to purchase electric power from the Discos or a competitive supplier of their choice.
Copyright Business Recorder, 2024
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