Developing an electricity market: ADB wing rates TA as successful and relevant

ISLAMABAD: The Independent Evaluation Department (IED) of the Asian Development Bank (ADB) has rated technical assistance (TA) for “Pakistan: Developing an Electricity Market” as successful and relevant.

The IED in its validation report stated that the objective of TA of $1.2 million was to provide capacity building and policy advice on the introduction of market mechanisms for electricity sales and purchases in Pakistan based on a competitive trading bilateral contract model (CTBCM), which was developed under a preceding ADB TA.

The introduction of competition in the electricity subsector was expected to support the energy sector’s financial sustainability in the long run through mechanisms that will remain effective despite political changes.

NTDC projects: ADB identifies implementation challenges

The report noted that since the late 1990s, Pakistan’s electricity market has operated under a single-buyer model, where the Central Power Purchasing Agency (CPPA) purchases electricity on behalf of distribution companies (DISCOs).

However, in 2020, the National Electric Power Regulatory Authority (NEPRA) approved a roadmap to transition to a market-oriented, multi-seller, multi-buyer regime.

This new competitive regime aims to provide nondiscriminatory open access, attract investments, improve security of supply, enhance efficiency, and ensure transparency in the wholesale electricity market. The TA reinforced the transition of Pakistan’s electricity sector from a single buyer to a multi-seller multi-buyer regime through market-based trading by adopting a CTBCM.

The TA’s rationale was based on an assessment of the power sector’s challenges due to technical, financial, and governance deficits. The TA was appropriately designed as knowledge and support technical assistance (KSTA), addressing the needs of government agencies to issue policy and regulatory directives for the smooth transitioning of the power market.

The TA design covered targeted interventions and initiatives and provided a platform to ensure harmonisation across various power sector entities. The TA had target outputs that logically contributed to the expected outcome through a results chain. The approach and methodology were technically sound and aligned with the envisaged development results. However, stronger links between the outputs and indicators were needed.

Additionally, the outcome indicators should have covered further aspects necessary for a competitive electricity market, beyond the endorsement and approval of the market development road map and the commercial code. In April 2021, an increase in TA budget by $0.5 million was approved, along with an extension of the TA implementation by 17 months.

The additional outputs were expected to enhance support for the new electricity market implementation, thereby increasing the TA’s relevance. The validation assesses the TA relevant.

The TA’s planned outcome and output targets were largely achieved. The TA delivered targets, such as (i) amending the policy, legal, and regulatory framework for the electricity market; (ii) developing new rules, regulations, and codes; (iii) deploying market-related information technology (IT) systems and tools; (iv) training market operators and employees to enhance human resources capacity; and (v) institutional restructuring of the implementing power sector entities and introducing coordination mechanisms. This validation assesses the TA effective.

The TA resources were efficiently used with 94.3 percent of the budget utilized.

However, actual costs incurred in the consultancy category at $1.12 million exceeded the approved budget of $1.03 million. Budget reallocation could have been done to avoid the cost overrun. The TA only utilized 10.5 percent of the training, seminars, and/or conferences budget. It did not spend any of its miscellaneous and contingency funds.

Copyright Business Recorder, 2024