ISLAMABAD: The Competition Commission of Pakistan (CCP) has recommended the government to swiftly implement the Competitive Trading Bilateral Contract Market (CTBCM) model to open Pakistan’s wholesale electricity market.
This move, the CCP believed, will foster competition and improve efficiency in the power sector.
In its Competition Assessment Study on the Power Sector, the CCP emphasized that retail competition should be the ultimate goal, allowing consumers to choose their electricity suppliers.
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The CTBCM model, approved by Nepra in 2020, is a critical step toward this vision, enabling bulk power consumers with loads of 1MW or more to purchase electricity either from Discos or from competitive suppliers.
The report highlighted the need for power distribution companies to activate their Market and Regulatory Affairs Departments (MIRAD) to prepare for competition.
The CCP submitted its findings to the Ministry of Finance, identifying several key challenges, including:
(i); High Capital Barriers: Significant capital requirements for generation, transmission, and distribution infrastructure are hindering new entrants from competing in the market.
(ii); Monopolistic Market Structure: The state-owned National Transmission & Despatch Company (NTDC) continues to dominate the transmission segment, operating under a single-buyer model, where the Central Power Purchasing Agency (CPPA-G) purchases electricity from power producers and sells it to distribution companies (Discos). This monopoly stifles competition.
(iii); Aging Infrastructure: Much of Pakistan’s power infrastructure is outdated and in need of upgrades, which the CCP highlighted as a critical factor for enabling an open and efficient market.
The CCP’s study also raised concerns over inefficiencies in the power sector, particularly within state-owned Discos, which continue to operate with average losses of 17%. These inefficiencies, combined with issues such as load shedding and circular debt, have hampered market development and competition.
Furthermore, the uniform tariff structure and subsidies compensating for tariff differentials were cited as barriers to competition, as they support inefficient Discos at the expense of more efficient ones. The CCP urged the government to revise these subsidies to encourage more competitive practices.
In its recommendations, the CCP called for the following measures:
(i); Immediate implementation of the CTBCM model envisioned in National Electricity Policy 2021, and National Electricity Plan 2023-27, to open the wholesale electricity market.
(ii); Rationalization of System/Wheeling Charges for transmission and distribution to support the effective execution of the CTBCM.
(iii); Strategic decommissioning of outdated, inefficient power plants to alleviate the financial burden of capacity payments.
(iv); Private sector participation in transmission infrastructure, along with the full implementation of the Transmission Line Policy 2015.
(v); Reform of the business model of Discos, including options for privatization or public-private partnerships, to address high losses and improve market dynamics.
The CCP also recommended gradually introducing retail competition in the power sector, starting by lowering the 1MW threshold, allowing more consumers to choose their electricity suppliers as the market matures, the CCP added.
Copyright Business Recorder, 2024
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