ISLAMABAD: Ministry of Finance (MoF) is reportedly unwilling to support Power Division’s plan to legalise revenue-based load shedding across the country, arguing that the matter relating to load shedding to prevent higher cost of electricity needs to be weighed against the fact that capacity payments would still be paid for the available but unutilised electricity, well informed sources told Business Recorder.
Currently all power Distribution Companies (Discos) and K-Electric (KE) are enforcing economic load shedding on a policy decision of Power Division, which does not have legal support of National Electric Power Regulatory Authority (Nepra), the Regulator.
At a public hearing on FCA, replying to a question, Chairman Nepra Ch Waseem Mukhtar stated that current revenue-based load shedding is illegal which is why the Regulator is imposing fines on Discos, adding that the government should legalise it if it intends to continue with the policy.
The sources said soon after the comments of Chairman Nepra, Power Division began preparation of its proposal titled “amendments in legal framework to implement economic load management in the country”.
According to Power Division, Prime Minister, while chairing a series of meetings to deliberate on power sector reforms on 15, 18, and 25 April 2024 directed the Power Division to review and propose amendments in existing legal and policy frameworks about Policy and Aggregate Technical & Commercial (AT&C) based Load Management in the country. To initiate such legal point and regulatory changes, the Power-Division notified a committee with members from the PPIB, CPPA, Law Division, Nepra, and independent legal and regulatory experts.
Power Division sent the draft summary to the concerned Ministries as per the rules of business for their comments prior to it submission to the ECC, CCoE or the federal cabinet to make the economic management legal.
Finance Ministry, in its comments, opined that the summary does not contain any empirical data which could be used to analyse the stated benefits of the proposal.
Power Division, in its summary, argued that distribution companies carry out revenue-based load shedding in areas with high line losses. On the other hand, given the trend of sharp increase in power price for the central pool, at times it also becomes economically and financially imprudent to purchase such costly electricity for delivery to consumers.
Due to economic compulsions, in such situations a well-structured load shedding plan is the only feasible solution for viability of power sector. However, Nepra and other legal forums have discussed economic load shedding policies and implementation and have highlighted the need for bringing load shedding due to economic or revenue compulsions into the legal framework.
It however, appears that NEPRA is not in favour of the proposed amendments and has expressed serious reservations on the same.
Finance Division, in its comments, stated that it is primarily concerned with the fiscal implications of the proposal, adding that while the phenomenon of load shedding in high line losses areas may have some rationale, the matter relating to load shedding to prevent higher cost of electricity needs to be weighed against the fact that capacity payments would still be paid for the available but unutilized electricity.
Power Division has been requested to explain to the Cabinet in some detail, the comparative advantage of load shedding aimed at preventing high cost of electricity.
Copyright Business Recorder, 2024
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