The federal government is to further reduce the threshold for subsidized consumers' of electricity besides fixing prices at par with the market, well informed sources in Power Division told Business Recorder. The government and International Monetary Fund (IMF) are nearing an agreement which is expected to be formally signed prior to federal budget for the fiscal year 2019-20.
According to sources, power sector reform is witnessing a progressive tariff rationalization process. Tariff is based on the principle of cost recovery except for consumers with consumption below 300KWh and agricultural tube wells. In future, the threshold for subsidized customers will be further reduced. Simultaneous steps are being taken to gradually move towards open access and competitive market regime where electricity prices will be market based. However, in the interim period, NEPRA shall determine the tariff in the light of the Amendment in 1997 NEPRA Act (2018).
The key features of future plan will be as follows: (i) uniform tariff for distribution licencees wholly owned and controlled by a common shareholder;(ii) cost of service except for poor class of customers; (iii) through pricing signals, promote energy efficiency, conservation and Demand Side Management; (iv) promote net metering; (v) promote use of surplus power by industries and commercial sectors; (vi) tariff for off grid, mini grid customers to be subsidized; (vii) in the long run, prices be determined by the market itself; and (viii) cross subsidies will be minimized.
The sources said, the new tariff structure will be guided by the principle of reducing the cost of electricity through, but not limited to, efficiency in supply, improvement in end-use efficiency, improved power factors, better customer awareness and other demand management measures.
Replying to a question about new generation power projects, the sources stated that new power generation projects will be required once surplus power is absorbed. In this context, clean-energy and indigenous fuel based projects will get priority. The new projects' financing plans will be guided by integrated long term plans, which will allow their investment arrangements to be made reasonably up-front. However, investors will be responsible to raise financing through financial markets on the basis of strengths of projects, balance sheets, other market based collaterals and/or innovative financing schemes except for nuclear, large hydro (run-of-river or multipurpose), technology transfer or other strategically important projects.
According to sources, new power capacity will be acquired on the basis of estimated requirements under integrated plan to avoid shortage or idle capacity in future. The integrated plan would be updated every two years to remain in sync with actual developments. Electricity will be procured at least possible cost adjusted only for needs for energy security and development of underserved or un-served areas.
Electricity from following categories of projects will be procured on the basis of international competitive bidding: (i) all new thermal, solar and wind power; and (ii) hydropower and indigenous coal based power projects, where feasibility and engineering studies have been prepared.
The sources further stated that hydropower and indigenous coal projects on raw sites (those sites for which detailed feasibility and engineering study have not been done) will receive Letter of Intent (LoI), through international competitive bidding for the work programme, to carry out feasibility studies. LoI will also be issued to IPPs for unsolicited hydropower projects for raw sites, identified by the IPP, after evaluation of the proposal by the PPIB/AEDB.
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