There have been a couple of important draft guidelines published by the National Electric Power Regulatory Authority (NEPRA) recently including the those for competitive bidding as well as the concept paper on the rate of return for power sector projects. The emphasis has been on promotion of competition in the power sector including increased participation from the private sector in developing power infrastructure. Although generation has still seen a lot of private sector interest, the need of the hour is to extend that interest to transmission and distribution networks as well.
The regulator has published guidelines for determination of revenue requirement and use of system charges (UoSC) for transmission purposes which will be the focus of this column today. Broadly speaking, the guidelines cover the formulae and principles for determining revenue requirement and UoSC for the National Transmission Despatch Company (NTDC) along with the proposed multiyear tariff methodology.
In addition, the document also provides for transmission guidelines for special purpose transmission licensee (SPTL). The government in view of the addition of more than 11000MW by the end of next year has already issued the policy framework for private sector transmission line proposals. This includes both private sector as well as public private partnerships for investment in the transmission sector.
Given the dilapidated state of the transmission network and the poor performance of NTDC, private sector participation is the way forward for effective overhaul of the system. The Chinese are already investing in the Lahore-Matiari transmission line which will evacuate almost 4000MW from the southern part of the country where a host of coal power plants are being set up under CPEC.
Under the current framework the tariff for SPTLs will be determined through competitive bidding in accordance with NEPRA competitive bidding transmission tariff regulations or on a cost plus basis. The regulator is of the view that the latter approach will bring an element of planning into the transmission sector rather than ad hoc arrangements.
The formula for calculating revenue requirement for STPLs includes O&M expenses, insurance cost, and return on equity, debt servicing and Sinosure fee if it is applicable as is the case for projects under CPEC. This column will delve into the specific technicalities in the coming weeks but would like to encourage all stakeholders to provide their feedback to NEPRA on these draft guidelines which are available at the regulators website.