ISLAMABAD: Karachi Electric (KE) is to file its tariff petition for the next tariff control period by July 2022 as the utility’s current Multi-Year Tariff (MYT) which was for a 7-year tariff control period, will expire on June 30, 2023.
According to KE’s integration plan into Competitive Trading Bilateral Contract Market (CTBCM), it will participate in CTBCM in various capacities of service provider, as well as, market participants. In order to align with the CTBCM framework which proposes central despatch, KE, as part of the implementation phase shall evaluate appropriate tariff structure, agree on key principles with Nepra and will accordingly file its tariff petition with NEPRA by July 2022.
Prime Minister Imran Khan recently directed Ministry of Energy (Power Division) to expedite implementation on CTBCM.
Nepra is scheduled to hold a public hearing on the KE’s integration plan into Competitive Trading Bilateral Contract Market on December 7, 2021.
Sharing MYT post-2023 scenario, KE argues that for a shift towards open market, sent-out as a KPI under KE’s MYT for the period post 2023 would need to be reviewed. Similar to current tariff structure, recovery of capacity payment of KE plants, i.e., depreciation and return on asset base should not be linked with despatch of KE plant. For the period post-2023, separate tariff component for Distribution (Network) and Distribution (Supply) business should be determined and allowed on Cost of Service basis along with an appropriate retail margin given the asset light nature of supply business.
Power utility maintains that tariff setting should be on cost reflective basis and any cross-subsidy provided should be separately identified for each consumer category. Per unit cross-subsidy charged for each consumer category that cross-subsidizes shall be uniform whether the consumer is served by DISCOs, KE or any competitive supplier.
The power utility further stated that if BPCs are allowed to move into bilateral contracts as envisaged under CTBCM, this will have an adverse mix impact on T&D losses by around 2.0% points. Accordingly, tariff framework needs to be on cost reflective tariff setting basis, as illustrated in the Plan.
KE has demanded that instead of variable O&M currently allowed, based on an assumed generation mix, separate variable O&M component be determined for each of KE’s generation plants to be allowed on actual basis.
It claims that currently, Discos and KE are obligated to charge consumers in accordance with GoP’s Uniform Tariff Policy, whereas Generators/ Competitive Suppliers will be able to benefit by voiding cross-subsidy surcharges imposed by GoP as per GoPs Uniform Tariff Policy. Therefore, for consumers who are eligible to participate in open market/ enter into bilateral contracts, uniform tariff policy should not be applied so that DISCOs and KE can also compete based on their Cost of Service.
KE further maintained that it is in continuous engagement with relevant stakeholders on formation of Discos’ Association and will provide input on defining the role, responsibilities and obligations, incorporation requirements, Board composition and criteria for Board members, and other key considerations/ aspects relevant to formation and functionality of Discos’ Association. In this regard, KE through letter of August 09, 2021 has also nominated its representative for promoters for Discos Association. KE will file for membership of Association of Discos upon incorporation of the Association.
KE is engaged with all relevant stakeholders and has participation on working groups for preparing of standardized templates for Connection Agreements. In this regard, it is submitted that for Connection Agreement with NTDC, KE is already engaged in its finalization with NTDC as part of discussions for contractual arrangements for off-take of additional supply from National Grid, and based on discussions, KE understands that the same shall be adopted as the standard template for Connection Agreement with NTDC.
Further, for template of Connection Agreement with BPCs (eligible consumers under CTBCM) and Generators, it is submitted that the initial draft was not aligned with the open market regime pursuant to CTBCM, and KE’s working group is working in close coordination with other DISCOs and CPPA in this respect.
As detailed in Section 3.1 of the Plan, KE will perform the role of Metering Service Provider in its service area and is in discussions with CPPA-G for formulation of joint SOP detailing modalities including exchange and verification of data required by the Market Operator to carry out the market settlement functions. Based on initial discussions between KE and CPPA teams, KE’s system is equipped with the basic technical requirements to fulfil the role of Metering Service Provider in KE’s service area. In addition, as part of the exercise, KE shall also evaluate any requirements for revisions/ additions to the existing metering infrastructure or any other technological intervention required in this respect in consultation with NTDC and CPPA. For formulation of a joint SOP for KE’s participation as Metering Service Provider, CPPA and KE teams are in deliberations to assess the requirements including technical and data related and it is targeted that an initial draft of the SOP is developed by October 2021, and the same is finalized by December 2021 based on detailed deliberations between KE and CPPA teams, which will then be submitted to Nepra for approval.
National Electricity Policy 2021 will be the governing document for transition towards competitive markets as also identified in Section 14 of the NEPRA Amendment Act, 2018 and therefore, policy guidelines as provided within the recently approved National Electricity Policy 2021 including mechanism to ensure recovery of stranded costs, lost cross subsidy surcharge arising as a result of transition towards competitive markets, as well as, a holistic review of the tariff regime needs to be undertaken prior to implementation of the CTBCM. Further, for a sustainable roll out of CTBCM based on a holistic assessment, it is requested that the National Electricity Plan should also be finalized in consultation with all stakeholders.
Copyright Business Recorder, 2021