CCOE to swiftly set up competitive power market

The Cabinet Committee on Energy (CCOE) on Thursday vowed to press swiftly ahead with the plan of developing a competitive electricity market in a bid to break the monopoly of power distribution companies.

At present, the distribution companies have complete control over the distribution system. Therefore, consumers are bound to take electricity from these companies, which are inefficient. They are not only adding to the multibillion-rupee circular debt but are also involved in electricity theft and losses.

The distribution companies are providing poor-quality service to the consumers. Even employees of these companies are involved in corruption, which is worsening the situation.

The cabinet body agreed that an efficient and competitive wholesale market would be developed that would reduce the cost of power for the consumers. It wanted to implement the plan in the shortest possible time in order to provide cheaper electricity to the consumers.

The Power Division presented a competitive electricity market introduction plan to the CCOE. Subsequently, the cabinet body directed the Power Division to present a detailed analysis of the market model and institutional reforms plan along with the timelines to the committee for its approval.

The cabinet body also directed the Power Division to bring a summary with the detailed analysis for formal approval.

Weary of the below-par performance of the power distribution companies, the government is already working on splitting the distribution companies into smaller firms to improve efficiency and reduce losses.

At present, third party is not allowed to take electricity from the national grid for distribution. The competitive market mechanism will end exclusive rights of the power distribution companies and will allow third parties to distribute electricity. Consumers would have to pay tolling fee for electricity transmission.

Circular debt

The cabinet body directed the Power Division to work out mitigation strategies for the circular debt, which had touched the Rs2.3-trillion mark. In one year, the circular debt has surged 33% despite Power Division’s efforts to control it.

The meeting, chaired by Minister for Planning, Development and Special Initiatives Asad Umar, reviewed the circular debt reporting format developed by the Power Division in consultation with the National Electric Power Regulatory Authority.

The cabinet body approved the format and directed the Power Division to work out detailed projections and mitigation strategies.

Published in The Express Tribune, October 30^th, 2020.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.