DISCOs hamper market competition

NEPRA says it’s facing hurdles to competitive market mechanism

ISLAMABAD:

The National Electric Power Regulatory Authority (Nepra) has aired serious concern over an attempt by the power distribution companies (DISCOs) to block the implementation of Competitive Trading Bilateral Contract Market (CTBCM) model, which is aimed at ending the monopoly of existing companies and providing better services to the consumers.

The power-sector regulator is striving to bring new players to the electricity market, which will encourage competition, push down tariffs and improve customer services. Nepra Chairman Tauseef H Farooqi has emphasised that they want to open the electricity market to facilitate the consumers but they are facing hurdles in the way of establishing a competitive market mechanism, which will work like a new motorway.

He made the remarks while chairing a hearing on the renewal of licences of the electricity distribution companies on Wednesday.

Provisional licences of the distribution companies have expired and they are now working without a legal backing. DISCOs’ representatives pressed the regulator to renew their licences rather than issuing new ones for operating in a competitive market environment.

They called for leaving their exclusive right untouched in areas where they had built the power distribution infrastructure. New players could function in the areas where DISCOs had no infrastructure of their own, they suggested.

Nepra chairman asked the representatives of DISCOs to give an affidavit or come up with some other mechanism to provide assurances that they would not claim certain incentives including the exclusivity right available in the current licences.

Elaborating, he said that a company with exclusivity had the sole right to operate in a territory. “It is the law of the land, which we cannot disregard,” he remarked. “We want to ensure that everybody is on board; if you give an affidavit or any kind of assurance, we will extend the licence.”

Farooqi stressed that they wanted to avoid any complication that may arise after the renewal of distribution companies’ licences. However, DISCOs refused to provide the affidavit or an undertaking. The regulator has three available options. First, DISCOs should give an affidavit or undertaking that they will not invoke the exclusivity provision if the licences are renewed.

Second, the regulator would have the option to make some changes. Third, the regulator should have the authority to stop the process and seek fresh applications for new licences, which will have new terms and conditions in line with the Nepra Act.

“Can you give assurance in any form, which will ensure that you will not invoke the exclusive right,” asked the Nepra chairman. He declared that their major task was to provide reliable energy to the consumers, who had the fundamental right to electricity consumption.

“We want to sustain the power sector by implementing CTBCM and bringing new investors but people are trying to block it,” he said, adding that they wanted to modernise the power sector by introducing new players.

The regulator also noted that the Water and Power Development Authority (Wapda) was “unbundled” to bring improvement to the power sector. However, DISCOs were being controlled by the federal government. The basic theme of unbundling was to empower the board of directors to make decisions. But the government has imposed a moratorium on making appointments in DISCOs.

DISCOs’ representatives proposed that they should be allowed to supply electricity if a competitor failed in the area of a distribution firm.

If any investor wanted to operate in an empty pocket, Nepra could grant exclusive rights to the operator, they said, adding that all distribution companies wanted to go with the authorities.

“If the authority proposes some modification, then the exclusivity provision will be clear; distribution companies do not have differences over it,” said the DISCOs’ representatives. They (DISCOs) should have a mechanism to ensure that they would not pose a threat to the authority later in the form of legal complications, some interveners said at the hearing, adding that the affidavit was a normal practice and DISCOs should not have the exclusivity right.

They said that Nepra had an opportunity to open the electricity market by ending the monopoly of DISCOs and it should not miss the chance. The interveners pointed out that the financial condition of distribution companies was poor as circular debt had been on the rise. The delivery of service was also very unsatisfactory.

They noted that the consumers were facing load-shedding and asked if there was no electricity on the DISCOs’ system, why the consumers should not have the right to get power supply from somewhere else. “If they (DISCOs) don’t want to provide services, the consumers should be given the choice to receive electricity from other sources,” an intervener suggested.

Published in The Express Tribune, December 8^th, 2022.

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