Changes to Electricity Act sought

Govt wants modernisation of law in line with new realities in power sector


Zafar Bhutta February 10, 2024
design: Ibrahim Yahya

ISLAMABAD:

The caretaker government has directed the Power Division to amend the National Electricity Act 1910 to keep pace with new realities in the power sector as progress has so far been slow on introducing a competitive electricity market with the help of wheeling charges.

Successive governments have strived to implement the Competitive Trading Bilateral Contracts Market (CTBCM) that allows private consumers to take electricity supplies directly from power producers.

At present, all consumers are bound to receive electricity from the national grid, which has long been plagued with rampant theft and losses.

The National Electric Power Regulatory Authority (Nepra), the power sector regulator, has taken an initiative to open the market and introduce the CTBCM model. However, there has not been sufficient progress on the plan.

During discussions in a recent meeting of the Cabinet Committee on Energy (CCOE), it was observed that the CCOE had constituted a committee to deliberate on wheeling charges and swiftly present its recommendations.

At the same time, the Power Division was directed to conduct an internal assessment through taking up the matter with the industry and relevant stakeholders. It was asked to submit its assessment to the committee by mid-February 2024.

Wheeling charges comprise the fee that will be paid to transmission and distribution companies for supplying electricity from power plants to customers via a third party.

It was emphasised that the National Electricity Act 1910 needed to be updated and modernised in line with new realities in the power sector.

The cabinet body on energy directed the Power Division to apprise it of the status of the electricity trading market plan.

The committee was informed that the Power Division had been working on market reforms with the aim of transitioning to the competitive market model, named CTBCM, from the existing single buyer model.

In this regard, the Power Division had presented the CTBCM model and roadmap to the CCOE in a meeting dated March 27, 2020.

The CCOE demonstrated keen interest in the adoption of electricity market reforms, calling it one of the most critical and important activities, and decided to directly monitor the execution of the CTBCM plan.

It told the Power Division to submit monthly reports on the progress achieved in efforts to implement the CTBCM plan.

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In compliance with the directive, the Power Division prepared monthly reports on the progress on CTBCM for the months of October, November and December 2023.

First part of progress reports highlights key updates on CTBCM including the cabinet committee’s approval for the submission of final test-run report to Nepra and its ratification by the federal cabinet.

The second part focuses on readiness of the power sector for the competitive wholesale electricity market whereas the last part presents updates on the completion of actions planned under the CTBCM test-run phase.

The Power Division submitted the reports to the CCOE. The committee considered the summary submitted by the Power Division titled “Submission of monthly reports to CCOE on the progress towards implementation of Competitive Trading Bilateral Contracts Market (CTBCM)”.

The CCOE told the Power Division to update the committee already constituted by the CCOE, headed by the minister for finance, revenue and economic affairs, on the issue of wheeling charges after discussing the matter with the relevant stakeholders, and submit updates.

Recently, the government also decided to extend the scope of negotiations with independent power plants (IPPs) to cover hydel and gas-based projects as well in an effort to slash tariffs, which have continued to surge in recent months.

The Pakistan Tehreek-e-Insaf (PTI) government, during its tenure, had started negotiations with the IPPs to review the dollar indexation clause. A cap was placed to control electricity prices that were rising with continuous depreciation of the rupee.

The current caretaker government has continued negotiations with wind energy producers. Now, it has decided to talk to hydel and gas-based IPPs as well.

It directed the Power Division in a recent meeting of the CCOE to come up with a separate summary.

The cabinet body told the Power Division to initiate a separate case for engaging with the remaining IPPs, including those dealing with hydel power that did not sign a memorandum of understanding (MoU).

During discussions, according to sources, CCOE members noted that the scope of negotiations should not be restricted to wind or bagasse-based power plants but hydel and gas-fired IPPs may also be included.

Published in The Express Tribune, February 10th, 2024.

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