CCP for doing away with inefficient power plants

Recommends transition to public-private partnership to promote efficiency

ISLAMABAD:

The Competition Commission of Pakistan (CCP) has recommended the phasing out of inefficient power generating plants to reduce capacity payments while promoting more efficient operations and transitioning to public-private partnership models in distribution companies to bring efficiency to the sector.

The proposals are aimed at dismantling the monopolistic barriers, achieving greater efficiency and creating a level playing field for all participants.

The CCP recommended a revision in tariff differential subsidies to eliminate the uniform tariffs applied nationwide. This will encourage efficiency by ensuring that consumers pay based on actual service costs and will promote better-performing distribution companies (DISCOs).

The CCP came up with the suggestions in a detailed research report titled "State of Competition in the Key Markets in Pakistan: Power Sector." The report highlights the significant presence and impact of state-owned enterprises (SOEs) on competition within the power sector, offering strategic insights to foster a more competitive market environment.

It outlines the structural, regulatory and strategic challenges faced by Pakistan's power sector, which has long been dominated by SOEs.

The report includes CCP's comprehensive recommendations to address the multiple challenges facing the power sector. These are targeted at removing barriers to entry, reducing inefficiencies and creating a fair marketplace that encourages private sector participation alongside SOEs.

The CCP called for timely implementation of the Competitive Trading Bilateral Contract Market (CTBCM) model, approved in 2020, which would open up the wholesale electricity market.

This model will allow bulk power consumers (with a load of one megawatt or above) to choose suppliers, fostering competition and providing consumers with greater choice and control. It urged the need for strengthening regulatory and market affairs within DISCOs to support CTBCM and enhance business planning in line with long-term goals for a competitive market.

In the report, transparent and fair charges were proposed for transmission and distribution services, essential for implementing the CTBCM model. "These charges should accurately reflect operational costs, fostering competition and encouraging investment."

The CCP underlined the need for gradual decommissioning of the outdated and inefficient state-owned power plants to reduce capacity payments and promote more efficient operations. Phasing out these plants will enhance system performance and reduce overall costs.

The recommendations included introducing low-cost power generation projects via competitive bidding for cost-effectiveness and efficiency in the sector. This approach will support affordable tariffs for end-consumers.

The competition watchdog advocated private sector participation in the expansion of transmission capacity under the Transmission Line Policy 2015. Engaging the private sector in building and maintaining the transmission infrastructure can improve efficiency and support CTBCM. It encouraged public-private partnership or the privatisation of DISCOs to address high distribution losses and promote a more competitive market.

As the market develops, the CCP suggested that the National Electric Power Regulatory Authority (Nepra) lower the threshold below one megawatt for consumers in choosing suppliers, enabling retail competition and increasing consumer choice. Significant investments are needed in infrastructure to expand and modernise the power network, facilitate effective competition and ensure reliability.

At the same time, consumers should be educated about payment discipline and the importance of timely payments, which can improve the sector's financial health and reduce electricity theft.

The CCP hoped that the report would inspire meaningful dialogue and collaborative reforms among policymakers, industry stakeholders and regulatory bodies.

CCP Chairman Dr Kabir Ahmed Sidhu, in his message, emphasised the critical role of a competitive power sector in driving economic growth and ensuring affordable energy for consumers.

"This report is a testament to CCP's commitment to promoting fair competition and addressing market inefficiencies in every sector of the economy," he stated.