Competitive electricity market: Systematic planning critical to ensuring success: experts

KARACHI: A gradual and systematic approach is critical to ensure that the government's vision of an open electricity market can be achieved successfully.

This was the consensus among an expert panel of key stakeholders and thought leaders who gathered to speak at a webinar on the 'Liberalization of the Power Market in Pakistan' under the Future of Energy dialogue series curated by Nutshell Conferences, the Corporate Pakistan Group (CPG) in collaboration with the Nepra and supported by K-Electric.

The focus was to brainstorm Pakistan's smooth transition roadmap towards a competitive electricity market.

The two-hour live webinar was attended by Chairman Nepra as well as representatives from Pakistan's industrial community, global energy consultants Kearney, and the International Finance Corporation (IFC). Discussion centered the key features of market liberalization and the policy level changes required to create an enabling environment which include but are not limited to the privatization of state-owned distribution companies and the introduction of a comprehensive and sustainable wheeling policy for transmission and distribution networks. Alongside this, the panelists also opined on the impact of an open electricity market on the economy, utilities, and especially on the customers at large.

The session began with the Keynote speech by the Honorable Chairman Nepra, Tauseef H Farooqi on the liberalization and future regulatory landscape in which he highlighted that NEPRA is aiming to remove inefficiencies from the system and to reduce the power cost in the country through Competitive Trading Bilateral Contracts Market (CTBCM) Model in the near future. NEPRA and the Federal Government have been working closely to develop the policy roadmap which can achieve this goal. He further added that the CTBCM will have a direct positive impact on the economy in terms of boosting industrial activity. NEPRA has approved a detailed design and implementation plan that includes the best practices from global examples.

Omer Haroon - Head of Strategy & Power Market, CPPA discussed the key features of CTBCM and explained that it ultimately induces competition that gives customers greater choice and control through market-based innovation. Agreeing to what Chairman Nepra said, he shared his views that the ultimate goal of CTBCM is not just to ensure the availability of power but also its affordability and for this, the market design needs to take into account the principles of transparency, predictability, and accountability. He said that every market design is unique, several global markets exist but there are differences in design principles due to local environment it provides. He also added that CTBCM, if implemented rightly, drives appropriate energy prices which benefit the customer.

Peter Brishimov - Principal, Kearney - a global management consulting firm with presence in over 40 markets worldwide - highlighted the prerequisites for successful liberalization of the market such as financial stability of the all entities in the sector, and sound governing institutions including regulators as well as financial institutions etc. He further recommended that the pace of liberalization should be gradual to ensure that there is no adverse impact. Based on the learning from the other countries, Pakistan should first conduct a dry run of 6-12 months prior to fully opening the market to derive learning and challenges. He emphasized that strengthening DISCOs is essential to the success of the model, and liberalization, if done in a systematic and gradual manner, can be a source to attract FDI within Pakistan's power sector that will ultimately benefit Pakistan in accelerate its economic growth.

As a representative of industrial customers, Dr. Mirza Ikhtiar Baig - Chairman, Baig Group, underlined the challenges being faced by the consumers under the current regime and how liberalization can help address these issues. He said that currently, the most pressing pain points of the customers are the security of supply and affordability of the power which is preventing industrial growth from actualizing its full potential in Pakistan. While there has been progress, especially after the global crunch due to the pandemic, there is still significant room for more growth. The Government has been supportive of industries but it is also coming at the cost of increased subsidies which they have to bear.

Azfar Ahsan, Chairman of Nutshell Conferences and the organizer of the important conversation stated that liberalization of the market is a positive step, and the strategy needs to be flexible so it can adapt to our politico-economic dynamics. He further mentioned that the consensus among experts was that opening of the market can be a game changer for Pakistan while the Ministry of Energy, Ministry of Finance, and Federal Government have been working actively to mitigate issues that gave us the faith that we have been on the right track.