One of the main aims under the Pakistan Power Sector Reforms has been to move towards a competitive trading bilateral contract market (CTBCM). This will result in a shift from the present arrangement of a single buyer, the Central Power Purchase Agency-G to multiple buyers and sellers under a competitive wholesale electric power market.
Although this has been in the pipeline for some time now, the CPPA finally submitted the conceptual design and planned roadmap for the envisaged market model to the National Electric Power Regulatory Authority (Nepra) last month. The document is available on the regulator’s website and is a comprehensive document outlining the objectives, structure and planned roadmap of the transition. Stakeholders are encouraged to provide their input to Nepra before any approval is given.
An important question is what will be achieved by moving towards a wholesale electricity market. For starters, it will provide a much needed level playing field and encourage more private sector participation including bulk power customers (BPCs).
The objectives also include enforcing payment discipline, while an exchange based model will also create more competition in the form of new capacity procurement opportunities. As things are currently structured, power purchase agreements (PPAs) are inflexible long term arrangements and are taking or pay contracts.
This has resulted in excess capacity payments in times of power surplus and chronic deficits at other times due to a lack of generation capacity. This has ensued continuous pressure on the exchequer and frequent power breakdowns that end up hurting the end consumer eventually.
Therefore, another main objective would be also to create the requisite conditions to reduce government liabilities by reducing the need for sovereign guarantees and let market participants assume the risk and provide the financial resources for management of the power system. The market system will also ensure trading of firm or reliable capacity at competitive and efficient prices.
According to the plan demand participants such as DISCOs, K-Electric and BPC’s will have their capacity obligations in such a manner that they have in advance the capacity required to supply the forecasted system peaks as well as operational reserves. Overall, the move to a wholesale electricity market is the need of the hour for Pakistan’s power sector. More on the roadmap and other important aspects in the coming days.
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