The National Electric Power Regulatory Authority (Nepra) has taken a landmark decision by granting the market operator licence to the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) in order to break the monopoly of power distribution companies.
The idea of Competitive Trading Bilateral Contract Market (CTBCM) was floated around 30 years ago in 1992 to split the power sector for improving the services of distribution companies.
The CTBCM is aimed at introducing competition in the electricity market where multiple sellers and buyers will trade electricity, says a statement issued on Tuesday.
At present, the existing state-run power distribution companies have monopoly over the selling and buying of electricity that has resulted in poor performance and deteriorating situation in the country.
'Competition in the electricity market will bring new investors that will compete and improve services and bring efficiency in the power sector,' the statement said.
Initially, there will be a test run of the CTBCM for six months where all IT systems and processes will be put under stress test to check their reliability and efficiency so that necessary adjustments could be made in the regulatory documents before actual transactions take place.
After the test run, financial transactions will commence under the CTBCM to achieve the benefits of affordable, reliable and sustainable electric power for the consumers.
In the statement, Nepra said that in a landmark decision that would usher in a new era of competition and help address the woes of the power sector, the authority granted the market operator licence under the CTBCM to CPPA-G.
The market operator will be responsible to administer its operations, standards of practice and business conduct of market participants in accordance with the market commercial code approved by the authority.
The commencement of the CTBCM under the amended Nepra Act of 2018 is one of the landmark achievements for the power sector of Pakistan.
The introduction of CTBCM - the wholesale electricity market - was originally conceptualised under Wapda's strategic plan prepared in 1992 for the 'unbundling' of power sector.
However, the idea did not turn into reality until Nepra approved the CTBCM in December 2019 (high-level design) and November 2020 (detailed design).
Under the CTBCM implementation roadmap, the relevant regulations were approved and notified within the due timeline of 18 months.
Furthermore, all the critical actions including the deployment of IT system, operationalisation of market departments in distribution companies, etc were completed within 18 months.
The CTBCM will tremendously improve the governance of the power sector through institutional reforms, improved procurement and payment discipline, utilisation of merchant generators without take-or-pay contracts, bilateral contracting by DISCOs based on demand forecasts and capacity obligations gradually moving away from sovereign guarantees, K-Electric's integration into central despatch resulting in savings of billions of rupees, deployment of IT and OT tools, automation of business processes, capacity building of human resources, etc.
The implementation of the CTBCM has the potential to turn around the overall technical, financial, commercial, and legal climate of the power sector.
Furthermore, large consumers will now be able to purchase electric power from the suppliers of their choice at cheaper and bilaterally agreed rates rather than purchase from the distribution companies at the regulated tariff.