Developing Electricity Market

Author: Afia Malik
Publication Year : 2021

On November 12, 2020, NEPRA has approved the detailed design and implementation plan of Competitive Trading Bilateral Contract Market (CTBCM) of electricity. NEPRA has given the timeline of 18 months for preparation and implementation. The model envisages that all the future contracts for the sale/purchase of electricity will be bilateral between the parties, that is, sellers – generation companies and buyers – distribution companies or bulk power consumers. Pakistan’s power sector does need a market, no doubt. The basic aim of the reform model introduced in the early 1990s was to develop a competitive electricity market. Other reform measures including unbundling, deregulation and privatisation were merely transitory stages to move towards a free market. The idea was to achieve cheap pricing for consumers through competition in generation and supply and shift decision making from government to the market. As part of these reforms, Pakistan unbundled its electricity sector into generation, transmission and distribution. Private investors were also allowed in the generation sector. But in the absence of competitive bidding, we ended up in long term contracts with sovereign guarantees. The anecdotal evidence suggests that the performance of our electricity system is worse today than what it was in 1990s, when the reforms were initiated. One of the reasons quite possibly is that we left the reforms half way through. Secondly, we were not fully prepared to implement reforms when these were initiated; the restructuring was undertaken only in haste under influence of the donors. The result is in front of us – the end consumer tariffs are high, the government is still a decision-maker, and though we have a separate regulator but with insufficient authority.