Electricity pricing and regulation

Publication Year : 2021

There is no clarity on how the energy sector is being regulated; whether we have state of the art pricing frameworks. NEPRA is the regulator, yet the final decision-making is done at the energy ministry. Our pricing system is based on load suppression model. This model was introduced when there was a shortage of energy and social welfare system was in place. After reforms, it should have changed, but we are continuing with it. In the generation cost-plus tariff, there is a lot of scope for improvement. But over the years, NEPRA has not come up with some good cost-plus formula. Both NEPRA and the government are responsible for the recent long term contracts with capacity payments. In 2005, NEPRA came up with power procurement regulation, which has no provision for long-term contracts. NEPRA has a strong advisory role under the law, but unfortunately, it is not exercising. NEPRA neither has the capacity nor the authority to take decisions which are assigned to it under the law. Similarly, NEPRA does not have the authority to check the inefficiencies of the DISCOs, as they are not independent corporate entities. They are under government control. The regulator does send an advisory to the government on various issues but is incapable of asserting its authority.

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