KE opposes opening Pakistan’s power market

KARACHI: K-electric Limited (KE) has given its detailed analyses and criticised the Competitive Trading Bilateral Contracts Market (CTBCM) Model noting its inadequacy in dealing with key power issues, such as circular debt and capacity under-utilisation.

Noting that key power sector issues remain unaddressed, KE has proposed a detailed and informed analysis drawing upon best international practices, recognising the peculiarity of the local power sector.

KE noted that the CTBCM, prepared by the Central Power Purchasing Agency (CPPA), instead of offering incentives for generation business, seeks to aggravate the issue of capacity under-utilisation by enabling addition of private generation projects for consumers who opt out of distribution companies (DISCOs). It recommended undertaking effective stakeholder consultation, prior to implementation of the proposed model.

“With surplus power capacity available in the country, the CTBCM model does not seek to address critical issues faced by Pakistan's power sector, including soaring levels of circular debt which has reached an alarming level of Rs1.6 trillion, lack of private participation and investment in T&D infrastructure, governance issues in state-owned entities and high Aggregate Technical & Commercial (AT&C) losses,” KE noted in its comment.

It called for coming up with a framework for resolving pressing issues of the power sector, and urged for agreeing on targeted regulatory/governance interventions to ensure that objectives of reliable supply of electricity at least possible cost for all consumers was achieved. KE noted the CTBCM model was skewed towards incentivising generation business allowing them to sell power directly to bulk consumers, and majority of the risk was still parked with DISCOs. The proposed model does not cover the long-term capacity commitments already entered into by the government on behalf of DISCOs, which may further exacerbate by allowing generators to cherry pick good consumers of DISCOs, thus exposing them to the risk of idle capacity payments and stranded costs.

Under the existing policy for tariff structure, high-end consumers, including bulk consumers cross-subsidise the low-end consumers.