Power policy proposes cost recovery at every stage

Updated February 10, 2020

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To be approved by CCI, policy envisages adjustment of provincial dues from NFC award. — AFP/File
To be approved by CCI, policy envisages adjustment of provincial dues from NFC award. — AFP/File

ISLAMABAD: The government has finalised National Electricity Policy 2020 that seeks ‘balanced development’ of power generation, transmission and distribution through full cost recoveries at every stage and to gradually bring an end to use of all imported fuels.

The draft policy that would pass through the next meeting of the Council of Common Interests for approval also envisages that “the agreed upon amounts owed by Provinces and/or their departments to the power sector, shall be automatically adjusted from the NFC award and departmental budgets”.

Under the policy, the National Electric Power Regulatory Authority (Nepra) would ensure liquidity of the electricity sector and facilitate the projects for which government may impose additional charge to be deemed as costs incurred by the distribution companies (Discos) or electricity suppliers. “Such additional charge may take into account the sustainability, liquidity and commercial viability of the sector, affordability for the consumers and the policy of uniform tariff,” says the policy draft seen by Dawn.

Similarly, the government would be empowered to incorporate in the consumer-end tariff any surcharge imposed by it, which would also be deemed to be cost incurred by the distribution companies or electricity suppliers and would be collected by them in discharge of their public service obligations.

The power sector planning would be integrated with the energy value chain through separate national energy plans to ensure sustainability, security and equity.

To be approved by CCI, policy envisages adjustment of provincial dues from NFC award

As an immediate step, the Integrated Generation Capacity Expansion Plan (IGCEP) would be the guiding document to be approved by the regulator and followed by a new Transmission System Expansion Plan (TSEP). The IGCEP and TSEP would be followed and implemented by all stakeholders, including one-window facilitators’ set-up, by the federal and the provincial governments and the plans would be updated on an annual basis.

The regulator would provide for recovery of stranded costs arising on account of distributed generation and open access in the consumer-end tariff. The Discos, the provincial governments and federal and provincial grid companies would be free to use different financing and investment options for expansion of the distribution network, including public private partnership models on both build, operate and transfer (BOT) and build, own, operate and transfer (BOOT) basis on competitive basis.

The Discos would be allowed to use various options, including use of technology and outsourcing of functions, for improving administrative losses and collections and also disclose all forecasts and network constraints.

The new policy would ensure open access to all market participants on a non-discriminatory basis and evolution of wholesale market to advanced phases by promoting competitive arrangements, both for and in the market, ensure payment discipline among market participants and eliminate sovereign guarantees for purchase of power over time.

The market operator would develop, in consultation with the stakeholders, a roadmap for transition of the power market with the approval of the regulator. This roadmap would provide time-bound actions for implementation by service providers and market participants, so that the wholesale market design can be timely implemented.

To ensure implementation of duly approved efficient market design and to promote development of the market, the regulator would in a timely manner frame regulation for supply, procurement, open access, wheeling, competitive bidding, import of power, up-front tariff, and ensure effective market monitoring and enforcement.

The regulator would promote efficiency in the tariff structure by aligning adjustments in generation-end tariff with the consumer-end tariff in a timely manner both for quarterly and monthly adjustments.

In view of various parameters, including the socio- economic objectives, budgetary targets and recommendations of the regulator on consumer-end tariff for each Disco, the government would continue to propose uniform tariff across the consumers and regions.

For that, the regulator would determine a uniform tariff inclusive of quarterly adjustments for all Discos.

In due course, the policy hopes that financial self-sustainability will eliminate the need for government subsidies, except for any subsidies for lifeline, industry or agriculture consumers. The subsidies to be provided by the government would be released in a timely manner for financial sustainability of the power sector.

All future procurement of electricity would be in accordance with the IGCEP and the TSEP.

Efforts would be made for development and enhancement of a robust transmission network which complements generation plans for smooth dispersal of power to load centres to ensure smooth operations, avoiding congestion and blackouts/brownouts.

The TSEP would provide for integration of the national and provincial transmission systems. For such integration, the provincial grid companies and special purpose transmission licencees shall coordinate with the National Grid Company and provide all relevant data at the conception stage, prior to any execution.

The generation mix for the sector would gradually reduce reliance on imported fuels and would move towards optimal utilisation of local resources such as coal, water, renewable sources, gas, and nuclear energy. Construction of multipurpose water reservoirs and tapping of hydro power potential in the country would be among the top priorities for power generation.

Published in Dawn, February 10th, 2020