ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) will begin on Tuesday (tomorrow) public consultation over a plan it had approved last month to set off operations of wholesale competitive electricity market in April 2022.

The design and implementation plan of the Competitive Trading Bilateral Contract Market (CTBCM), which was approved last month, entails action plans from institutional restructuring and strengthening the policy and regulatory framework, with its main objective being gradually introducing competition through non-discriminatory open access for all market participants and bringing transparency, predictability and credibility in the power market.

On Dec 22, international consultants of Nepra and the Central Power Purchasing Agency (CPPA) will explain to the federal and provincial agencies concerned, independent power producers, energy and industry associations, the financial sector and consumer groups how the wholesale market can be set in motion.

Nepra expects that the plan once implemented would improve security of power supply and system efficiencies and payment discipline, resulting in a shift from the historical sovereign guarantee-based regime of “take or pay” to “take and pay” contracts.

April 2022 deadline set for completion of Nepra-approved CTBCM plan

The two-phased CTBCM will be completed in 18 months i.e by April 2022. Initially, the wholesale market would become operational and take over about 16 per cent of electricity sales and purchases. The CTBCM roadmap was submitted by CPPA to Nepra in February under various government decisions. This is part of the power sector reform process started in 1992 and was expected to be completed in three to five years.

Conceptually, this would mean the power generators and purchasers would have freedom to sell and purchase electricity bilaterally like a stock exchange on a take-and-pay basis through a market operator (MO) and special purpose trader (SPT) — Central Power Purchasing Agency — unlike the existing arrangement where consumers are bound to purchase electricity from the distribution company of a specific area. Ultimately, electricity units will be traded like trading of shares at a stock exchange.

The CPPA would function as a market operator and start wholesale power exchange activities, including metering, billing and settlement of electricity transactions through a software-based arrangement to be followed by retail exchange activities within 18 months to complete bilateral trading.

The revised memorandums of understanding (MoUs) recently signed by the IPPs with the government would also be covered in the scheme, with a right of refusal to the CPPA.

Under these MoUs, the IPPs had agreed to convert their existing contracts of guaranteed “take-or-pay” to “take-and-pay-basis” without exclusivity when competitive trading arrangement is implemented and becomes fully operational, as per the terms defined in the licence of each IPP. They had agreed that in the interim period, the CPPA shall work towards providing access to the bilateral market at the earliest, while the government had committed to actively supporting the creation of competitive power markets.

The right of refusal to the CPPA has been given keeping in view that some IPPs, which had completed their debt repayments and were in last leg of their power purchase agreements (PPAs), would happily walk to their preferred consumers, while the IPPs which are still in debt repayment tenure would not be able to find their own customers.

An implementation group comprising the federal power secretary and Nepra chairman would oversee the CTBCM implementation roadmap and ensure operational hiccups are addressed quickly to avoid market complications. The power division, CPPA and Nepra are reported to have already done a lot of homework and they will be required to start complete rollout of regulatory, legal, technical, commercial and financial actions to facilitate transition to the wholesale power market.

Published in Dawn, December 21st, 2020