ISLAMABAD: After capping the upfront tariff-based renewable energy projects, the government has constituted an inter-provincial committee to formulate an overall National Electricity Policy and National Electricity Plan envisaging the roadmap for future development of electricity generation, transmission and distribution capacity and its market structure.

A senior government official told Dawn the committee would first formulate a national electricity policy for approval by the Council of Common Interests (CCI). The policy would set the direction for future electricity generation and distribution, and creation of a market operator to enable wholesale trading of electricity. Alongside, the committee would also develop first five-year plan for future electricity projects in all areas with targets and timelines and how the market be opened going forward.

The official said Minister for Power Awais Ahmad Khan Leghari had already issued a notification for the establishment of a nine-member committee under Regulation of Generation, Transmission and Distribution of Electricity Bill 2017 approved by the National Assembly. Interestingly, the bill is yet to become a law, pending its approval by the Senate and the President of Pakistan.

A newly inserted section (14-A) of the said bill requires the federal government to prepare and prescribe a national electricity policy and plan with the approval of the CCI from time to time for the development of power markets, provided that input and assistance from the National Electric Power Regulatory Authority (Nepra) would also be required from the development of the said policy.

Under the said section, the policy would cover development of system based on optimal utilisation of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy and development of “efficient and liquid market design”. It has to integrate national and provincial transmission systems.

Interestingly, the law also required to ensure policy for the development of a sustainable renewable energy market with a dedicated and gradually increasing share in the power sector besides all matters relating to reform, improvement and sustainability of the sector.

The policy would take technical assistance from consultants appointed by the Asian Development Bank for the draft policy and plan. The committee will comprise a top official of the power division, four energy secretaries of the four provinces and one representative each from Nepra, Private Power and Infrastructure Board (PPIB), and Alternate Energy Development Board (AEDB).

Under the notification, all the members of the committee would personally ensure their attendance at every meeting. The National Transmission and Dispatch Company Limited (NTDC) and the Central Power Purchasing Agency (CPPA) will provide technical input and support to the Committee.

The NTDC will immediately hire and appoint an independent and professional consulting company to provide technical support to the committee in the development of the transmission and generation aspect of the plan.

The draft policy to be prepared for consideration and approval of the CCI would cover electricity generation, transmission and distribution besides establishment of market operator, wholesale trading of electricity and creation of retail market for electricity.

Under this policy, the five-year electricity plan would be approved and notified by the federal government to cover power generation, including timeline for de-licensing generation plants, enhancement of net-metering regime, improving the generation mix, improving pricing methods, share of provincial generation in national grid and encourage efficiency.

The plan would also set the tone for transition of the power market into a competitive multi-buyer regime, improvement in settlement and clearing function, establishment of a settlement guarantee fund, encouraging trading of electricity on an exchange, moving away from CPPA-G as purchasing agent of distribution companies (Discos).

It will propose means for the development of a wholesale trading market in electricity, including incentivising trader licences, timeline for initiation of wholesale market and trading limits of wholesale traders.

The plan would set targets and role of the PPIB and AEDB after establishment of a competitive market regime and set targets and means to develop the transmission sector on modern lines including system improvements, timeline and manner of segregation of system operator from NTDC, establishment of an efficient and professional system operator.

In the distribution sector, the plan would suggest milestones and guidelines for possible de-merger of larger Discos, investment plans to improve efficiencies and set the role of provincial governments in improving efficiencies, segregation of retail function in a phased manner from Discos.

The broad outline of the policy and plan is to create a retail power market, manner of making retail function operative independently of Discos, incentivising trader licences. It would also set the direction of the power sector financing including circular debt management and reduction, securitisation of debt, enhancement of capital market investment, financing and borrowing.

The final draft of the National Electricity Policy shall be placed before the CCI for its approval while the national electricity plan would be approved by the federal government for implementation.

Published in Dawn, December 21st, 2017