Liberalising of the power sector will prove to be a game-changer as it will do away with monopoly to encourage competition and reasonable tariffs, a top government official said on Tuesday.
Tauseef Farooqi, chairman of the National Electric Power Regulatory Authority (Nepra) said the authority approved the detailed design and 18-month implementation plan of the competitive trading bilateral contract market (CTBCM) that will usher in a competitive environment in power sector.
The government initiated financial health assessment of power distribution companies to know their credit worthiness. The power sector is expected to have multiple wholesale buyers and sellers after April 2022.
Currently, the power sector is dependent on a single buyer (government) and after the implementation of the plan the multiple buyers and sellers will come in the market with investments.
An official of the Nepra said two discos are credit worthy, while others are not. Government can provide sovereign guarantees to them if they arrange loan funds.
“We are also reaching out to investors through Private Power and Infrastructure Board and Alternative Energy Development Board,” said the official.
The reform plan entails actions ranging from institutional strengthening to augmenting legal and regulatory frameworks. Interventions covering people, processes and technological aspects will provide non-discriminatory open access to all market players.
The main aim behind embarking upon the power sector’s massive unbundling is to transform the industry into functionally more efficient entities through introducing competition in the market and CTBCM will finally help in accomplishing the critical goal. It will initially cater to the wholesale market but will eventually pave the way for progressive opening up of the retail sector as well as trading with the regional markets.
Moreover, it will usher a new era of transparency, predictability and credibility whereby electricity shall be traded like any other commodity. CTBCM has the potential to turn around the overall technical, financial, commercial and legal climate resulting in much-needed improvements in the overall governance of the wholesale market. CTBCM will provide large consumers with the much-needed options to actively trade electricity founded on competitive market-based principles.
This eventual systemic improvement in the wholesale market will consequently have the trickle-down effect, for other consumers, resulting in more competitive prices in the days to come. CTBCM will also contribute to improving the security of supply, enhancing efficiency, amplifying payment discipline in the wholesale market operations and advancing conditions to move away from the historical sovereign guarantees-based regime.
Nepra will keep a rigorous monitoring check on CTBCM implementation to ensure its timely and effective implementation for achieving the desired results of affordability, reliability and sustainability of power services.