Nepgra grants operator license to CPPA

CPPA will monitor enforcement of CTBCM

The National Electric Power Regulatory Authority (Nepra) has taken a landmark decision by granting a market operator license to the Central Power Purchasing Agency (Guarantee) Limited (the CPPA-G) to break the monopoly of existing power distribution companies.

The idea of the Competitive Trading Bilateral Contract Market (CTBCM) began in 1992, around thirty years ago, to unbundle the power sector to improve the services of distribution companies.

This dream has come true for the power sector of Pakistan after thirty years.

The purpose of the competitive trading bilateral contract market is to aim at introducing a competition in the electricity market where multiple sellers and buyers will trade electricity.

At present, existing state-run power distribution companies have a monopoly over the selling and buying of electricity. This has resulted in poor performance and led to the deteriorating situation in the country.

The competition in the electricity market will attract new investors that will compete to improve the services and bring efficiency to the power sector.

Pilot Project

Initially, there will be a test run of the CTBCM for six months wherein all IT systems and processes will be put under stress test to check their reliability and efficiency so that necessary adjustments are made in the regulatory documents before the actual transactions take place under the CTBCM.

After the test-run period, the financial transactions will commence under the CTBCM to achieve the benefits of affordable, reliable, and sustainable electricity for the consumers of the power sector of Pakistan.

In a statement, Nepra said that in a landmark decision that will usher in a new era of competition and help address the woes of the power sector, the Authority has granted the market operator licence under CTBCM to the Central Power Purchasing Agency (Guarantee) Limited (the CPPA-G).

The market operator will be responsible to administer its operations, standards of practice and business conduct of market participants in accordance with the market commercial code approved by the Authority.

The commencement of the CTBCM under the amended NEPRA Act of 2018 is one of the landmark achievements for the power sector of Pakistan.

Pakistani authorities had conceived the introduction of CTBCM, i.e., the wholesale electricity market, under the WAPDA Strategic Plan prepared in 1992 for the unbundling of the power sector.

However, the idea did not turn into reality until NEPRA approved CTBCM in December 2019 (High-Level Design) and November 2020 (Detailed Design).

Under the approved CTBCM implementation roadmap, the relevant regulations were approved and notified within the due timeline of 18 months. Further, all the critical actions, including deployment of IT systems, operationalization of market departments (MIRAD) in DISCOs, etc. were also completed within the record 18 months.

The CTBCM will tremendously improve the governance of the power sector through institutional reforms, improved procurement and payment discipline, and utilization of merchant generators without take-or-pay contracts.

Discos will enter into bilateral contracting by DISCOs based on demand forecasts and capacity obligations gradually moving away from sovereign guarantees, and KE integration into central despatch resulting in billions of rupees of savings.

There will be the deployment of IT and OT tools, automation of business processes, capacity building of human resources, etc.

The successful implementation of the CTBCM has the potential to change the overall technical, financial, commercial, and legal climate of the power sector.

Further, large consumers will now be able to purchase electricity from the suppliers of their choice at the cheaper and bilaterally agreed rates rather than purchase from DISCOs at the regulated tariffs.

The Authority appreciates the efforts of all key implementation entities, including MoE (PD), CPPA-G, PPIB/AEDB, NTDC, DISCOs, KE, and other stakeholders in achieving major milestones of the CTBCM Implementation Roadmap in a record eighteen months.