CCP recommends swift implementation of CTBCM model to open wholesale electricity market
\n ISLAMABAD
\nThe Competition Commission of Pakistan (CCP) has said that Pakistan was in dire need of competitive reforms in its power sector long dominated by state-owned enterprises (SOEs) and saddled with inefficiencies, The News reported on Saturday.
\nCCP\u2019s report \u201cState of Competition in the Key Markets in Pakistan: Power Sector,\u201d says that the power sector\u2019s monopolistic grip, largely controlled by state enterprises, restricts private sector entry and drives up costs, leaving consumers with high bills and limited choices.
\nStructural inefficiencies and a centralised single-buyer model exacerbate the problems, with power losses exceeding 17.6%, an ageing infrastructure, and soaring circular debt, it added.
\nThe report further highlights the significant presence and impact of SOEs on competition within the power sector, offering strategic insights for fostering a more competitive market environment.
\n\u201cThis report is a testament to the CCP\u2019s commitment to promoting fair competition and addressing market inefficiencies in every sector of the economy,\u201d said CCP Chairman Dr Kabir Ahmed Sidhu while emphasising the critical role of a competitive power sector in driving economic growth and ensuring affordable energy for consumers.
\nFurthermore, the forum calls for change: to revitalise the sector through privatisation, investment in smart grids, and a shift to competitive pricing \u2014 before these entrenched flaws further erode economic stability and energy affordability for Pakistan.
\nIt reveals fundamental weaknesses in market dynamics, regulatory frameworks, and infrastructure quality that are impeding efficiency and affordability in the sector.
\nTransmission and distribution are primarily controlled by the National Transmission and Dispatch Company (NTDC) and regional distribution companies (Discos).
\nA single-buyer model further restricts competition, with the Central Power Purchasing Agency (CPPA-G) acting as the sole purchaser of power producers.
\nThis centralised setup not only discourages private investment but also contributes to high operational inefficiencies, particularly in distribution where average losses exceed 17.6%.
\nThe sector\u2019s installed capacity has grown, reaching 45,885 megawatts as of June 2023, with a diversified energy mix. Thermal sources account for 62.79% of this capacity, followed by hydel (23.18%), nuclear (7.89%), and renewables (6.14%).
\nFurthermore, a competitive trading bilateral contract market (CTBCM) model was approved in 2020 to encourage private players, allowing bulk consumers to choose their power providers.
\nMajor weaknesses include high transmission and distribution losses, an ageing infrastructure, and circular debt that exacerbates inefficiency. The Paris Agreement, which Subsidies provided under the tariff differential subsidy (TDS) mechanism, while meant to stabilise prices, often benefits inefficient Discos disproportionately, undermining market equity. Additionally, unreasonable system charges deter new private entrants, hindering competitive pricing and sectoral reforms.
\nPakistan has significant potential to enhance competition by implementing the CTBCM model effectively. Encouraging private-sector participation, particularly through initiatives like competitive bidding for low-cost generation projects, could lower consumer prices and improve operational efficiency. Investment in smart grids and renewable energy, as seen in other countries, presents a sustainable path forward.
\nGeographical and socio-economic challenges, including high costs associated with rural grid expansion and power losses due to long-distance transmission, create a complex operational environment.
\nResistance from entrenched SOEs and regulatory delays could stymie needed reforms. Without swift action, the sector\u2019s inefficiencies could increasingly burden Pakistan\u2019s economic growth and energy affordability.
\nThe report calls for sweeping reforms, including the phased privatisation or public-private partnerships (PPPs) for Discos to tackle distribution losses. It also recommends infrastructure investment, tariff rationalisation, and regulatory enhancements to support the CTBCM model\u2019s implementation, setting the stage for broader retail competition.
\nThe CCP recommends swift implementation of the CTBCM model to open the wholesale electricity market, allowing bulk consumers more choice and fostering competition.
\nStrengthening regulatory and market affairs within Discos is essential, alongside transparent charges for transmission and distribution services, the CCP also advises phasing out inefficient state-owned plants to cut costs.
\nCompetitive bidding should be used for low-cost generation projects, and the private sector\u2019s participation in transmission expansion is crucial for efficiency. Transitioning Discos to public-private partnerships or privatising them will help reduce losses.
\nAdjusting tariff subsidies to avoid uniform rates will promote efficiency, and gradually lowering the threshold for retail competition will boost consumer choice.
\nInfrastructure upgrades for transmission and distribution are critical for competition, and consumer education on timely payments can improve financial stability and reduce theft. These steps aim to dismantle monopolies and create a more competitive, efficient power sector.<\/p>\n","protected":false},"excerpt":{"rendered":"
CCP recommends swift implementation of CTBCM model to open wholesale electricity market ISLAMABAD The Competition Commission of Pakistan (CCP) has said that Pakistan was in dire need of competitive reforms in its power sector long dominated by state-owned enterprises (SOEs) and saddled with inefficiencies, The News reported on Saturday. CCP\u2019s report \u201cState of Competition in […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-442710","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"\n