PAKISTAN Law and Practice Contributed by: Nadir Altaf and Muhammad Fahim Khan, RIAA Barker Gillette
hampering the financial ability of the DISCOs to cross-subsidise. • Stranded Cost: DISCOs argue that they spend regularly to maintain and expand their existing distribution networks and that abruptly losing high-revenue consumers to wheeling would mean that the DISCOs are unable to recover such costs, leaving such costs “stranded”. The consumers lost to wheeling are often reli- able, high-revenue customers that form the backbone of Pakistan’s industries (eg, factories, commercial and industrial establishments). This means the DISCOs’ concerns are juxtaposed against the developmental considerations of those industries that contribute significantly towards the economic growth of the country. Ageing Transmission and Distribution Networks Unfortunately, owing to neglect and lack of investment, the transmission and distribution networks of Pakistan have aged poorly. This has exacerbated losses, which go on to feed the problem of circular debt. This means these networks are ripe targets for foreign investment. Bureaucratic Hurdles Owing to institutional inertia and other factors, Pakistan suffers from chronic delay in govern- ment decision-making. 2. Market Structure, Supply and Pricing 2.1 The Wholesale Electricity Market The wholesale electricity market is entirely regu- lated at present. NEPRA determines the tariffs for all sales of electricity, including sales made
by generation companies to distribution com- panies. NEPRA has begun the process of deregulating the market in order to increase competition. In preparation for this deregulation, an elaborate mechanism of gradual transition to a competi- tive market – known as the CTBCM – has been developed. To enable the development of the CTBCM, the NEPRA Act was substantially amended in 2018, introducing the new licences discussed in 1.6 Recent Changes in Law or Regulation . 2.2 Electricity Imports and Exports NEPRA has developed a legal framework to enable the import of electric power from out- side of Pakistan, including from the state of Azad Jammu and Kashmir. The NEPRA (Import of Electric Power) Regula- tions 2017 enable licensees to negotiate and contract with power projects based outside NEPRA’s jurisdiction for the import of electric power. The NEPRA (Import of Electric Power) Regulations 2017 have recently been replaced with the NEPRA (Electric Power Procurement) Regulations 2022. Currently, imports under these regulations are being made from the State of Azad Jammu and Kashmir and from Iran. The pricing of these imports is negotiated between the genera- tor/exporter and the power purchaser (usually CPPAG or, for older projects, the NTDC) and subsequently approved by NEPRA. Pakistan presently does not export electric pow- er.
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