Competitive Trading & Bilateral Contracts Market

(CTBCM)

Opportunities, Way Forword & Challenges

By
Wajid Ali Chattha
Opportunities & Way Forword

Issuance of Regulatory Framework

NEPRA has lately issued most of the regulations that are mandatory for effective implementation of
CTBCM. These regulations include Electricity Procurement, Open Access and Market Operations
Regulations. CPPA & NPCC have also applied in NEPRA for issuance of Market Opertor & System
Operator License. Timely availability of regulatory framework is a key aspect of efficient functioning of
Competitive model.

Candidate Projects in IGCEP 2022-31

A total of 17,812 MW Installed capacity is deemed to be available by 2031, is considered as candidate

projects in IGCEP. This is a major opportunity for CTBCM to fit in these demand projections. Additionally,
more than 8,000 MW of the committed projects (More than 60%) are Hydro projects and empirically
these projects face a lot of delays so it again offers an opportunity from other sources to meet consumer
demand.

33,082 14,159 17,812 69,372

4,320
34,118 13,310 15,482 66,749
3,840
34,426 12,859 14,218 64,863
3,360
35,153 12,334 12,993 63,360
2,880
35,153 11,789 9,890 59,232
2,400
36,801 9,231 7,820 55,772
1,920
38,101 8,301 52,912
1,440
38,101 4,922 960 44,283
500
38,521 4,258 43,259
480
41,268 0 41,268

10,000 20,000 30,000 40,000 50,000 60,000 70,000

Existin Committe Candidat Net

Figure 1: Installed capacity categories in IGCEP-2022-31

Net Metering

AEDB has assumed that every year 480 MW will be added in system via Net metering. Same assumption
has been incorporated in IGCEP 2022-31. However simultaneously NEPRA is working on a proposal to
change tariff of buy back net metered units from National Average Power Purchase Price to National
Average energy Purchase Price. This step, if implemented will probably reduce Net metering expansion
in country ultimately opening up window for Generation under CTBCM.
Note: It is proposed that Net metering should be considered as a subsidy by Grid for contributing towards emission less
generation rather than a formal generation entity under normal tariff rates.

Global Fuel Prices

Although globally it is assumed that Fuel prices have passed through peaks but all forecasts are
suggesting that Global fuel prices will still remain substantially higher than 2020-21 levels. Overall, this
outlook requires our energy mix to be more indigenous hence it will be an encouragement for
indigenous fuel/source (Thar coal, Bagasse, Local Gas, Solar, wind, Hydro) Power plants.
Gas Supply issues of Captive Generation Units:

Recently Govt has started initiative of temporary disconnection of Gas supply to Captive generation
units. There is also a lot of pressure from different sectors to permanently disconnect gas supply to low
efficiency captive gas units and shift this gas to higher efficiency IPP’s. If this scenario is permanently
applied, industry will have to shift to Grid System and possible enter into bilateral contracts under
CTBCM.

Challenges
Wheeling Charges:

DISCO’s have been actively pushing Govt to determine wheeling charges based on inclusion of impact of
cross subsidies and stranded cost components. Based on higher inefficiencies of DISCOs, a straight away
inclusion of these components will result in very high wheeling charges ultimately resulting in Higher per
unit cost of delivered electricity to eligible consumers.

Govt is facing a double-edged challenge, if it applies wheeling charges based on existing efficiency rate
of DISCOs, with actual stranded cost & cross subsidy component, the resultant per unit cost might be
too high for a competitive market to appropriately function. On other hand if wheeling charges are
determined to facilitate competitive market mechanism it will result in exit of major chunk of consumers
from energy basket, thereby resulting in higher tariff rate for domestic consumers. Both decisions have
consequences where with option one industries face such tariff rate which hinder them to be globally
competitive and with second option domestic consumer tariff will increase resulting in political
consequence.

Exit of Efficient consumers from DISCOs supply network:

Eligible consumers (BPCs) under CTBCM which make up 16% of Disco’s consumer base in terms of
Energy withdrawn from DISCOs are amongst the most efficient consumers of DISCOs with a higher
recovery rate. If these consumers exit from DISCOs electricity supply pool overall recover rate of DISCOs
will further deteriorate. Ultimately resulting in accumulation of higher circular debt rate per consumer.

Disparity in treatment of Inefficient DISCOs:

CTBCM in order to facilitate inefficient DISCOs to be more participative in competitive market will
provide Govt backed guarantees to generators in these DISCOs. However, this action will be a disparity
against the spirit of competitive market and will result in further inefficiencies in these DISCOs. Low
performing DISCOs should be facilitated in order to ensure that these DISCOs are not left behind in this
model but they also should be given strict time bound targets so that the true spirit of a competitive
market is established at the earliest with out any discretionary treatment to any identity.
Financing Cost under CTBCM:

As the CTBCM model will predominantly be without Govt backed Guarantees so financing cost for new
projects will become higher ultimately resulting in added cost of electricity.

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