As part of a power-sector reform project, the PTI government has decided to revive Pepco to bring erratic power distribution companies (Discos) under centralised control. Approximately eight years ago, it had been 'abolished' on paper the power company was not wound up formally under the law for failing to do its job.
It will ultimately lead to privatisation of Discos and the creation of a competitive electricity market in the country. According to the proposed plan, power distribution firms will be asked to hire Pepco as their 'management agent' through a 10-year, extendable agreement.
In exchange, Discos will pay a fee to finance Pepco's expenditure. The management fee will reportedly be charged from power consumers. The arrangement is expected to improve management and governance of the power sector in general and Discos in particular. However, few expect the repetition of the experiment to deliver the goal: improvement in the performance of distribution entities.
The power distribution firms were extracted from Wapda back in 1998 as part of a reform programme aimed at corporatisation of the distribution entities under Pepco to prepare them for sale to the private sector. The scheme didn't work. Instead, experts point out, that the independence allowed to Discos in the name of corporatisation without their privatisation spawned festering issues such as the growing circular debt, distribution losses, unrecovered electricity bills and the crumbling electricity distribution infrastructure.
The solution to the issues is not to be found in repeating mistakes or reintroducing failed models. These issues can only be resolved by allowing room to private companies to participate in the business of electricity distribution, and creating a competitive market where both retailers and customers have the option to terminate their agreements without hassle. At present, the government is trying to evolve a model for a 'competitive market' to allow private generation companies to enter into direct electricity sale/ purchase agreements with public-sector distribution companies or bulk private consumers on a 'take-and-pay' basis.
The purpose is to give them and their customers a wider choice to sell or buy electricity at a mutually agreed price. This is expected to create competition among generation companies and make the price affordable for bulk buyers. Is this enough though? The government needs to take the debate towards privatisation of the retail electricity business. It could consider issuing overlapping distribution licences to two or more private companies competing for the same set of customers in the same area as is being practised in the UK and several other countries.
This model will preclude the sale of assets of Discos, which is hardly possible even in the distant future. The overlapping licences will ensure that companies constantly strive to improve their services in addition to giving consumers the option to change their service provider if they decide to do so for better services and rates.