Power re­form

The Pak Banker - - EDITORIAL -

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.

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