What is CTBCM?
The market structure followed in Pakistan has been a single-buyer model in which CPPA (as a single-buyer) purchases electricity on behalf of ex-WAPDA distribution companies (DISCOs).
In November, 2020, NEPRA approved a Competitive Trading Bilateral Contract Market (CTBCM) model that provided a roadmap for opening the Wholesale Electricity Market of Pakistan, aiming to provide choice to the bulk power consumers (with 1MW or above load) to purchase electric power from the DISCOs or a competitive supplier of their choice.
In order to provide an enabling regulatory framework for successful commercial operations of CTBCM, the Authority has also formulated following regulations (1) NEPRA Licensing (Market Operator) Regulations, 2022; (2) NEPRA (Electric Power Trader) Regulations, 2022; (3) NEPRA Licensing (Electric Power Supplier) Regulations, 2022; (4) NEPRA Electric Power Suppliers (Performance Standards) Regulations, 2022; (5) NEPRA Licensing (Distribution) Regulations, 2022; (6) NEPRA Consumer Eligibility Criteria (Electric Power Suppliers) Regulations, 2022; (7) NEPRA Consumer Eligibility Criteria (Distribution Licensees) Regulations, 2022; (8) NEPRA (Registration) Regulations, 2022; (9) Amendments in NEPRA (AMEC) Procedure Regulations, 2022; (10) Amendments in Fee Regulations.
In May, 2022, the Authority has granted market operator licence and approved market commercial code (MCC). As per the approved MCC; (a) the single buyer regime will end and DISCOs will be procuring power through centrally organized auctions run through the Independent Auction Administrator (IAA), (b) bulk power consumers (more than 1 MW load) will be given choice to procure power either from distribution company (DISCO) or it’s competitive supplier and (c) market sales on merchant basis will also be allowed to interested generation plants including those retiring from legacy generation fleet or connected with the national grid as captive generating plants.
CTBCM will tremendously improve the governance of wholesale market through institutional reforms, restructuring and automation of business processes and intense capacity building of professionals. It is pertinent to mention that these institutional reforms include creation of market implementation and regulatory affairs departments (MIRADs) in all distribution companies. By requiring DISCOs to actively plan, procure and enter into power procurement contracts bilaterally, these DISCOs are expected to improve their discipline, capacity and bankability thus ultimately doing away with sovereign guarantees for procurement.
The Authority has also issued directions for creation of Market Operator as a separate entity from the legacy role of CPPA as agent of DISCOs (SPA), direction to NTDC to separately obtain System Operator licence and registration of IAA.
Apart from several IT interventions including implementation of Market Management System (MMS) and automation of dispatch process (SDXP), other most important development is creation of Power Sector Centre of Excellence (PSCE) institute with collaboration of one of the leading universities in Pakistan (LUMS) that is offering regular trainings and learning opportunities for power sector professionals. With start of CTBCM transparency of wholesale market operations will tremendously improve that will help in achieving the objectives of market reforms.
NEPRA has directed its licensees on 31.05.2022 to start the market on trial run basis for six months. This transition towards CTBCM will help achieve benefits of de-bundling the power sector that will enable the bulk power consumers to have choice in supply of electric power (competitive suppliers) at negotiated rates and also translate into low costs and reliable power for all consumers. As a safeguard, the competitive suppliers are not allowed to charge higher tariff than the tariff of regulated suppliers of last resort.