PBC recommends key reform measures for energy sector

PBC recommends key reform measures for energy sector

KARACHI: Pakistan Business Council (PBC) has recommended the government a set of reforms for bringing improvement in the energy sector.

The PBC sent its recommendations to the federal minister for industries and production and proposed key reform measures for the energy sector:

• Federal government to restrict its role to removing the existing bottlenecks in power transmission infrastructure and to ensure that the merit order in generation is maintained;

• Implement the terms of the MOU reached with IPPs to reduce the capacity charges and complete the renegotiation with those IPPs yet to be addressed;

• Utilize excess generation capacity through marginal pricing to promote industrial use, also to generate economic activity;

• Either privatize or transfer management of government owned Gencos (which are not due for retirement) to technically qualified private sector companies on an incentive for loss mitigation/incremental profit generation. Facilitate this through adequate protection from NAB and build appropriate safeguards on asset stripping and forced dismissal of employees;

• Move to multi-seller/multi-buyer arrangements, allowing market dynamics to set the price for both generation and distribution of electricity;

• Permit wheeling of electricity;

• Establish power/energy commodity exchange(s) for transparent pricing;

• Transfer all government owned Discos to the provinces at no cost;

• Provinces to establish Public Private Partnerships to operate the Discos on prescribed performance improvement incentives;

• Give consumers choice in the last mile of distribution. The GoP should set an example of this in the federal capital where it owns the Islamabad Electricity Supply Company (IESCO). Provinces and – KE can follow, the latter after its exclusivity expires in 2023;

• Unbundle KE post its exclusivity period. In the meantime, expedite the resolution of constraints affecting long term investment in safe and reliable supply of power to the country’s largest city and commercial centre. In doing so, also rectify the harm done to Pakistan’s image as an FDI destination;

• Phase out the country-wide uniform pricing formula so that the more efficient DISCOs can supply at a lower cost to consumers and provinces are able to use this to attract industry;

• Remove all “cross subsidies” e.g., from industrial / commercial to residential consumers – The government can provide targeted cash transfers to the most deserving population segment via the Ehsaas program;

• Any properly justified new capacity addition to be allowed only on renewables, without any take-or-pay sovereign guarantees;

• Retire all inefficient and costly generation plants in the public sector;

• Consider facilitating the conversion and deployment of existing coastal furnace oil plants for seawater reverse osmosis desalination;

• Promote renewables, especially for off grid use;

• Fast-track additional LNG terminals, storage and transmission to meet the shortfall between demand and supply of gas;

• Use the Ehsaas programme to subsidize gas to the deserving population. Right price gas to promote conservation;

• Incentivize conversion of domestic cooking and heating to electricity or other fuels such as LPG etc.;

• Aggressively promote energy conservation.

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