With the unending circular debt and the structural problems in the energy sector, the government is making strategic changes in its approach to attracting fresh investments in the power generation and transmission systems.
A few days ago, Prime Minister Nawaz Sharif asked the concerned entities that if internationally reputable firms were reluctant to take part in bidding for the 6,600MW coal-based projects at Gadani Power Park, the government should make use of an interim policy finalised by the PPP government for short-term capacity enhancement.
Alongside this, the government is finalising an upfront transmission tariff regime to enable private entities and provincial governments to set up independent power projects for their own energy needs, and to inject surplus electricity into the national grid at wheeling charges to be approved by the National Electric Power Regulatory Authority (Nepra).
The government knows that even if it is able to add generation capacity, the transmission system does not have the capacity to provide additional supply to the consumers because a major chunk of national grid has outlived its designed life over two decades ago. Attempts to put energy beyond 15,000MW into the national grid essentially leads to it tripping, and a cascading blackout throughout the system.
At the same time, the bureaucracy is reported to have informed the prime minister that local and international investors interested in setting up coal-based projects in the country are reluctant about participating in international bidding. Since they are few, it is argued, there is no need for bidding, and hence the government should allow all of them to invest instead of thinning them out by making them compete against each other.
Simultaneously, fresh investments in the transmission system would be pursued under the upfront transmission regime so that by the time generation capacities come on stream, the national grid is geared up to transmit additional power to the consumers.
Now, the federal government has instructed Nepra under policy guidelines permissible under the Nepra Act 1997 to design the transmission tariff, commonly known as tolling charges, to enable any entity to evacuate its electricity generation through the national grid at cost.
Ultimately, the power producers — whether private investors or provincial or local entities — will be able to produce as much electricity as they can and send it out through the national grid to customers of their choice by paying a certain tolling or wheeling charge to the NTDC.
