ENERGY REGULATORY PARTNERSHIP–PAKISTAN FINAL REPORT ON A LIMITED-SCOPE ASSESSMENT OF LICENSE REQUIREMENTS AND CONDITIONS FOR THE REGULATORY OVERSIGHT OF THE ELECTRIC POWER COMPETITIVE MARKET ENVIRONMENT IN PAKISTAN

    

              

  

    January 2019 This publication was produced for review by the United States Agency for International Development. It was prepared by Muhammad Ziauddin.

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FINAL REPORT ON A LIMITED-SCOPE ASSESSMENT OF LICENSE REQUIREMENTS AND CONDITIONS FOR THE REGULATORY OVERSIGHT OF THE ELECTRIC POWER COMPETITIVE MARKET ENVIRONMENT IN PAKISTAN ENERGY REGULATORY PARTNERSHIP–PAKISTAN Project Title: Energy Regulatory Partnership–Pakistan Sponsoring USAID Office: USAID/Pakistan Cooperative Agreement #: AID-OAA-A-16-00042 Recipient: National Association of Regulatory Utility Commissioners

(NARUC) Date of Publication: October 2018 Revised: January 2019 Author: Muhammad Ziauddin

This publication is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the National Association of Regulatory Utility Commissioners (NARUC) and do not necessarily reflect the views of USAID or the United States Government.

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Executive Summary Restructuring and reforms in power sector of Pakistan were initiated in the mid-1990s by the unbundling of Water and Power Development Authority (WAPDA) into a number of independent corporate entities with the ultimate aim to involve the private sector in otherwise fully government controlled power sector thereby improving efficiency through competition. It was mandatory to establish a regulatory institution to regulate the newly established corporate entities. Accordingly, the National Electric Power Regulating Authority (NEPRA) was established in 1997 with the mandate to regulate the entire power sector.

To allow the private sector in a competitive power market some rules/regulations, procedures, guidelines have to be developed and approved by the competent authority and supported legally through an amendment in the existing NEPRA act. This will also require adequate capacity building in various stakeholder institutions. For this purpose, it is essential to assess the existing capability/capacity of concerned institutions.

At present, NEPRA functions under a functional framework, where departments tackle a single statutory function of the regulator, for instance licensing, tariff, management & enforcement etc. Like other countries, the aspect of the organization needs to evolve towards a Market-Based or Divisional structure, where departments/divisions oversee specific segments of the market and cater for the entire lifecycle of a project is also need to be reviewed

In order to provide legal cover to Competitive Power Market (CPM), NEPRA act has already been amended in 2018.

In order to conduct an “Initial Limited Scope assessment to Explore and Provide Data on the Various Choices for the Development of a Competitive Market”, the National Association of Regulatory Utilities Commissioners (NARUC), under USAID funding has commissioned this study. NARUC appointed the Consultant having the expertise required to meet the objective of the study, to serve as an in-country advisor of the NARUC/Energy Regulatory Partnership–Pakistan (ERP-P) based in Islamabad, Pakistan and to support key energy sector entity NEPRA on regulation and policy.

NEPRA Amended Act 2018 NEPRA’s parent statute, Act of 1997 was amended in April 2018. The amendment in the law introduced drastic changes in the market structure which consequently had implications on the market development plan. A host of new entities were introduced which require the development of comprehensive framework by the regulator to implement and enforce new market reforms. The statutory provisions giving effect to these licensees need some rational reforms under which NEPRA has been functioning in the preceding twenty years. For instance, traditionally both the sale and network aspects were covered in a single distribution license. After the NEPRA (Amendment) Act 2018, both functions have been separated i.e.,

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networking and power supply for which separate licenses will be issued. The amended act also provides for a gradual cessation of the licensing requirement for generation companies and a complete exemption for ‘Captive Power Plants’, which is another newly introduced concept. Under the amended act, the regulator has been granted various additional powers in its arsenal. The addition of these powers fundamentally changed the role of NEPRA, from an overseeing authority to a prosecution and enforcement agency.

Review of Power Sector Reforms in Other Countries Electricity market reforms have been underway worldwide for nearly three decades however, the competitive power market concept varies in each country’s case. In this report, mainly three transitional world class regulatory models have been reviewed which serve as a guideline while the selection of the most appropriate amongst them will depend upon the prevailing ground conditions and compatibility with Pakistan’s existing regulatory set-up. a) Brazil: Brazil is a good example of electric power market reform and restructuring due

to its innovations in developing a competitive market based on the predominance of hydro-electricity. The reform changed the structure of the Brazilian power sector from being vertically integrated into a significantly unbundled form both vertically and horizontally. As a result of such reforms, quality of electricity service in Brazil has generally improved and post-market restructuring has led to growth in generation capacity, diversification of energy sources, a more robust energy mix, efficiency gains, and labor productivity.1

b) Turkey: The state owned monopolized power sector was converted to a competitive market environment in 2013 as the Electricity Market Law (EML) overhauled the electricity legislation in Turkey and provided basis to a transformed framework for the design and regulation of the market. This law paved the way towards unbundling of state owned electricity assets, opening of the market for competition above a threshold level of electricity consumption and also allowed third party access to the grid.

c) USA: Initially in the United States, the electricity industry was dominated by state based integrated system. Congress enacted Public Utilities Regulatory Policies Act (PURPA) in 1978, requiring utilities to purchase electricity from small scale power producers, including renewable energy and cogeneration projects. This Act opened the monopolistic power market to independent power producers (IPPs). Thereafter, in 1992 Energy Policy Act was passed which provided the Federal Energy Regulatory Commission (FERC) the authority to grant transmission licenses on request. Due to these reforms the performance of US electricity market is up to the required standard.

                                                            1 The literature reviewed noted several areas of improvements in Brazil’s electricity market post market reforms but statistical data on specific indices and the metrics of evaluation were unavailable for quantitative review and analysis. 

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Comparison of Licensing Requirement in Competitive Power Markets In the context of this study, a brief comparison of licensing requirements has been made for Turkey, Brazil and United States of America (USA). It reflects that all three countries have a well-established licensing mechanism. In Turkey and Brazil, a national level regulatory body exists which practices the licensing system while in the USA, a mixed system of regulatory authorities exists i.e., central and state level regulators. The Consultant understands that due to national level regulatory bodies, the regulatory models of Turkey and Brazil present footprint for Pakistan to promulgate effective regulation for the development of a competitive power market. In order to select a model, in totality or part, which is the right fit for the country, NEPRA along with other stakeholder’s experts and management need to thoroughly study and understand the dynamics of these models with special focus on license mechanism, rules, procedures and issues handling.

Consultations with CPM’s Stakeholders

During the course of study, meetings with different stakeholders including IPPs, GENCO, System Operator (NPCC), Market Operator (CPPAG), DISCO and Regulator (NEPRA) were held to seek their opinion and to assess their knowledge, expertise, and environment to work in a CPM model. It was observed that majority of these players have little idea about the government’s inclination towards developing a Competitive Power Market (CPM) in Pakistan. However, CPPA-G based on the mandate provided to them by NEPRA and through various decisions of the Government of Pakistan, has started efforts for the formation / development of Comprehensive Competitive Trading Bilateral Contract Market (CTBCM) Plan and had commissioned a study to develop a Market Model Conceptual Design – Road Map for implementation under ADB funding which is briefly touched upon in the report. System Operator was of the view that they are not yet prepared for CPM and a lot of work is to be done in the areas of online network data, SCADA system, installation of hardware for the purpose of collecting online data, capacity building of officials etc.

Assessment Keeping in view the state of awareness, expertise and stakeholder’s knowledge about the competitive power market in Pakistan, the assessment is divided in to three parts; (A) General Assessment; for existing situation of Competitive Power Market Environment (B) Specific Assessment; for Licensing Requirements of NEPRA in Competitive Environment (C) Structural Assessment; about Organizational Restructuring of NEPRA. All three are summarized below:

(A) General Assessment - deliberates current situation of Competitive Power Market environment.

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i. Presently, power sector of Pakistan is not geared up with Competitive Power Market

(CPM) environment.

ii. Stakeholder entities generally lack awareness about the steps needed to be taken for

the development of a CPM and only a handful of experts are aware of the necessary

steps needed to be taken in order to develop a CPM. Majority of the stakeholders

need capacity building in this area.

iii. Political awareness about CPM amongst the stakeholders is also not up to the desired

level.

iv. Almost half of the distribution companies are operating at a loss which raises the

question as to how they will survive in a CPM environment.

v. There is a lack of coordination among the donor agencies as various agencies have

been conducting similar work with overlapping scopes of work thus resulting in

duplication of efforts which wastes resources. Coordinated efforts are required to

ensure efficiency and optimum utilization of resources.

vi. Keeping in view all of the above, relevant stakeholders need to be equipped with

adequate knowledge and skills through trainings/visits to other countries having a

competitive power market in order that they can take informed decisions needed to

develop the CPM in Pakistan.

(B) Specific Assessment for Licensing Requirements of NEPRA in Competitive Environment.

i. The licensing, legal and HR department of NEPRA are not yet geared up with CPM

environment.

ii. NEPRA’s management and experts have limited knowledge about strengths and

weaknesses of different models of CPM, about their success and operations,

therefore, are not in position to recommend a suitable model as a whole or part

which would be best fit in Pakistan’s environment.

iii. There is a need for specific knowledge and capacity building of NEPRA’s management

and experts which will help them formulate rules and regulations for issuance of

licenses to different stakeholders in CPM environment.

iv. There is also a need for trainings and skill development to handle licensing issues of

different stakeholders in CPM environment before the selection model best fit for

Pakistan.

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v. After the selection of a model for Pakistan, trainings related to hardware, software,

on line SCADA system, communication system, secrecy and security in bids matching

while purchasing and selling electricity in the CPM and other relevant tools is an

essential requirement.

vi. The knowledge of handling long term bilateral contracts and spot purchasing in CPM

environment is almost negligible. This area needs significant improvement.

vii. Specific capacity building with reference to licensing requirements

Market Operator License System Operator License Power Supplier License Distribution License (wires only) Power Trader License Forward Market Spot Market (day ahead, Intra-day, real time, ex-post trading, etc.)

(C) Structural Assessment to rationalize existing organizational structure of NEPRA

i. Conduct of business regulations needs to be formulated by specifying the scope of

work and modus operandi of each department in the existing structure.

ii. Few structural changes are needed which should be capable to handle the activities

of new entrants i.e. supplier, trader, market and system operators.

iii. Delegation of powers to individual members and professionals in light of the NEPRA

Act.

iv. In order to avoid persisting lack of coordination among the departments, a liaison

officer/focal person in each department be entrusted with the duty to liaison with

other departments on day-to-day matters.

v. With the aim of improving efficiency of departments it is suggested that an e-office

be set up. Implementation of a dynamic online complaint redressal system linking all

stakeholders through a centralized database will help speed up the complaint

resolution mechanism.

vi. Legal Department needs to be rationalized according to the CPM environment in the

country.

vii. An R&D department may be introduced in NEPRA, which may help to resolve various

matters related to new technologies, policy and planning.

viii. The monitoring and enforcement department needs to be strengthened, redefined

and should focus on the overall performance of power sector. However, an expert

in the relevant department should be made mandatory with the monitoring team.

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TABLE OF CONTENTS

1. INTRODUCTION ...................................................................... 12

2. REFORMS & RESTRUCTURING IN POWER SECTOR OF

PAKISTAN ................................................................................. 16

3. REVIEW OF NEPRA (AMENDMENT) ACT, 2018 AND

ORGANIZATION RESTRUCTURING ........................................ 27

4. REVIEW OF REFORMS IN GLOBAL ELECTRIC POWER

INDUSTRY AND WORLD CLASS REGULATORY MODELS ...... 46

5. LICENSING REQUIREMENT IN COMPETITIVE POWER MARKETS

60

6. CONSULTATIONS WITH CPM’S STAKEHOLDERS ................... 65

7. ASSESSMENT ............................................................................. 72

8. RECOMMENDATIONS .............................................................. 75

ANNEX A .......................................................................................... 78

ANNEX B .......................................................................................... 80

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LIST OF FIGURES

FIGURE 2-1 EXISTING ORGANOGRAM OF NEPRA ............................... 20

FIGURE 2-2 NEPRA LICENSING PROCEDURE .......................................... 24

FIGURE 2-3 EXISTING POWER MARKET OF PAKISTAN ....................... 26

FIGURE 3-1 APPEAL MECHANISM UNDER THE NEPRA

(AMENDMENT) ACT ...................... Error! Bookmark not defined.

FIGURE 3-2 DIVISION BASED ORGANIZATION STRUCTURE OF

NEPRA ........................................................................................................... 41

FIGURE 4-1 POWER SECTOR REGULATORY MODEL OF TURKEY .. 53

FIGURE 4-2 POWER SECTOR REGULATORY MODEL OF BRAZIL 56

FIGURE 4-3 POWER SECTOR REGULATORY MODEL OF USA

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LIST OF TABLES

TABLE 3-1 LICENSE REQUIREMENTS AND CONDITIONS FOR NEW ENTITIES ... 28

TABLE 3-2 PROPOSED ORGANIZATION STRUCTURE OF NEPRA ...................... 37

TABLE 5-1 LICENSING REQUIREMENTS COMPARISON OF TURKEY, BRAZIL AND

USA .................................................................................................................... 61

TABLE 6-1 ROADMAP FOR IMPLEMENTATION OF CTBCM ................................. 68

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List of Acronyms

ADB Asian Development Bank

AEP American Electric Power

ANEEL Agência Nacional de Energia Elétrica (Brazil Electricity Regulatory Agency)

BPCs Bulk Power Consumers

BTCEM Bilateral Competitive Trading Electricity Market

CCEE Electric Power Commercialization Chamber

CCI Council of Common Interest

CERC Central Electricity Regulatory Commission

CPCN Certificate of Public Convenience and Necessity

CPPA-G Central Power Purchase Agency Guarantee

CPM Competitive Power Market

CTBCM Competitive Trading Bilateral Contract Market

DISCOs Distribution Companies

DOE Department of Energy

ECC Economic Coordination Committee

EIA Environmental Impact Assessment

EML Electricity Market Law

EMRA Energy Market Regulatory Authority

EPİAȘ Market Operator of Turkey

ERP-P Energy Regulatory Partnership-Pakistan

ERRA Energy Regulators Regional Association

EUAS Electricity Generation Company of Turkey

FDI Foreign Direct Investment

FERC Federal Energy Regulatory Commission

GENCOs Generation Companies

GHCL GENCO Holding Company Limited

GM General Manager

GoP Government of Pakistan

GSO Grid Station Operation

HRD Human Resource Development

HRM Human Resource Management

HR Human Resource

ISOs Independent System Operators

IPPs Independent Power Producers

KESCO Karachi Electric Supply Company

KE Karachi Electric

LSEs Load Serving Entities

M&E Monitoring and Enforcement

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MME Ministry of Mines and Energy

MO Market Operator

MSR Multi-Sector Regulators

MW Mega Watt

MWP Ministry of Water and Power

NARUC National Association of Regulatory Utilities Commissioners

NEPRA National Electric Power Regulatory Authority

NERC North American Electric Reliability Corporation

NPCC National Power Control Center

NTDC National Transmission & Power Dispatch Company

OATT Open Access Transmission Tariff

OECD Organization for Economic Co-operation and Development

OFFER Office of Energy Regulation

OMS Organizational Management Structure

ONS The operator of the National Electricity System

PEPCO Pakistan Electric Power Company (Private) Limited

PGCIL Power Grid Corporation of India Limited

PMAs Federal Power Marketing Agencies

PPAs Power Purchasing Agreements

PPP Public-Private Partnership

PURPA Public Utilities Regulatory Policies Act

RECs Regional Electricity Centers

RTOs Regional Transmission Organizations

SCADA Supervisory Control and Data Acquisition

SEBs State Electricity Boards

SERCs State Electricity Regulatory Commissions

SOP Standard Operating Procedure

SPS Special Purpose Supplier

SSR Single Sector Regulator

SIN Sistema Interligado Nacional

TEAS Turkish Electricity Generating and Transmission Corporation

TEIAS Turkish Electricity Transmission company

TEDAS Turkish Electricity Distribution Company

TEK Turkish Electricity Authority

TETAS Turkish Electricity Trading and Contracting Company

UK United Kingdom

USA United States of America

USAID United States Agency for International Development

WAPDA Water and Power Development Authority

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1. INTRODUCTION

1.1 Background of the Study

The power market of Pakistan is in a restructuring stage as it is transforming from single buyer market wherein all power generated in public and private is purchased by a government-owned entity; Central Power Purchase Agency (CPPA-G) and selling to various government-owned Distribution Companies (DISCOs) for onwards sale to ultimate consumers’ at uniform tariff determined by the regulator “National Electric Power Regulating Authority (NEPRA)” and notified by the government, to a competitive power market (CPM) wherein private sector will play a major role and the government will regulate the sector through an independent regulatory authority.

The ultimate aim to transform the power sector to a competitive power market is to provide socio-economic benefits to the masses at large, thus providing an opportunity to the consumers to purchase electricity which is reliable at a competitive price. This can only be achieved by implementing across the board reforms in the regulatory and management systems. Such type of across the board reforms come through an evolutionary process, manifesting over time.

There are many countries in both developed and developing a world where competitive power markets are either in place through an evolutionary process and across the board reforms or are in a transition phase. Therefore, an analysis of the world-class competitive power markets is necessary which can then be used for the development of a competitive power market in Pakistan after necessary customization taking into account existing social and cultural environment.

Restructuring and reform of Pakistan’s power market started in the mid-1990s with the unbundling of Water and Power Development Authority (WAPDA)’s power wing into a number of independent corporate entities to effectively manage power generation and distribution companies along with National Transmission and Dispatch Company (NTDC). In addition, a regulatory authority, National Electric Power Regulatory Authority (NEPRA) was set up in 1997 with a specific aim to safeguard the interest of power generation, transmission and distribution companies besides the consumers at large. Around the same time, private sector investment in power generation was also allowed through a government policy that proved to be of great success.

A brief account of existing power structure and regulating authority is provided in the subsequent sections of this report.

In order to conduct an “Initial Limited Scope assessment to Explore and Provide Data on the Various Choices for the Development of a Competitive Market”, the National Association of Regulatory Utility Commissioners (NARUC), under USAID funding has commissioned this study.

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At the beginning of January 2018, NEPRA and NARUC conducted an initial meeting to discuss opportunities for collaboration, as supported by the USAID-funded Energy Regulatory Partnership-Pakistan (ERP-P). NARUC’s cooperative agreement supports technical assistance, training and capacity building on regulation and policy in Pakistan as the country shifts toward more transparent, coordinated, strengthened and effective regulation in the energy sector including electric power industry.

The NARUC appointed the Consultant having expertise required to meet objective of the study, to serve as an in-country advisor of the NARUC/Energy Regulatory Partnership–Pakistan (ERP-P) based in Islamabad, Pakistan and to support key energy sector entity–NEPRA as the country shifts toward more transparent, coordinated, and effective regulations and policies.

1.2 The objective of the Study

To provide a limited-scope assessment of license requirements and conditions for the regulatory oversight of the Electric Power Competitive Market Environment in Pakistan.

1.3 Scope of Assignment

The subject study is the part of the NARUC collaboration project with NEPRA titled A Limited-Scope Assessment Of License Requirements And Conditions For The Regulatory Oversight Of The Electric Power Competitive Market Environment In Pakistan. The Consultant provided assistance to NEPRA and NARUC team to create an initial limited scope assessment that explores and provides data, information, and knowledge on the various choices for the development of a competitive market and licensing requirements. Generally, this study conducted by NARUC and NEPRA with close collaborative support of the Consultant covers the following scope of work:

• A quick literature review of the changing electric power industry and presentation of summary findings on the benefits and effects of competitive market development

• The collection, gathering and analyzing data and information • Identifying NEPRA’s regulatory strengths that may complement and weaknesses that

may affect market development – special emphasis on enforcement capabilities and compliance performance

• Investigation of regulatory treatment areas with gaps and voids and implementation of improvements in these substantive areas – record collection and audit procedures are vital for essential regulation

• Study and consideration of alternative transitional world-class regulatory models that could be tailored to fit Pakistan’s evolving electric power industry, taking full notice of the effects and timing of gradualism and moderation in the process

• Close coordination with a potential market operator, Central Power Purchasing Agency to ensure NEPRA’s regulatory input and leadership in the development of wholesale competitive market rules and ancillary services

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• Meeting with selected individuals in the community of identified stakeholders, including representatives of each customer class, utilities, investors, national government, local governments, service providers, suppliers, market competitors, etc., to learn about their concerns and share ideas with electric power market development

• Close study of NEPRA’s organizational management structure (OMS) to consider a shift from a functional-based OMS to an objective-based OMS – this shift in OMS may well serve to empower NEPRA’s overall regulatory capabilities and emphasize of focus on enforcement actions to improve compliance in the electric power industry

• Documentation of facts, data, and information to ensure credibility and to provide justification of movement toward achieving meaningful results

• Careful selection, designing, and implementation of training, capacity development, and public outreach activities whenever the situation presents itself.

1.4 Methodology

Following the methodology was adopted for the study:

• NEPRA deputed a team of technical and legal experts to work in collaboration with the consultant

• The consultant held various discussions and meetings with NEPRA team to understand their thoughts, and to gather knowledge of existing expertise to discharge current mandate as well as to assess their strengths and weaknesses

• The consultant reviewed the power sector reform process in various countries like Brazil, Turkey, USA, UK, and India along with relevant regulatory set-ups. In addition, the consultant also analyzed the reformed power sector structure with a view of an implementation in Pakistan after necessary adjustments/changes based on the actual ground situation

• Consultation with relevant stakeholders was an important part of this exercise as the success of the proposed competitive market depends on the acceptance of stakeholders. Accordingly, the consultant conducted meetings with relevant stakeholders to understand their thoughts regarding competitive power market viz-a-viz existing single buyer power market in Pakistan and their anticipation of issues during implementation of competitive power market and analyzed their inputs in the relevant part of the report.

• Discussion with CPPA-G forms another important segment of the study as it will be regulating various market players in the competitive power market. Accordingly, meetings were also held with their officials. Their thoughts/views are also reflected in an appropriate section of this report.

• Based on various inputs and information, the consultant and NEPRA team developed this draft report of the study.

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1.5 Structure of the Report

The study report is organized into different sections. Chapter 1 consists of Introduction while Chapter 2 reflects reforms & restructuring in the power sector of Pakistan. Similarly, in Chapter 3 NEPRA (Amendment) Act, 2018 and organization restructuring is discussed. proposed in Chapter 4 Review of reforms in the global electric power industry and world-class regulatory models are discussed. In Chapter 5 Licensing requirements in the competitive power, markets are provided. Stakeholder consultation has been presented in chapter 6 whereas chapter 7 takes care of assessment on issues that can be confronted while implementing CPM and elaborates the required capacity building in stakeholder institutions. The recommendation is provided in chapter 8.

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2. REFORMS & RESTRUCTURING IN POWER SECTOR OF

PAKISTAN

2.1 An Overview

Till the year 1996 the country’s power sector was being managed by two vertically integrated public sector utilities i.e. Water and Power Development Authority (WAPDA) which was responsible for the entire country except for the metropolitan city of Karachi which was managed by the Karachi Electric Supply Company (KESCO), now Karachi Electric (KE).

However, due to the very large management structure of WAPDA and centralized decision making, it’s performance deteriorated with the passage of time thereby delaying decision making and damaging governance which resulted in inadequate power generation capacity addition, poor system maintenance etc.

2.1.1 Restructuring of WAPDA

In order to improve the state of affairs of the power sector, the Government of Pakistan in 1994 decided to unbundle and isolate the power wing of WAPDA from the overall WAPDA system and currently they are only responsible for the management of water sector of the country. Accordingly, in December 1998 the WAPDA Act was amended to permit unbundling of power wing of WAPDA in a number of corporate entities; viz eight distribution companies (DISCOs) which were subsequently made ten by further unbundling two DISCOs in to four; three Generation Companies (GENCOs) were subsequently made four by separating one power plant from a GENCO, One National Transmission & Power Dispatch Company (NTDC) and a Pakistan Electric Power Company (Private) Limited (PEPCO), to oversee the transition from unified power wing of WAPDA in to various corporate entities. These corporate entities were supposed to be managed under an independent board of directors, thereby operating each entity as a separate cost and profit center. However, due to heavy political and bureaucratic interference desired results could not be achieved.

2.1.2 Existing Structure of Power Market in Pakistan

The primary aim of the restructuring of WAPDA was to gradually move from public sector monopolistic sector structure to a privatized and competitive power market in open the sector for private sector investment.

However, only power generation segment was opened to market competition and rest of the components of the value chain such as transmission and distribution that were separated from WAPDA into publicly owned companies to infuse corporate culture among them remained under monopoly. In the case of KESC, now KE, the ownership of the whole system was transferred to the private sector without unbundling.

Prior to restructuring and unbundling of Power wing of WAPDA, it was mandatory to establish a regulatory institution to regulate the newly established corporate entities.

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Accordingly, the National Electric Power Regulating Authority (NEPRA) was established in 1997 with the mandate to regulate the power sector of Pakistan.

2.1.3 Market Regulatory System

The establishment of a regulatory authority was an important element of earlier developed and approved Government of Pakistan’s strategic plan to unbundle Pakistan’s power sector to improve reliability and efficiency in the sector. The existing regulatory framework is quasi-judicial for issuance/renewal of licenses, tariff setting, disposal of appeals and maintenance of proper standards and quality of services by the licensees. Therefore, the authority is vested under the act and rules with the power of delivering decisions.

2.2 National Electric Power Regulatory Authority (NEPRA)

NEPRA, the regulatory authority of power sector in Pakistan, has been mandated by the law to safeguard the interests of the investor and the customer through judicious decisions based on transparent commercial principals so that the sector moves towards a competitive environment. It is the mandate of NEPRA to prescribe performance standards for generation, transmission and distribution sides for a safe, efficient and reliable supply of electric power to ultimate consumers. There is a provision of the imposition of penalties in the NEPRA act for power service providers not adhering to prescribed standards. The power to impose penalties is essential for enforcement of rules and regulations, however, due to political and bureaucratic influence despite NEPRA’s imposition of penalties, this could not be implemented licence thereby weakening the enforcement capability of the regulator. NEPRA has established performance standards for Generation, Transmission, and Distribution Licensees and has also developed Industry standards & code of conduct i.e., Grid code & distribution code, and consumers’ affairs manual.

2.2.1 Powers and Functions

The powers and functions of the Authority as defined in the Act are:

a) Grant of licenses for a generation, transmission, and distribution of electric power

b) Prescribing procedures and standards for investment programs by generation,

transmission and distribution companies

c) Prescribing and enforcing performance standards for generation, transmission and

distribution companies

d) Establishing a uniform system of accounts by generation, transmission and distribution

companies

e) Prescribing fees including fees for grant of licenses and renewal thereof

f) Prescribing fines for contravention of the provisions of the Act

g) Reviewing its orders, decisions or determinations

h) Settlement of disputes between the licensees

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i) Issuing guidelines and standard operating procedures

j) Determination of tariff, rates, charges and other terms and conditions for supply of

electric power services by generation, transmission and distribution companies and

recommendation to the Federal Government for notification

k) Review of organizational affairs of generation, transmission and distribution companies

to avoid any adverse effect on the operation of electric power services and for

continuous and efficient supply of such services

l) Encouraging uniform industry standards and code of conduct for generation,

transmission and distribution companies

m) Procurement advice to public sector projects

n) Submission of reports to the Federal Government in respect of activities of generation,

transmission and distribution companies

o) Redressal of complaints lodged with the Authority by a consumer or any other person,

against a licensee for contravention of any provision of NEPRA Act or any order, rule,

regulation or instruction made or issued thereunder

p) Performing any other function which is incidental or consequential to any of the

aforesaid functions

2.2.2 Monitoring and Enforcement

Monitoring and enforcement (M&E) is an important component of regulation to ensure that the licensees operate in accordance with the conditions of the license as well as to safeguard the consumer. Monitoring of licensees is conducted as per the articles of the respective license for critical analysis of their performance and penalties and fines are imposed on the (the performance standards rules for generation, transmission, and distribution specify the criteria to be used for monitoring of the performance).

2.2.3 Transparency

Transparency is the key element for striking a balance between the interests of the investors, public sector enterprises and consumers and ensuring the trustworthiness of regulatory decisions. Transparency is ensured through the following:

i. Seeking comments from stakeholders and the general public through press advertisements, official letters, and NEPRA website.

ii. Conducting public hearings. iii. Availability of licenses granted and determinations on the website of NEPRA.

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2.3 Existing Structure of NEPRA

The Authority consists of a chairman appointed by the federal government and four members, one from each province, to be appointed by the federal government on recommendations of the respective provincial governments. These Members are designated as Member (Tariff), Member (Licensing), Member (Monitoring & Enforcement /M&E) and Member (Consumers Affairs).

The organization chart of NEPRA is depicted in Figure 2-1. From the organogram, it has to be noted that tariff department is heavily populated. The reason behind this could be that the tariff department has a heavy workload as their duties include determination and issuance of tariff for generation, transmission and distribution companies. As part of issuing tariff, they have to adjust consumer’s tariff on a monthly basis for adjustment of fuel cost. Further, on the power generation side, they have to separately issue tariffs for all kinds of power generation system e.g. hydro, thermal (coal, gas, and oil), wind, solar etc., besides they also have to handle review petitions filed by various power generation, transmission and distribution companies.

The licensing department is relatively small as the issuance of licenses for power generation, transmission and distribution is a one-time exercise.

Monitoring and enforcement department is pretty large in the organizational set-up followed by the consumer affairs department, however, their effectiveness is questionable.

In the changed scenario of competitive power market regime, the major workload is expected on the M&E departments whereas the role of tariff department will gradually decrease with the passage of time as the market becomes more mature.

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Figure 2-1 Existing Organogram of NEPRA

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2.4 Existing Monitoring and Enforcement Capabilities

NEPRA has an M&E department to gauge the performance of its licensees with respect to compliance of relevant laws/rules/regulations, terms and conditions of the license and other applicable documents. As per the mandate the M&E department is involved in monitoring and enforcement activities. It has been observed that M&E department is weak in enforcement for one or other reason, it appears that NEPRA mostly relies on the data provided by the stakeholders and perhaps due to the constraint of resources, it is not always possible for NEPRA to physically verify the data. However, the monitoring mechanism needs to be strengthened.

2.4.1 Monitoring the Operational Performance of Power Plants

Based on the performance analysis of public sector power plants and keeping in view the new generation capacity addition by year 2018, NEPRA issued directives to the Ministry of Water & Power (now Ministry of Energy) & GENCO Holding Company Limited (GHCL) to prepare and share with NEPRA and other policymakers, a detailed plan of phasing out old / un-economical & un-serviceable generating units, which have completed their useful life. This is deemed appropriate as the national exchequer suffers a huge financial loss in the form of capacity payments made to various in-efficient units of Public Sector GENCOs. However, no response has been provided by the concerned quarters so far. This also proves that the enforcement mechanism of NEPRA needs to be strengthened.

2.4.2 Analysis of Data Provided by Generation Licensees

Performance monitoring of the licensees regulated by NEPRA is critical for improving their operations. It is observed that the information required by the M&E Division for carrying out monitoring activities has not been normally provided by the various generation licensees, well in time. Furthermore, accuracy/authenticity of requisite data/information cannot be guaranteed.

2.4.3 Technical Audit of Generation Licensees

All generation facilities are paid for consumables, fuel, services & operational costs etc., as per rates/charges set out in their tariff determinations. The performance of power plants can be monitored with the technical/financial audit for well in time maintenance, replacement of consumables & fuel consumption etc. This will increase the reliability of power plants and help reduce the capacity degradation/reduction, as per the current situation, where the installed capacities of public sector thermal power plants have dropped significantly. However, presently, there are no Standard Operating Procedures (SOPs) or guidelines etc. for carrying out a technical/financial audit of NEPRA’s licensees.

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2.4.4 Loading Position of NTDC’s Grid Stations

The authenticity of submitted data is a challenge, as the data forwarded by GSO is prepared manually. Despite monitoring the loading position and issuing advisories there is no significant improvement observed at the grid stations.

2.4.5 Investigating Power Breakdowns and Blackouts

SOPs are needed for investigation of a breakdown; currently, NEPRA relies on reports from GM (System Protection) NTDC. NTDC in its reports always holds generation companies responsible for breakdowns whereas the generation companies shift the blame on the NTDC/NPCC, the system operator. An overall bias is observed in the reports submitted by NTDC.

2.4.6 Monitoring Progress of Power Projects / Delays in Projects

Delays in projects have a negative impact on system reliability and stability besides overall cost increase in projects thereby increasing the cost of power supply. NEPRA’s role of monitoring the projects have been challenged by licensees on legal grounds. SOPs for monitoring the projects as well as fines/penalties for delayed constructions in tariff determinations are required in order to ensure timely completion of the projects.

2.4.7 System Constraints of NTDC & Discos Leading to Power Curtailment and Added Load Shedding

There are no SOPs that are required to carry out technical audits of NTDC and DISCOs transmission and distribution networks. DISCOs always hold NTDC responsible for curtailment/load shedding whereas NTDC holds DISCOs responsible for poor infrastructure leading to increased load shedding.

2.4.8 Investment Utilization by NTDC & DISCOs

SOPs are also needed to conduct a financial audit of utilization of allowed investment and benefits achieved. It has been observed that despite making huge investments in the system, the element of improvement is not achieved on the ground by licensees.

2.4.9 Issues Observed Regarding Monitoring & Enforcement of DISCOs

Inability is observed on the of part DISCOs to implement the authority's direction as per fixed deadline regarding digitized plotting of distribution system (compliance with the article of granted distribution license – Article [3.3 (i) & (ii)]. Similarly, delay in submission of reports has been observed with regard to monitoring and enforcement of the authority's directives issued in the tariff determination of DISCOs. With reference to monitoring of operational performance and system development plans, provision of incorrect information from DISCOs to the authority has been observed by through the fact that different figures are reported at different times, which raises doubt on the authenticity of the data. This issue was observed in the context of information regarding loading position of distribution network of DISCOs (both 132kV & 11 kV network) and also in distribution network expansion /rehabilitation

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activities (for FYs 2017-18 to 2024-25) which are planned / to be planned by DISCOs for maximum evacuation of allocated quota of power against the demand.

2.5 NEPRA Licensing Procedure

A discussion with NEPRA team revealed that since its incorporation it has been awarding licenses to various generation, transmission and distribution companies for almost twenty years. With the passage of time and experience gained, they have taken care of various issues that confronted at initial stages and learned with experience and feel comfortable in most of the cases. However, there are some specific areas like distribution licenses and licenses to power producers for supplying electricity to bulk power consumers & housing societies, where they still face issues which are handled on a case to case basis. Various international and national/local training is provided to professionals of NEPRA for their capacity buildings in different areas, details of which have been provided in Annex A & B respectively.

NEPRA under the existing Act is mandated to grant licenses for generation, transmission and distribution services. No entity is allowed to construct, own or operate generation, transmission or distribution facilities for power business in the country without having a relevant license issued by NEPRA for the specific purpose. The grant of licenses is governed by the Licensing Generation Rules, 2000 and Distribution Rules, 1999 while all licenses are subject to prescribed terms and conditions. In the existing scenario, the licensing procedure of NEPRA for power sector business is presented in Figure 2-2. The NEPRA Amendment Act 2018, envisages the establishment of new entities like supplier, market operator, trader etc., which are yet to be implemented. Consequently, the internal operations of NEPRA are expected to be changed.

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Figure 2-2 NEPRA Licensing Procedure

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2.6 Central Power Procuring Agency–Guarantee (CPPA-G)

Another important step taken by the Government towards transforming the wholly public sector owned monopoly to competitive power market was the establishment of CPPA-G in 2015 under the Companies Ordinance, 1984 with the mandate to perform the market operations.

Initially CPPA was incorporated in 2009 under the Companies Ordinance 1984, however, its operation remained under NTDC as its subordinate department. It was operationalized to act as an independent entity in 2015 on authorization issued by NEPRA to act as a market operator and changing its nomenclature to CPPA-G.

Accordingly, the CPPA-G now acts as a market operator for which a market operator status was initially granted by NEPRA up to June 2017 and later extended for an interim period.

The government approved the mandate and timeline for CPPA-G to develop the competitive electricity market - Competitive Trading Bilateral Contract Market (CTBCM) within two (02) years of the notification of market rules and associated operationalization of CPPA-G by NEPRA. Thus, CPPA-G had to prepare a comprehensive CTBCM Plan for the transition of the power market to the competitive environment. In this regard, NEPRA has prepared Market Operator Registration, Standards and Procedure Rules, 2015 while CPPA-G has prepared a CTBCM Plan and which has been submitted to NEPRA for approval.

Figure 2-3 shows the existing structure of the power market in Pakistan:

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Figure 2-3 Existing Power Market of Pakistan

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3. REVIEW OF NEPRA (AMENDMENT) ACT, 2018 AND

ORGANIZATION RESTRUCTURING

While the competitive regime was in its transition phase, NEPRA’s parent statute, i.e. the Regulation of Generation, Transmission and Distribution of Electric Power Act 1997 was amended in April 2018. The amendment to the law introduced some changes in the market structure which consequently will have implications on market development. A host of new entities have been introduced which require development of comprehensive framework by the regulator to implement and enforce new market reforms. To encourage the captive power projects, the licensing requirements are relaxed. This includes the introduction of the following entities into law:

i. Market Operator Licensee: A licensed entity responsible for carrying out the

bilateral trading framework for energy and performing all related functions,

including invoicing, balancing and settlement etc.;

ii. System Operator Licensee: A licensed entity responsible for administering the

grid systems and dispatch;

iii. Power Supplier Licensee: A licensed entity that shall be responsible for sale of

electric power to end consumers;

iv. Distribution Licensee: A licensed entity that shall be responsible for the network

and wiring aspects of electric power;

v. Power Trader Licensee: A licensed entity that shall be responsible for trading of

electric power;

vi. Provincial Grid Company Licensee: A licensing regime for grid companies owned

by Provincial Governments;

3.1 License Requirements and Conditions for New Entities

The above-mentioned licensee entities are entirely new frameworks which are now part of the law. The statutory provisions giving effect to these licensees have drastically reformed the frameworks under which NEPRA has been functioning in the preceding 20 years. For instance, a tradition ‘distribution’ license was granted to entities for both the sale and network aspects of the electric power. With the NEPRA (Amendment) Act 2018, this function has been reformed and ‘distribution’ may only be granted for the purposes of networking. The sales aspect of energy has to be undertaken by the newly introduced ‘electric power supply’ licensee. This amendment has not only changed the market structure but will also affect the privatization process of the DISCOs.

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Similarly, the traditional licensing regime has also been reformed. The Amendment Act provides for a gradual cessation of the licensing requirement for generation companies and a complete exemption for ‘Captive Power Plants’, which is another newly introduced concept. A brief of the licensing requirements under the amended Act is provided below in Table 3-1.

Table 3-1 License Requirements and Conditions for New Entities

S.N Entity Eligibility Criteria Duties and Responsibilities

1 Market Operator

The market operator license shall be granted by NEPRA subject to prescribed requirements. Only one market operator license shall be granted at one time. The eligibility criteria for grant of license as a market operator shall include but not limited to: minimum solvency

requirements; minimum technical and

human resource requirements;

An application for a license shall be accompanied by a draft commercial code governing the form and manner in which the market operator shall undertake its licensed activities.

The public service obligations of the licensee including quality of service, transparency of transactions, timely collection and dissemination of payments, effective collection and dissemination of any and all taxes and surcharges as may be imposed. A market operator may, from time to time and subject

to approval by the Authority, make such commercial code as may be required to enable it to carry out its functions.

A market operator shall regulate its operations, standards of practice and business conduct of market participants and their representatives in accordance with its commercial code, policies, and procedures as approved by the Authority.

The Authority may, if required in the public interest, direct the market operator to make such commercial code or amend.

2 System Operator

The eligibility criteria for grant of license as a system operator shall include but is not limited to: • Minimum technical and

human resource requirements; and

An application for a license shall be accompanied by a draft grid code governing the form and manner in which the system operator shall undertake its licensed activities.

Public service obligations of the licensee including quality of service and transparency of transactions. The system operator license shall be responsible for Generation scheduling, commitment and dispatch, Transmission scheduling and generation outage coordination, Transmission congestion management, Cross-border transmission coordination, Procurement and scheduling of ancillary services and system planning for long-term capacity and such other activities as may be required for reliable and efficient system operations. A system operator shall, from time to time and subject

to approval by the Authority, make such grid management code as may be required to enable it to carry out its functions as a system operator.

A system operator shall regulate its operations standards of practice and business conduct in accordance with policies and procedures as approved by the Authority.

The Authority may, if required in the public interest, direct the system (operator to make such grid code or amend its existing grid code.

3 Power Supply Licensee

The eligibility criteria for the grant of a license to supply electric power shall include but not limited: • Minimum solvency

requirements;

Public service obligations of the license including quality of service, transparency of transactions, timely collection and dissemination of payments, effective collection and dissemination of any and all taxes and surcharges. The licensee shall:

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• Minimum human resource requirement:

possess a right to make sales of electric power to consumers in the territory specified in the license and to frame schemes in respect of that territory;

be responsible to make sales of electric power within its territory on a non-discriminatory basis to all the consumers who meet the eligibility criteria laid down by the Authority.

publicly make available the Authority's applicable rates, charges and other terms and conditions for power sales to consumers.

establish within three months of the issue of its license and make available to the public instructions specifying: o procedures for obtaining service; and o the manner and procedure for metering, billing, and

collection of the licensee's approved charges and disconnection in case of non-payment of charges, electric power theft and use of energy for purposes other than for which it was supplied and procedures for reconnection and recovery of arrears and other charges.

maintain accounts in accordance with the manner and procedure laid down by the Authority; and

develop, maintain and publicly make available, with prior approval of the Authority, an investment program for satisfying its service obligations and acquiring and selling its assets.

4 Power Trader Licensee

The eligibility criteria for grant of license for the trading of electric power shall include but is not limited to: minimum solvency

requirements minimum technical and

human resource requirements

In anticipation of the new market and in accordance with the amended Act, public service obligations of the licensee will include quality of service, transparency of transactions, timely collection and dissemination of payments, effective collection and dissemination of all taxes and surcharges as may be imposed by the Federal Government etc. As such, the licensee shall: possess a right to trade in electric power subject to

conditions of the license be responsible to carry out trade bilaterally between the

parties by entering into appropriate contracts containing necessary safeguards with regard to the supply of electricity through trading;

ensure that appropriate meters are in place for the purpose of energy accounting and comply with the specifications as specified by the Authority;

have requisite agreements with transmission licensees and distribution licensees for transmission or wheeling of electricity, as the case may be;

declare to the Authority it's maximum trading monthly volume and five-year trading plan;

comply with any direction issued by the system operator;

publicly make available the Authority's approved applicable rates, charges and other terms and conditions for power sales to consumers;

maintain accounts in accordance with the procedure laid down by the Authority and any other obligations as may be imposed by the Authority

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5 Distribution Licensee

The eligibility criteria for grant of distribution license shall be prescribed and shall include but not limited to: minimum solvency

requirements minimum technical and

human resource requirements

the source and scope of electric power and rates paid by it.

The licensee shall be responsible for providing distribution service within its service territory on a nondiscriminatory basis to all the consumers who meet the eligibility criteria laid down by the Authority.

The licensee shall follow the performance standards laid down by the Authority for distribution and transmission of electric power, including safety, health and environmental protection instructions issued by the Authority or any Governmental agency or Provincial Government.

A distribution company may distribute electric power sold by generation companies to other distribution companies.

The distribution licensee shall make its transmission facilities available for operation by any other licensee, consistent with applicable instructions established by the system operator.

The licensee shall develop, maintain and publicly make available, with the prior approval of the Authority, an investment program for satisfying its service obligations and acquiring and selling its assets.

6 Provincial grid company

The eligibility criteria for grant of distribution license shall be prescribed and shall include but not limited to: minimum solvency

requirements minimum technical and

human resource requirements.

Only one such license shall be granted for each Province at any one time.

The provincial grid company shall be responsible to operate and provide safe and reliable transmission services on a nondiscriminatory basis, including to a bulk-power consumer who proposes to become directly connected to its facilities. The licensee shall: provide transmission and interconnection services to

the national grid company and to others, wherever necessary, at such rates, charges and terms and conditions as the Authority may determine.

Purchase inter-connection service from the national grid company as may be necessary and to connect its facilitates to the national transmission grid at the rates, charges and terms and conditions determined by the Authority.

Follow the performance standards laid down by the Authority for transmission of electric power, including safety, health and environmental protection instructions issued by the Authority or any Government agency.

make available to the general public the tariff specifying the Authority’s approved rates, charges and other terms and conditions for transmission services.

not levy any rate or charge or impose any condition for the transmission of electric power which has not been approved by the Authority as a tariff.

not cause a division or any associated undertaking to engage in generation and distribution.

develop, maintain and publicly make available, with the prior approval of the Authority, an investment program for satisfying its service obligations and acquiring and selling its assets.

3.2 Salient Features and Need for Organizational Restructuring

Some salient features of the Amendment Act, that have significantly changed the role, powers and mandate of the Authority are discussed below.

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3.2.1 Establishment of Appellate Tribunal

The Amendment Act has established the Appellate Tribunal has established that will review all decisions, determinations and orders of NEPRA. The Tribunal will comprise of three members, i.e. the Chairman, Member (Electricity) and Member (Finance), appointed by the Federal Government. The orders and determinations of the Tribunal shall be binding on the Authority and appealable before the High Court.

Prior to amendment in the Act, the aggrieved party was supposed to move to High Court and Supreme Court. Due to increase in judicial power of NEPRA, the aggrieved party has another forum to address their grievances. With the implementation of the proposed Appellate Tribunal, the adjudication framework will be enhanced to a five-tier process, and in case of consumer issues, a six-tier process, which will start at the provincial offices of inspection and end at the Supreme Court. The following illustration shows the process of adjudication framework proposed under the Amendment Act in Figure 3-1.

3.2.2 Cessation of Generation Licenses

The Amendment Act has provided a mechanism that shall implement a gradual cessation of generation licenses in the forthcoming years, with the generation license requirement to be abolished gradually under a mechanism to be formulated by the Federal Government after consultation with the authority. Licensing is a core function of NEPRA, and cessation of a licensing regime for generation companies will effectively remove a significant portion of the regulator’s function and work. This has been done in favor of liberalizing the sector by removal of barriers for new entrants and captive power plants.

Provincial Offices of Inspection

NEPRA

Review before the authority

Apellate Tribunal

High Court

Supreme Court

Figure 3-1 Appeal Mechanism under the NEPRA (Amendment) ACT

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3.2.3 Market Liberalization and Reform

Alongside cessation of generation licenses, there are a number of additional licenses and entity classes introduced in the Amendment Act, which are envisioned to fundamentally shift the entire energy sector towards a more competition-based regime. NEPRA will now grant system operator and market operator licenses, the licensees will then be tasked with overseeing transmission systems & dispatch and market transactions respectively. The authority will also be granting provincial transmission licenses where required. The Amendment Act further introduces two new classes of licensees, namely the Energy Trader and Energy Supplier. The Energy Supplier license will be authorized to sell electric power to end consumers. This power was originally granted by way of Distribution Licenses but has now been rescinded. All other energy transactions or trading shall be undertaken by an Energy Trader licensee. The rationale to introduce these new entities is to bring more discipline to the sector thereby improving technical and financial health. In addition, NEPRA now also maintains an overarching power of registering and regulating any other entity as required.

3.2.4 New Powers Granted to the Authority

Under the Amendment Act, the regulator has been granted the following additional powers in its arsenal

Powers of investigation Power to issue directions Prohibition orders

The addition of these powers will further strengthen the enforcement role of NEPRA. In the power sector, from an overseeing authority to a prosecution and enforcement agency.

3.2.5 The National Electricity Policy and Plan

The Amendment Act has introduced the concepts of the National Electricity Policy and the National Electricity Plan. The National Electricity Policy is a policy document that shall be prepared by the Federal Government with the approval of the Council of Common Interest (CCI). The Policy’s scope shall be focused inter alia on the development of power market, energy sustainability, transmission systems and optimal utilization of resources. The National Electricity Plan, however, is a document that shall be prepared and prescribed by the Federal Government, which has no set parameters or heads under which it shall be formulated. As such, the Plan has unrestricted freedom to address and cover any subject matter deemed relevant by the Federal Government.

Most significantly, all functions of the Authority shall be subject and subservient to both the Policy and the Plan. This is a departure from the previous regulatory regime, under which the Regulator has unfettered discretion in its regulatory activities. Now, all functions are to be executed in conformity with the Policy and Plan.

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3.2.6 New Consumer Complaint Framework

The Amendment Act has introduced an entirely new framework for complaint redressal before the Authority. Under the amended Act, the Authority is required to establish offices of complaints at a district level throughout the country, who shall deal with matters of overbilling, non-compliance of instructions with respect to metering and collection of approved charges, disconnection in case of non-payment of charges, electricity theft and use of energy for purposes other than for which it was supplied. This framework is in conjunction with other existing consumer grievance redressal frameworks.

From the above, it is observable that the regulatory functions, mandate, and responsibilities of NEPRA have been extensively revised. The Authority has been given additional responsibilities and functions, which are to be executed in a continually developing and evolving sector. This poses numerous challenges for the regulator, more so when coupled with the current inefficiencies and organizational ineffectiveness faced by NEPRA as an organization.

In view of the foregoing, it is imperative that the Authority engage in restructuring or rationalize its organizational framework with the objectives of effective implementation of the amended NEPRA Act and removal of inherent deficiencies within the organization.

3.3 Organizational Structure Theory

An ‘organization’ is defined as “a system used to define a hierarchy within an organization - it identifies each job, its function and where it reports to within the organization.” A structure is then developed to establish how the organization operates to execute its goals. There are many types of organizational structures. There is a functional structure, the divisional structure, the matrix structure, and the futarchy structure. Each organizational structure comes with different advantages and disadvantages and may only work for companies or organizations in certain situations or at certain points in their life cycles.

Poor organizational design and structure result in chaos. Some of the consequences include but are not limited to confusion within roles, lack of coordination among functions, failure to share ideas, and slow decision making. Often those at the top of an organization are oblivious to these problems or, worse, pass them off as challenges to overcome or opportunities to develop. Ultimately, it is important to get a group’s organizational structure correct in order for its aims to be successful.

Organizations, especially regulatory authorities, have long wrestled with the problem of how to structure their organizations to enable employees, particularly specialists, to do their jobs with maximum efficiency and productivity. One perplexing issue has been whether to organize around ‘functions’ or ‘products’. In the regulatory context, the ‘functions’ approach to organizational restructuring is straightforward, in which an organization is divided into an objective or function based manner. This is the structure maintained by NEPRA currently. The alternative ‘product’ based approach is translated to a regulator as a ‘market-based’

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structure since the regulator’s ‘product’ is effective regulation of different segments of its sector. Both these options are discussed in the subsequent paragraphs.

3.3.1 Functional Structure

The functional structure is based on an organization being divided up into smaller groups with specific tasks or roles. For example, a company could have a group working in information technology, another in marketing and another in finance. Each department has a manager or director who is answerable to an executive a level up in the hierarchy who may oversee multiple departments. One such example is a director of marketing who supervises the marketing department and answers to a vice president who is in charge of the marketing, finance and IT divisions.

In the context of NEPRA, the functional structure is translated to departments segregated on the basis of specific tasks. For instance, NEPRA has a licensing department that processes all licensing applications received by the regulator. The tariff department executes the tariff determination function for all segments of the sector. These departments are then supported by other departments, such as Legal, that have their own function-based designated Legal Advisors.

However, the major challenge presented by such a structure is a lack of inter-departmental communication, with most issues and discussions taking place at the managerial level among individual departments. For example, one department working with another on a project may have different expectations or details for its specific job. This is particularly concerning in a regulator’s context, where two departments (which specific and differing specialties) can present divergent conclusions and findings on a single matter. In addition, with groups paired by job function, there is a possibility of employees developing tunnel vision — seeing the regulator solely through the lens of the employee’s job function, which diminishes the employee’s capacity and the regulator’s efficacy in the long run. Lastly, such structures, once entrenched, are not amenable to change, or progress or development, due to the specificity and focused nature of work employees are generally accustomed to.

NEPRA has had function-based structure since its inception in 1997. The limited usefulness of this structure is manifest in last 20 years track of the achievements of NEPRA’s envisioned goals as no progress could be made to some of the core objectives like market development, eradication of monopolies, privatization, the economic aspect of the regulations etc.

3.3.2 Market-Based / Divisional Structure

The alternative to the Functional approach discussed above is a Market-Based or Divisional approach toward organizational structuring. This structure is employed in larger organizations that operate across several horizontal objectives. It allows for much more autonomy among groups within the organization. It has many different divisions and each division essentially operates as its own company, controlling its own resources and cultivate its own specialized expertise that benefits the organization in the long term.

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This type of structure offers greater flexibility to a large company with many divisions, allowing each one to operate as its own company with one or two people reporting to the parent company’s chief executive officer or upper management staff.

In the context of a regulator, a market-based/divisional structure can be employed by allocating departments based on sector divisions. For NEPRA, this may translate to a single department overseeing renewable energy. This would create a department that caters to the entire life cycle of a renewable energy project, from licensing, tariff and monitoring and enforcement. Such a structure would allow an organization to overcome its entrenched inefficiencies within a functional framework, and will further allow departments to bolster and cultivate their own independent and specialized expertise over the long term.

An assessment of energy regulators of various countries indicates that most regulators have shifted from a functional to a divisional organization structure, based on the respective segments of their sectors.

3.4 Divisional Based Organization Structure of NEPRA

In the context of this study, a market-based/divisional organizational structure for NEPRA has been thoroughly reviewed. At present, NEPRA is working under a functional framework, where departments tackle a single statutory function of the regulator, for instance licensing, tariff, management & enforcement etc. Departments functioning in an isolated manner, without consideration of the changing market dynamics and structures, is not a suitable organizational model and will be detrimental for the efficacy of the regulator. The organization needs to evolve towards a Market-Based/Divisional structure, where departments/divisions oversee specific segments of the market and cater for the entire lifecycle of a project. For instance, even though generation licensing requirements will be phased out, in the interim, a generation department would execute all functions of the regulator pertaining to a generation project, from its inception to its demise. This department would look after licensing, tariff, and management and enforcement for all generation projects. This would allow the department to cultivate specialized expertise in the long run for a single segment of the market and allow the regulator to make better and more efficient decisions.

In addition, the entire reorganization exercise needs to be undertaken to achieve decentralization within the organization. Smooth, swift and efficient working demands decentralization in the day to day routine matters of an organization, meaning that professionals need to work in a framework of cohesion rather than isolation, where authority and decision making is done at different rungs of the organization rather than at the top. In NEPRA, the organization has become more centralized over the period of time and the Authority is overstretched in such routine matters which could otherwise be dealt at a Divisional level. This has resulted in a massive number of regulatory meetings on every subject matter, which inevitably impacts the quality of decisions. In view thereof, it may be prudent to delegate some functions of the Authority to the Divisional heads for routine matters,

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specifically such matters that can be resolved without the need for overarching, policy guidelines from a full Authority. This will relieve the Authority Members of a big chunk of workload to focus on the regulatory decision making on one hand and on the other hand, it will help improve efficient disposal of routine tasks. It will, therefore, be prudent to formulate Conduct of Business Regulations specifying the modus-operandi for work disposal in NEPRA.

Furthermore, it is prudent for the regulator to constitute a new ‘Advisory Division’. Such a division would be unfettered and completely independent from the substantive organization and shall exclusively advise Members of the Authority themselves on various cases. The rationale of such a division is that it is untenable to assume that all Members of the Authority maintain at all times the required specialized technical expertise to make prudent and accurate determinations on the subject matters placed before them. The role of an Advisory Division could be to assist and advise the Members in this regard. Moreover, such a division shall be completely independent of the main organizational structure of the regulator. This is necessary for achieving the unbiased and effective performance of the division itself.

Lastly, it is felt necessary to highlight the importance of Human Resource Development (HRD) for a progressive organization. In modern organizations, HRD is seen as a strategic partner of the top management as its working has a direct bearing on the overall performance of the organization. Thus HRD in any progressive organization is responsible for monitoring the progress towards achievement of organizational objectives, identifying gaps and formulating strategies for structural reforms within the organization and improvement of the quality of manpower. HRD is responsible to continuously assess the kind of expertise needed by the organization, the hiring of best resources, training need analysis, devising training programs, development of available human resources through commensurate training etc.

The HRD Department at NEPRA currently stands in its infancy. At present, NEPRA maintains both HRD and HRM departments; however, there is a need to clearly define the role of HRD distinct from routine HRM activities. To be a forward-looking organization, NEPRA needs to institute a modern HRD concept. HRD department needs to be closely associated with the other Departments dealing with core regulatory business of the organization for a better understanding of the main functions of NEPRA, required the organizational structure to achieve its objectives and the kind of expertise needed to perform those functions effectively. NEPRA’s proposed reorganized structure is presented as under in Table 3-2 and Figure 3-2. It may be noted that the structure change should include the consent of top management of NEPRA.

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Table 3-2 Division Based Organization Structure of NEPRA

Division Department /

Advisor Role and Function

Advisory Division

Advisor (Electricity) Advisor (Finance) Advisor (Law and Ethics)

Advise the Authority on technical matters relating to energy generation, distribution and transmission Advise the Authority on financial matters relating to tariffs, fees, rates, charges, etc. Advise the Authority on matters of law and ethics, including management of conflicts of interest

Registrar Registrar Office Coordination

Perform statutory functions of Registrar under the NEPRA Act and Rules and Regulations Coordination function to be executed by Registrar Office

Wholesale Energy Division

Generation Department Power Trader Department Market Operator Department

Assume responsibilities of all functions pertaining to generation companies including:

- Licensing (Generation)

- Tariff (Generation, including BPCs Captive Generators and sale of power by generating Companies to entities other than consumers - §14(3))

- Monitoring and Enforcement (Generation including BPCs, Captive Generators sale of power by generating Companies to entities other than consumers - §14(3))

- Implementation of Standards (Generation including BPCs and Captive Generators)

Assume responsibilities of all functions pertaining to the trading of electric power including:

- Licensing (Power Trading)

- Tariff (Power Trading, Sale of power to BPCs (§22) and Sale of power to other DISCOs (§23))

- Monitoring and Enforcement (Power Trading, Sale of power to BPCs (§22) and Sale of power to other DISCOs (§23))

- Implementation of Standards (Power Trading, Sale of power to BPCs (§22) and Sale of power to other DISCOs (§23))

Assume responsibilities of all functions pertaining to market operating of electric power including:

- Oversight of Market Operator

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Retail Energy Division

Power Supplier Department

Assume responsibilities of all functions pertaining to the supply of electric power (sale business) including:

- Licensing (Supply of Power)

- Tariff (Supply of Power)

- Monitoring and Enforcement (Supply of Power)

- Implementation of Standards (Supply of Power)

- Billing and Metering (Supply of Power)

Networks Division

Transmission Department Distribution Department

Assume responsibilities of functions pertaining to all transmission activity including:

- Licensing (System Operator, National Grid Company, Provincial Grid Companies & Special Purpose Transmission Companies)

- Tariff (System Operator, National Grid Company, Provincial Grid Companies & Special Purpose Transmission Companies)

- Monitoring and Enforcement (System Operator, National Grid Company, Provincial Grid Companies & Special Purpose Transmission Companies)

- Implementation of Standards (Transmission)

- Oversight (System Operator, National Grid Company, Provincial Grid Companies & Special Purpose Transmission Companies)

- Import of Power

- Investment and Power Acquisition Programs (System Operator, National Grid Company, Provincial Grid Companies & Special Purpose Transmission Companies)

- Transmission (Wheeling by Generation Companies and BPCs)

Assume responsibilities of all functions pertaining to distribution of electric power (wire business) including:

- Licensing (DISCOs, KE and Private Distribution Companies)

- Tariff (DISCOs, KE and Private Distribution Companies)

- Monitoring and Enforcement (DISCOs, KE and Private Distribution Companies)

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- Implementation of Standards (Distribution)

- Oversight (DISCOs, KE and Private Distribution

Companies)

- Metering (DISCOs, KE and Private Distribution Companies)

- Investment and Power Acquisition Programs (DISCOs, KE and Private Distribution Companies)

- Distribution (Wheeling by Generation Companies

and BPCs)

Consumers Division

Complaints Department Dispute Resolution Department

Assume responsibilities of complaint redressal functions under the NEPRA Act for Violations of Law, including:

- Complaints against licensees and imposition of fines and penalties thereon

- Complaints by (and between) Licensees or

Federal/Provincial Governments (§37)

- Complaints against IOs (§27A (5)) Assume responsibilities of complaint redressal functions under the NEPRA Act for Consumer Disputes, including:

- Management and oversight of District Level Complaint Offices (§35A)

Prosecution, Legal and Adjudication Division

Prosecution and Litigation General Counsel Adjudication

Assume function of prosecution and litigation on behalf of the Authority, including:

- Prosecution of complaints (§35A) - Oversight of litigation against the Authority in courts

of law - Adjudication before the Appellate Tribunal (§12A)

Assume function of providing legal assistance and support to the Authority and all departments Drafting Orders/Determinations of the Authority Drafting Show Cause Notices and Explanations

Policy, Research and Development Division

This division shall be responsible for –

- Drafting subordinate legislation (including Grid Code, Distribution Code, Commercial Code, Industry Codes, Standards, Consumer Services Manual)

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- Advise the GoP on the National Electricity Policy and Plan

- Advise the Authority w.r.t conformity with the GoP’s Policies and Plan

- Research on foreign jurisdictions and international liaison

- Propose sector development initiatives

Services Division

Human Resource IT

HRD Function - Identifying and fulfilling hiring needs - Organizational design - Determination of salaries - Drafting a yearly training plan for the

officers of the organization - Coordinating with funding entities

HRM Function - Day to day management of HR needs of the organization HR Training - Drafting yearly training plan for the officers of the organization

- Coordinating with funding entities

- Automation of systems (particularly the development and administration of an online complaint system connected to all forthcoming complaint offices of the Authority

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Figure 3-2 Division Based Organization Proposed Organizational Structure of NEPRA

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3.5 Critical Review of Divisional Based Organization Structure

For a critical review of the aforementioned divisional based organization structure of NEPRA, some experts associated with NEPRA were consulted. According to them, the division based organization structure is mostly based on the experience of Multi-Sector Regulators (MSR) which are simultaneously regulating the affairs of oil, gas water and electricity sectors etc., while NEPRA is only regulating the power market. Further, divisional structure is practiced by large organizations that have worldwide footprint such as General Electric (GE) etc. However, GE is a manufacturing giant whereas NEPRA is a regulator. It is not rational to compare the organizational structure of a manufacturer with a regulator. Similarly, a company with thousands of products will need to have its sales functions divided w.r.t different products across different divisions but it is not plausible to apply this divisional model to a regulator that has an exclusive sector to regulate with well-defined functions. This viewpoint is further endorsed by the fact that most of the Energy Regulators Regional Association (ERRA) members which have already implemented competitive markets are still following function-based organizational structure. In view thereof, the proposed divisional model will create chaos and smooth functioning of the organization will be disrupted.

The proposed structure has fragmented core functions of the Regulator I.e., Licensing, Tariff, and Monitoring & Enforcement into many divisions. This categorization of the core functions into smaller divisions will severely limit growth opportunities and capacity development of professionals.

In view of the above discussion, it is construed that any Single Sector Regulator (SSR) functional structure is comparatively appropriate but it needs to be rationalized with the CPM environment. Therefore, the proposed divisional model is not suitable for NEPRA at this stage. In view of the above, the existing structure of NEPRA is discussed below along with its constraints/loop-holes in order that they can be addressed to increase the overall efficiency and effectiveness of the organization.

According to these experts that there are certain flaws/loop-holes in the existing structure of NEPRA which impede efficient and effective oversight of the power sector. The said are summarized below:

i. The concentration of decision-making powers at the highest Authority level. ii. Lack of communication/ coordination among different departments. iii. Lack of office automation/IT-based solutions. iv. NEPRA has had function-based structure since its inception in 1997 which has certainly

improved during the last two decades but still needs to be rationalized with the future competitive market scenario.

v. Some of the core goals/objectives of NEPRA could not be achieved like market development, eradication of monopolies, privatization, the economic aspect of the regulations etc.

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In view of NEPRA, it is needed to improve the existing function-based structure instead of going towards the division based structure. Although the Consultant is of the opinion that division based structure will be suitable for NEPRA in a later stage. However, few structural changes are needed which could be capable to handle the activities of new entrants i.e. supplier, trader, market and system operators.

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3.6 Challenges

The foregoing discussion highlights the steep departure of the original NEPRA from established practices, regimes, and legal frameworks. For instance, the generation licensing regime has been placed on the clock, with the entire regiment being disbanded within a period of 5 years or within the ensuing period of complete transformation of power market from single buyer to a competitive power market.

Additionally, numerous new entities have been introduced into law, such as the Trader, Supplier, and Captive Power. The law is vague and silent on the exact parameters and scope of these entities, which imposes further responsibilities on the regulator to understand and develop the frameworks to be introduced in the Parliament to provide legal status. Since these frameworks are novel and avant-garde, the regulator needs to determine a starting point for developing the same, which includes extensive capacity building, research, and innovation on part of NEPRA.

In continuation of the above, the Amendment Act has placed a number of subject matters within the scope of Regulations to be made exclusively by the Regulator. This includes the majority of the new licensing requirement, such as eligibility criteria, standards, manner & procedures for applications, and monitoring & enforcement. Drafting and implementing subordinate legislation relating to these subject matters poses immeasurable challenges for the regulator, due to the regimes introduced in statute being a complete departure from existing frameworks and practices.

Furthermore, the NEPRA (Amendment) Act 2018 was introduced by the GoP in an accelerated manner, without performing the consultation and instructive exercises necessary for the smooth implementation of sectoral reform. No distribution company, private stakeholders or the regulator, or other public functionaries, were consulted or apprised on the 2018 reforms. This has resulted in an unprepared sector, where the regulator and regulates are unfamiliar with the reforms that are now part of the law and are unqualified to effect smooth implementation. This was also felt by the Consultant during a meeting with various stakeholders. The regulator, in particular, has been placed in a predicament, where it does not maintain the necessary capacity and experience to implement the reforms introduced in law, let alone to build upon them.

Lastly, due to the entirely avant-garde reforms introduced vide the NEPRA (Amendment) Act, the sector lacks any material, documentation, precedent or jurisprudence to rely upon and develop required frameworks. Moreover, a preliminary review of multi-jurisdictional literature also suggests that the framework implemented vide the 2018 amendments do not have an exact counterpart in other jurisdictions. This presents further challenges, particularly on the regulator, on where relevant information can be found and used to implement the sectoral reforms.

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3.7 Required Assistance and Capacity Buildings

With the above background, NEPRA is faced with the following issues with regards to the establishment of the Competitive Energy Market framework:

3.7.1 A literature review regarding world-class regulatory models

With the advent of the recent amendments to the NEPRA Act 1997, NEPRA needs to undertake extensive research into laws, rules, regulations, licensing frameworks, and regulatory documents of other regulators in other jurisdictions, such that holistic and comprehensive frameworks can be established within Pakistan, that can cater for the forthcoming energy market reforms.

3.7.2 Strengths and weaknesses of NEPRA

NEPRA has been regulating the power sector for the preceding 20 years and has entrenched expertise in the Pakistani energy sector. As such, the forthcoming reform to the sector is a departure from established practices and requires the regulator to reform its own operational and professional capacities, particularly in the areas of monitoring, enforcement, legal and development of new SOPs, standards, codes etc. The role of M&E Division has further broadened in the amended NEPRA Act by including the “Investigation Clause”. As per the amended NEPRA Act, it is the prerogative of NEPRA to conduct investigations in respect of any matter that is a violation of the Act, Rules, Regulations, and Code made thereunder or the conditions of a license issued or registration granted under this Act, as the case may be. However, currently, there is no SOP or guidelines etc. for carrying out effective and result oriented investigations of incidents occurred in the power plants.

3.7.3 Gaps and voids

The NEPRA (Amendment) Act has introduced a plethora of new frameworks for the regulator to implement, administer and enforce and the existing frameworks have glaring gaps and voids in this context like, such as new standards, manuals and other subordinate legislation have to be developed (for monitoring previously licensed activities and new licensed activities, for determining tariffs in line with the amended NEPRA Act, for establishing legal procedures for new adjudication and enforcement powers).

3.7.4 Capacity buildings of NEPRA’s professionals

The CPPA-G has developed a competitive bilateral market model, for sale of power at wholesale, which shall be duly approved by NEPRA and implemented by CPPA-G. Successful and efficient implementation of the market model necessitates that the regulator and the market operator work in tandem and coordinate their efforts in achieving the desired frameworks. In this context, relevant capacity building of relevant professionals of NEPRA is highly needed which will enable them to handle the matters of the competitive power market.

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4. REVIEW OF REFORMS IN GLOBAL ELECTRIC POWER

INDUSTRY AND WORLD CLASS REGULATORY MODELS

Worldwide electricity markets are undergoing through reforms for the last few decades. The reasons behind these reforms are theoretical and technological developments along with political drivers, which engaged the electric power industry towards restructuring. These reforms introduced various novel concepts including privatization, liberalization, and market-based strategies implementation. Different nations restructured their electric power industries for meeting various national and international challenges. Due to these reforms, the private sector significantly replaced the role of government with reference to ownership and management aspects of the electricity industry. These reforms are associated with unbundling electricity industry, privatization of assets, the realization of a competitive market, separation of distribution service from sale, electricity pools creation, the establishment of independent system operators, regulatory reforms, injection of foreign investments and recovery of stranded costs. The logic behind these reforms is to improve efficiency, maximize economic surpluses and enhance consumer welfare. The electricity industry restructuring and reform process in some of the countries are briefly discussed below:

4.1 Brazil

Brazil is a good example of electric power market reform and restructuring due to its innovations for making competitive based on the predominance of hydro-electricity. Before 1995 the power sector was predominantly government-controlled with vertically integrated companies. The reform of the electric power sector in Brazil originated in the new constitution of 1988. It allowed private investment in infrastructure and provided the legal framework for regulating that investment. But in a real sense, the restructuring process in the electrical power sector was set in motion only by the ratification of the Electricity Concession Law No. 9074 early in 1995. The law provided for the unbundling of the sector—principally the functions of the dominant power generator and transmitter Eletrobrás. A number of entities entered into distribution and transmission systems. Private companies were provided permission to own transmission lines operated by the system operator (ONS) and regulated by a regulatory authority (ANEEL). To prevent the concentration of single party in the electric power market, the competition was implemented with the support of such regulations that imposed ownership limitation is all segments of electric power supply chain. The first reform model which implemented during 1995, was characterized by opening up the power market with emphasis on the privatization of all the companies and system expansion was supposed to be achieved through short-term price signals and contract obligations. In the latest model which implemented in 2004, the focus is on mutual existence of both private and state-controlled companies. The two reform waves changed the structure of the Brazilian power sector from vertical integration into a significantly unbundled form both vertically and

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horizontally. As a result of such reforms, the quality of electricity service in Brazil has generally been good by international and regional standards.

4.2 Turkey

Turkey has a long history of electricity sector reforms. Initially, the sector was state-owned directed monopoly which has shifted into competitive market environment with the passage of time. During 1963, the Ministry of Energy and Natural Resources was established and thereafter in 1970 Turkish Electricity Authority (TEK) was created, as an integrated monopoly, incorporating all electricity activities other than distribution. The distribution segment of the power sector was assigned to municipalities until 1982. To remove the monopolistic power of TEK and to set a framework for private participation in the power sector, the Turkish Parliament passed a Law No. 3096 in 1984. The objective of this law was to attract private investment in the sector as to decrease stress on the government budget. During 1993, TEK was split into two separate public entities i.e., The Turkish Electricity Generating and Transmission Corporation (TEAS), responsible for both generation and transmission activities, and the Turkish Electricity Distribution Company (TEDAS), responsible for distribution and retail sale activities. To further release the burden on the public budget, a fundamental approach was adopted during 2001 through Electricity Market Law (EML) No. 4628. This law overhauled the electricity legislation in Turkey due to providing a basis to a transformed framework for the design and regulation of the Turkish electricity market. This law paved the way towards unbundling of state-owned electricity assets, the opening of the market for competition above a threshold level of electricity consumption (the threshold to gradually decline) and also allowed third-party access to the grid. This law focuses on the establishment of a bilateral contracting market complemented by a residual balancing mechanism. Under EML, it is required to sell all generation capacity to wholesalers, retailers, and consumers either directly or through a spot market. In response, TEAS was unbundled into three separate state-owned entities;

The Electricity Generation Company of Turkey (EUAS) for a generation. The Turkish Electricity Transmission Company (TEIAS) for transmission and

dispatch. It also operates the balancing market, which complements the bilateral free market, and it acts as the settlement agency.

Turkish Electricity Trading and Contracting Company (TETAS), acts as the single buyer of electricity sold under the PPAs, and it onward sells this electricity to the distribution companies.

In 2013, distribution and retail sale activities were legally unbundled and are now carried out by separate legal entities. The incumbent supply companies can now sell electricity to end users within their designated regions. In terms of market restrictions, legal entities carrying out electricity market activities cannot have a direct shareholding in a distribution company and vice versa.

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Due to EML, Energy Market Regulatory Authority (EMRA) has established which is an independent and financially autonomous regulator of electricity and petroleum sectors of Turkey. The EMRA is further supervised by Energy Market Regulatory Board. Due to these reforms, power sector ownership has shifted significantly from the public to private, with an increasingly environmentally friendly generation mix.

4.3 USA

In the USA, initially, the electricity industry was dominant by the state base integrated system. Congress enacted the Public Utilities Regulatory Policies Act (PURPA) in 1978, requiring utilities to purchase electricity from small-scale power producers, including renewable energy and cogeneration projects. This Act opened the monopolistic power market to independent power producers (IPPs) as contracts were made by IPPs and vertically integrated utilities in various states. As a result of this Act, some states started competitive bidding mechanisms to meet additional energy requirements and adopt the most economic generation mix. Thereafter, Energy Policy Act was enacted in 1992 which gave the Federal Energy Regulatory Commission (FERC) the authority to grant transmission license on request. Due to PURPA, competitive bidding mechanisms, and the Energy Policy Act, IPPs were attracted to the electric power market. Furthermore, FERC issued Orders 888 and 889 in 1996 which directed the utilities to publish separate rates for electric power services (i.e., unbundling wholesale generation, transmission, and ancillary services). These orders instructed the owners of transmission systems to offer power producers open, nondiscriminatory access to their transmission system. The Order 888 resulted in the formation of ISOs which are independent organizations that have operational control and offer open transmission access. FERC in 1999 further realized that still, substantial barriers exist in the US electricity market with reference to the supply of electricity at lowest possible prices for reliable service. To address these issues, FERC issued Order 2000 which established the concept of the regional transmission organization (RTO) and outlined its functions and characteristics. Additionally, the order encouraged transmission owners to participate in RTOs. ISOs and RTOs have similar responsibilities, which include facilitating nondiscriminatory access to transmission infrastructure and coordinating, controlling and monitoring the use of the transmission grid in their respective territories. Through Order 2000, FERC encouraged the formation of RTOs across most of the country; however, some utilities and state regulators chose not to join RTOs in order to maintain control over system operations. ISOs and RTOs currently serve about two-thirds of electricity consumers.

4.4 UK

In the United Kingdom, the reforms in the electric power sector occurred over a period of time. These reforms resulted in the complete restructuring of the industry into distinct segmental lines as electricity generation, transmission, distribution, and marketing all became

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separate operations. The first minor step towards restructuring was the issuance of Electricity Act 1983 which encouraged IPPs. In July 1989, the Electricity Act was signed into law. Due to these changes, a way of reforms started in the electricity industry of UK during 1990. The publically owned generation and transmission company “Central Electricity Generation Board” was split up into four separate organizations; two large power generation companies, one transmission, and one distribution network. The distribution network consisting of 12 Regional Electricity Centers (RECs). Concurrently, the Office of Energy Regulation (OFFER) was established which resumed the responsibility of industry regulator. Moreover, electricity marketing for more than 1 MW was deregulated at an unregulated price.

4.5 India

India has also progressively liberalized its energy industry in last few decades although government-owned companies are still active players in the sector. Due to these reforms, hundred percent ownership is permissible through foreign direct investment (FDI) in generation, transmission, distribution and power trading segments except for nuclear power. The basic statute which governs generation, transmission, distribution, and trading of electricity is the Electricity Act 2003. This Act further resulted in the formulation of National Electricity Policy 2005, the National Tariff Policy 2016, establishment of Central Electricity Regulatory Commission (CERC), state electricity regulatory commissions (SERCs) and Appellate Tribunal. Even then, the majority of generation, transmission, and distribution companies are in the ownership of either central government or with state electricity boards (SEBs), however, private sector participation is increasing, especially in generation and distribution. The interstate transmission system is mainly owned and operated by Power Grid Corporation of India Limited (PGCIL), a state-owned company, and the intrastate transmission system is owned and maintained by state utilities. However, the public-private partnership (PPP) structure is increasingly preferred by the government for setting up the interstate and intrastate transmission networks. Overall, the power market is dominated by long-term contracts. For thermal (coal and gas) power projects and hydro projects, long-term power is procured through a negotiated way or pursuant to a competitive bidding process.

4.6 Benefits of the Competitive Markets

The competitive markets developed due to these reforms have a number of benefits as different nations are enjoying the positive impacts of these developments. However, the reforms should be backed by careful design otherwise instead of receiving benefits, it can result in a disaster of the power sector.

Due to these reforms, the quality of electricity service in Brazil has significantly improved and is in accordance with international and regional standards. Rules have been put in place to separate generation, transmission and distribution activities as to enhance the competitiveness of the power market.

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In the case of Turkey, due to these reforms, the ownership of the power sector has shifted significantly from the public to private hands, along with the development of environmentally friendly generation mix. Similarly, the performance of the US electricity market is quite well due to these reforms as prices are low as compared to other OECD countries and economic efficiency gains over the past decades have been substantial.

As a result of these reforms, the electricity industry of UK has become clearly more efficient and almost free of political influence. The electricity market has also highly attracted foreign investment.

4.7 Transitional World Class Regulatory Models in Power Industry

From the preceding section, it is observed that the key feature of power industry reforms is well set regulatory system. Majority of these countries have established quality regulatory bodies to oversee the power markets while balancing the interests of consumers and investors in-line to pertain the objectives of government policies by attaining efficient energy markets.

A very important point to be noted in all these models is that the regulator does not set tariff for eligible consumers. Tariff is only for regulated consumers. The bi-lateral trading in the market is free and buyer and sellers negotiate their rates among themselves. For DISCOs trading bilaterally, the regulator needs to ensure that the process is transparent, and enough competition is present. The prices should be arrived at through competition. Following three regulatory models could be reviewed as a guideline while the selection of the best one will depend on ground conditions of Pakistan matching with regulatory set-up exercised by any of these regulators.

4.7.1 Regulatory Model of Turkey

The Ministry of Energy and Natural Resources formulates the energy policy of Turkey. Energy Market Regulatory Authority (EMRA) is the regulatory authority of the energy market including electricity. It is an autonomous, public legal entity with administrative and financial autonomy and regulating and monitoring electricity and petroleum markets. EMRA is governed by the Energy Markets Regulatory Board.

EMRA can create and approve tariff levels, issue licenses, establish quality service standards and address other matters such as management and consumer complaints arising from a lack of quality or interruptions in the power supply.

EMRA can issue a license for power generation to private and public companies along with organized industrial zones. According to the latest figures published by EMRA in April 2017, 62.5% of Turkey's total installed capacity is owned by private entities. The transmission system is the sole monopoly of Turkish Electricity Transmission Company (TEİAȘ). Initially, TEİAȘ was solely the operator of the system but due to the introduction of new license mechanism under Electricity Market Law 2013, it has also granted the market operation license in the form of EPİAȘ. Turkey is divided into

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21 privatized distribution regions. All the distribution companies were privatized through the transfer of operations rights and have a distribution license from EMRA. The distribution system assets are still held by the state-owned Turkish Electricity Distribution Company (TEDAȘ). The EML prohibits distribution companies from being involved in any activity other than distribution services. The required investment for doing relevant work is the sole responsibility of the distribution company.

Supply is carried out by private entities having licenses from EMRA. In addition, the state-owned Turkish Electricity Trading and Contracting Company (TETAȘ) also supplies electricity. The supply licensees are allowed to import and export electricity while generation companies are allowed for import of electric power.

System Balancing

The legislation provides the framework for establishing a market that relies primarily on physical bilateral contracts between market participants and the balancing (day-ahead, intra-day and real-time) and settlement mechanism.

The Electricity Market Balancing and Settlement Regulation describes the market parameters and the system is balanced by the Turkish Electricity Transmission Company (TEİAȘ) and market operator EPİAȘ under the National Load and Dispatch Centre. EPİAȘ has the Market Management System, which handles monetary transactions and the market players participate in this market through a market participation agreement. The National Load and Dispatch Centre estimates hourly consumption and this estimate is used as a guide to schedule activities for the next day. Also, it uses a day-ahead schedule that is based on consumer use and consumption estimates to schedule how much electricity is needed in the next 24 hours.

EPİAȘ carries out wholesale activities and is also responsible for operating organized wholesale markets and financial settlement of the activities realized in them.

Electricity Trading

Generators sell the electricity they generate to supply companies. Private supply license holder companies trade electricity either from the spot market or through bilateral agreements. The state-owned Turkish Electricity Trading and Contracting Company can also trade electricity.

Wholesale electricity is supplied either by private supply license holders or the state-owned Turkish Electricity Trading and Contracting Company (TETAȘ). By far the key player in the market is TETAȘ, which mainly procures electricity through bilateral agreements with publicly owned power plants or privileged power plants. TETAȘ has a wholesale tariff for sales to consumers with regulated tariffs. Other consumers can freely agree their terms of sale with TETAȘ. Private wholesale suppliers who can trade electricity with other suppliers can sell electricity without being subject to any

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regulated tariff. There is also a spot market in Turkey (operated by EPİAȘ), where trading is not tied to bilateral agreements.

Eligible consumers (who have an annual electricity consumption of at least 2,400 kWh) can freely choose their own suppliers and determine sale prices. Consumers that fall below the annual limits set by EMRA must purchase electricity from the incumbent supply companies based on the tariffs set by EMRA.

The general overview of power sector regulatory model of Turkey is presented in Figure 4-1.

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Figure 4-1 Power Sector Regulatory Model of Turkey

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4.7.2 Regulatory Model of Brazil

The electricity market in Brazil is the largest in Latin America and is overseen by the Brazilian Federal Constitution. Ministry of Mines and Energy (MME) is responsible for formulating and implementing national policies on the energy sector. ANEEL is a special regulatory body having technical and political autonomy to regulate, supervise and monitor activities related to the energy sector.

ANEEL's main responsibilities and obligations are managing and supervising concession and permission contracts for electric power public services, deciding disputes between market players, analyzing negotiations and transactions between concessionaires, permit holders and authorized companies, imposing fines and penalties on agents for non-compliance with regulatory obligations, calculating rates for providing electric power services (especially the electricity supply from distributors), approving rules and procedures for the electric power trade and organizing and promoting energy auctions.

Electric power is generated by public and private companies under the supervision of ANEEL. Historically the generation was in the hand of public but due to reforms private power producers are permitted. Similarly, in transmission besides the traditional public entities now private companies are also permitted to own transmission lines, which are operated by the ONS and regulated by ANEEL.

The operator of the National Electricity System (ONS) is a non-profit private entity that manages the national interconnected transmission system “Sistema Interligado Nacional” (SIN). The ONS is made up of all the agents connected to the basic grid, and its main functions are planning and programming the operation and centralized dispatch of power generation, envisaging the optimal operation of the SIN, supervising and coordinating the operation centers of the SIN and preparing and presenting new rules for the operation of the basic grid for the approval of ANEEL.

The power distribution in Brazil is operated by about 63 public and private companies holding public service concessions. Electricity distribution concessionaires cannot develop any activity relating to power generation, transmission or energy trading. In addition, they can only acquire energy through auction based on the lowest price and sell energy to captive power consumers under the tariff set by the National Electric Energy Agency. Distribution concessionaires must maintain 100% of their contracted power demand and ANEEL takes necessary measures to enable the distribution companies to provide the energy they need.

System Balancing

ONS is responsible for coordinating and controlling the operation of electric power generation and transmission facilities in the national interconnected transmission system and planning the operation of the more isolated systems under the supervision and regulation of the ANEEL.

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To perform its legal and institutional missions, the ONS undertakes a series of studies and actions carried out on the system and its proprietary agents to manage different sources of energy and the transmission network. This ensures a continuous supply throughout Brazil and a sustainable, secure and balanced supply/demand relationship.

Electricity Trading

In Brazil electricity trading occurs through the following two markets:

Regulated Power Market - It is composed mainly of distribution companies and captive consumers, whose commercial relationship is fully regulated by ANEEL. The distribution companies can charge and receive a determined rate (tariff) for the power they supply. They must, however, acquire their entire power demand through power auctions organized and supervised by ANEEL.

Free Power Market - Free power consumers, power generators and trading companies are the main agents in this market. These agents are free to negotiate their own power volumes and prices. Gradually, the choice of selecting the power provider by the consumer is adopted. In this regard, during the first phase only bulk consumers are permitted to select their power providers and thus this concept can be also extended to other consumption sectors. Similarly, Electricity Retailers have created to involve in business related electric power purchase and sale through long-term contracts along with spot market contracts.

Electric Power Commercialization Chamber (CCEE) is a non-profit private entity regulated and supervised by ANEEL. It is responsible for registering and processing the volume of all the energy contracted in the electric power market. Short-term power transactions are settled financially at the CCEE. Long-term power transactions are also registered with CCEE but are settled financially directly by the parties. The CCEE is also responsible for calculating the clearance price for the difference in the contracted volumes in the short-term market, as well as being responsible for conducting auctions for the sale of energy to distribution companies in the regulated market. Similarly, electricity imports and exports are allowed subject to government decision and policy.

The general overview of power sector regulatory model of Brazil is presented in Figure 4-2.

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Figure 4-2 Power Sector Regulatory Model of Brazil

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4.7.3 Regulatory Model of USA

Department of Energy (DOE) is responsible for advancing the national, economic and energy security of the US by implementing policies regarding nuclear power, fossil fuels, and alternative energy resources. The Federal Energy Regulatory Commission (FERC) is an independent agency under the DOE.

FERC regulates the rates, terms, and conditions of the transmission system and Wholesale market. In addition to regulating wholesale market and transmission of electricity in interstate commerce, FERC also reviews certain mergers, acquisitions and corporate transactions by electricity companies, licenses and inspects private, municipal, and state hydroelectric projects, issues and enforces mandatory reliability standards, monitors and investigates electricity markets, administers accounting and financial reporting regulations and rules etc.

The individual state public utility commission has jurisdiction over retail sales of electricity in the state where the sales are made. State Public Utilities Commissions regulate the terms and conditions associated with the sales of electricity by Load Serving Entities (LSEs) to end users (such as residential, industrial and commercial consumers). State public utility commissions (and sometimes other state agencies) also regulate the siting and physical construction of generation (except hydroelectric and commercial nuclear facilities), transmission and distribution facilities.

The electric power in the USA is generated by a large number of commercial generators including Duke Energy, NRG Energy, Southern Company, NextEra Energy, American Electric Power (AEP). While transmission facilities are usually privately owned, many are controlled and operated by large regional entities (that is, independent system operators (ISOs) or regional transmission organizations (RTOs). ISOs and RTOs (overseen by FERC) are responsible for controlling, managing and operating the bulk electric transmission grid. ISOs/RTOs control, operate, and manage the bulk transmission grid, and perform various market auctions that are intended to match supply and demand. The power is distributed by about 144 distribution utilities in the US. Electric energy is typically supplied to end users by LSEs.

Wholesale sales and transmission of electricity in interstate commerce and FERC are responsible for regulating these, while the retail sale is regulated by States Commissions. Furthermore, State Commissions have also the jurisdiction to construct generation, transmission, and distribution facilities in their respective states.

Other bodies such as the Nuclear Regulatory Commission, North American Electric Reliability Corporation (NERC) and Federal Power Marketing Agencies (PMAs) play critical roles in other aspects of the electricity industry.

System Balancing

Electricity supply and demand is balanced through self-supply, bilateral contracts or through ISO/RTO electricity auctions. Electric utilities not participating in an ISO or

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RTO must effectively balance their supply with customer demand by either relying on their own generation facilities (that is, self-supply), by purchasing electricity under bilateral contracts.

Electric utilities must have sufficient energy and capacity to meet expected demand. Supply and demand in ISO/RTO regions are balanced through reverse auctions, in which the ISO/RTO matches bids for supply with bids for demand.

Electricity Trading

Overall, the US electricity market can be broadly divided into the following two categories:

Wholesale Market: Sellers in these ISO/RTO organized wholesale markets must first have authority from FERC to sell electricity at market-based rates. Moreover, sellers and buyers in wholesale markets must comply with the rules and regulations of FERC, and the applicable ISO/RTO. Sellers that clear in an auction generally are paid the market clearing price. The supply of electricity can also occur through bilateral agreements between buyers and sellers of a specified amount of electricity at a given price. Wholesale of electricity in interstate commerce are regulated by FERC and can be market-based (most sales are market-based) or cost-based.

Retail Market: At the state level, there are retail markets where LSEs supply electric power to end users. State Public Utilities Commissions generally have jurisdiction over retail sales of electricity within a state from one entity to an end user.

The general overview of power sector regulatory model of the United States is presented in Figure 4-3.

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Figure 4-3 Power Sector Regulatory Model of USA

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5. LICENSING REQUIREMENT IN COMPETITIVE POWER MARKETS

5.1 Rationale for Licensing

The role of a regulatory authority is the key to promote competition in the power market with a goal to achieve economical tariff for customers and ensure reliable and continuous power supply. The regulatory authority intervenes to prevent failure of the market, remove any anti-competitive practices and promote the public interest. Generally, obtaining a license for power sector business is pre-requisite in most of the countries which means that anyone generating, transmitting, distributing or selling electricity shall hold a license issued by the regulator, or be exempt from this requirement as per policy of the government. During the issuance of a license, the authority must ensure that the applicant has sufficient technical capacity, financial and human resources to comply with requisite regulatory requirements during construction and operational phases. Furthermore, the regulator should satisfy that granting license will promote the long-term interests of consumers in relation to the price, quality, and reliability of energy supply. In the long run licensing is the tool to oversee the activities of the licensee and enforce these in compliance with national & international standards of the electric power industry. Licensing is also a tool to properly manage the transition and to handle the situations like BPC’s leaving the system to avoid stranded costs etc.

5.2 Comparison of Licensing Requirement in Competitive Power Markets

Different countries have different approaches towards licensing of power sector as it depends upon the legal system, regulatory framework and policy objectives of the relevant economy. Due to power market reforms, the advanced countries have well established licensing mechanisms with key features of quality licensing requirements for ensuring energy security through creating the competitive market environment. In the context of this study, a brief comparison of the licensing requirements of some of the countries, extracted from the latest literature, are given below in Table 5-1, with the exception of broker licensing as such operations are not envisioned under the current NEPRA Act. The countries selected for comparison are:

Turkey

Brazil

United States of America (USA)

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Table 5-1 Licensing Requirements Comparison of Turkey, Brazil, and the USA

Licensing Area Turkey Brazil USA

1)

Au

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Co

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Po

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Pla

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Investors secure a

preliminary license from EMRA before the issuance of generation license for 3 years and in the meantime get other relevant permits.

After fulfilling the requirements, the preliminary license is converted to Generation license for a period of 49 years.

Construction permit and environmental approval from concerned authorities (if required) are needed. The construction permit demands to start construction activities within 2 years.

ANEEL grants generation authorization/concession for the construction of power plants through competitive bidding, especially for hydro projects.

Authorizations grant rights period is usually 20 to 30 years while Concessions grant rights period is generally 30 to 35 years.

Obtaining authorizations or concessions are based on the technical, financial and legal capacity of the applicant.

Environmental approvals are also necessary.

State public utility commissions are generally responsible for granting authorization to construct electric generation facilities. In the case of Hydro projects, the jurisdiction is mostly with FERC while for nuclear projects the concerned authority is the Nuclear Regulatory Commission.

State public utilities commission issues a Certificate of Public Convenience and Necessity (CPCN) to power project developer.

The developer also needs to obtain permits from various federal or state agencies to comply with environmental or cultural resource requirements.

The license tenures also differ depending on the state but hydroelectric facilities are generally for 30 to 50 years, nuclear facilities are federally regulated and are anywhere between 10 and 20 years, solar thermal plants in California have no tenure limitations other than a maximum 5-year construction period while photovoltaic generation is subject to local jurisdiction. Again, conditions of licensing in general are locale-specific in the U.S.

2)

Op

erat

ion

al R

equ

irem

ents

of

Gen

erat

ion

Lic

ense

e

Obeying relevant regulations, laws, and EMRA decisions.

Paying transmission and distribution system usage fee.

Availability of plant for operations as according to obligation.

Informing EMRA in advance for at least 120 days if the licensee has an intention to stop power generation.

The licensee must have permissions from EMRA for selling or transferring of the plant to the third party and also for any change in the shareholding structure of the facility.

The license can be terminated automatically if the licensee becomes bankrupt or the license expires. It can also terminate by board resolution from EMRA or at the license holder's request.

Authorized operational power plants shall perform according to the Authorization Act and Regulatory rules of ANEEL.

Concession Agreement based Power plants shall operate according to contractual terms.

Non-compliance with the applicable rules can result in administrative penalties imposed by ANEEL.

In case of non-compliance with environmental technical conditions, the license can be revoked.

Power plants shall follow technical, safety and environmental standards issued by State Commissions.

Federal licensee hydro-electric power plants shall follow the regulations and conditions issued by FERC.

Nuclear power plants shall fulfill the technical requirements of the Nuclear Regulatory Commission.

Power Plants shall follow the Occupational Safety and Health rules.

3)

Req

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ts f

or

con

nec

tin

g p

ow

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lan

t to

T

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Gri

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During the pre-licensing stage, EMRA requests a positive opinion from TEİAȘ or the distribution company to connect the relevant facility to the grid.

Thereafter the power generating facility must sign a connection and system usage agreements with TEİAȘ or the distribution company. These agreements

An application is required to submit to System Operator (ONS) for an interconnecting power plant with the national grid. In some cases, the application shall be submitted to transmission and distribution companies.

The application must contain data, preliminary access studies, and information about the project. The document consolidating and

Interconnection of generation facilities with the grid is regulated by FERC.

FERC has established rules and standards for interconnection of power facilities.

FERC has issued Standard Interconnection Agreements & Procedures for large and small generators.

Each transmission utility (including every FERC-regulated ISO/RTO) is

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are mandatory for Generation License.

Power plants with an installed capacity higher than 50 MW shall use transmission lines while projects less than 50 MW use distribution network.

establishing the conditions for grid access is called the opinion access.

bound by and required to incorporate these rules.

4)

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Req

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ts t

o

Co

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Ele

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T

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Net

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The ownership of transmission network is with TEİAȘ.

The relevant system user will make the investment for interconnection (if needed) on behalf of TEİAȘ which shall be then recovered through deduction from the system usage fee.

Electricity transmission lines can be subject to an EIA process, depending upon capacity and length.

ANEEL runs a reverse auction bidding process for constructing, operating and maintaining transmission lines.

The bidder must comply with qualifying requirements based on technical, financial and legal capacity.

The winner is the company with the lowest desired annual revenue.

The successful bidder will be party to a concession agreement providing the conditions for the construction, operation, and maintenance of the transmission lines.

The siting and construction of transmission facilities are generally regulated by state regulatory commissions.

Each state has its own rules, regulations, and guidelines concerning the siting and development of transmission facilities.

State transmission projects are also subject to environmental impact studies and public hearing etc., while Federal projects are subject to the National Environmental Policy Act of 1969.

5)

Req

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ate

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T

ran

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etw

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TEİAȘ under its transmission license carries out all transmission network activities and must treat all parties equally.

Every year TEİAȘ must publish the regional capacities regarding interconnection of generation facilities in the upcoming five and ten years.

TEİAȘ increases its network capacities and a number of connection points upon request of EMRA and MENR.

The transmission network is operated according to requirements of concession agreement issued by ANEEL and ONS.

Compliance with the rules and contractual terms is supervised by ANEEL and supported by periodic reports and documents to ensure the continued quality of service.

Transmission concessionaires pay the annual part of the General Reverse Reserve (RGR) and apply 1% of their net operating revenue to research and development projects in the energy sector.

Non-compliance with the rules can result in administrative penalties that vary depending on the severity of the deviation. In case of non-compliance with environmental technical conditions, the license can be revoked.

FERC regulates the transmission of electric energy in interstate commerce.

Every public utility transmission owner and operator of facilities that are used to transmit electricity in interstate commerce must have an open access transmission tariff (OATT) on file with the FERC.

Each ISO/RTO is regulated by FERC which oversee the transmission system under its jurisdiction.

All interstate transmission facilities must be operated in accordance with NERC's reliability standards, which set out rules and requirements for the reliability of the bulk electric transmission system.

For the transmission of electric power across international borders to Canada and Mexico, authorization must be obtained from DOE.

6)

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The distribution network is the ownership of the Turkish Electricity Distribution Company but its construction is carried out by private distribution license holders.

Distribution license holders must execute a connection and system usage agreement with the system users.

For the construction of new connection assets, the system user can either wait for the distribution company or can carry out the relevant works on behalf of the distribution company using its own financing.

The distribution company will then reimburse the system user during the year of the proposed connection date.

Similar to transmission requirements, the National Electric Energy Agency (ANEEL) organizes auctions of electricity distribution for public services.

The bidders must submit a proposed revenue annual waiver and the successful bidder will be the one that submits the highest waiver proposal.

The successful bidder will be party to a concession agreement providing the conditions for the provision of electricity distribution services.

Regarding the applicable environmental licenses, the procedures are similar to those applied to the construction of electricity generation plants.

State utility Commissions generally have jurisdiction over the construction of electricity distribution systems.

utilities are granted franchised service territories for the distribution operations.

It is unusual for a state utility commission to permit a different utility to provide any distribution services in a utility's franchised service territory.

A state utility commission reviews applications to construct new electric distribution systems or upgrades to determine whether they comply with state laws and regulations.

State utility commission typically looks at environmental, technical, public interest and economic factors in deciding whether to approve a project.

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7)

Req

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Dis

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S

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Turkey is divided into 21 distribution regions. The distribution assets are all owned by the Turkish Electricity Distribution Company.

Each distribution company holds a license issued by the EMRA.

The right to operate in each region is granted to private entities through the transfer of operation rights.

The distribution license holders must operate the system within their distribution zone under the relevant laws and regulations on an impartial basis.

The distribution companies are also responsible for investments and maintaining and reading the meters of the system users.

Distribution network requirements are established in the concession agreement in accordance with the rules issued by the ANEEL.

Distribution concessionaires must provide a service that is adequate, regular, continuous, efficient, safe and accessible.

These concessionaires are liable for direct and indirect damage resulting from the inadequate rendering of electricity distribution services.

Distribution concessionaires are subject to regulatory intervention to ensure adequate performance of services.

The ongoing requirements to operate electricity distribution systems vary by state with an aim to ensure that facilities continue to meet minimum reliability, safety, and operational standards.

Additionally, local governments and municipalities in some states own and operate local distribution systems.

Also, local distribution facilities in some states are owned and operated by the customers they serve (known as a "cooperative).

Municipalities and cooperatives are subject to limited regulation by FERC and are mostly self-regulated.

Investor-owned utilities may have to obtain and pay for a franchise granted to serve a municipality (depending on the state and locality).

8)

Au

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Op

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Req

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ts t

o S

up

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to

En

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s

End consumers can be categorized into two general types: eligible and non-eligible.

Eligible consumers can choose their own supplier, whereas non-eligible consumers are supplied by the incumbent supply company at the tariffs set by EMRA.

The eligibility limit is fixed by EMRA and has been consistently decreased, from 9,000-kilowatt-hour (kWh) of annual consumption in 2003 to 2,400 kWh in 2017.

In 2013, incumbent supply companies were legally unbundled from the distribution companies and secured their own supply licenses from EMRA.

The total electricity to be purchased by supply license holders from electricity generation and import license holders cannot exceed 20% of the electricity consumed in the market in the previous year.

The amount of electricity supplied by the companies to end users cannot exceed 20% of the electricity consumed in the market in the previous year.

A potential energy trader must submit an application for authorization to ANEEL along with company certificates.

Free end consumers are usually supplied by trading companies and/or power generators.

Under the Trading Convention, the legal entity authorized by ANEEL to carry out energy trading activities must adhere to the Electric Power Commercialization Chamber (CCEE) and be subject to any terms and conditions set out in specific trading procedures.

The energy trading agent must comply with any provisions set out in the Trading Convention, bye-laws, rules and trading procedures issued by the CCEE and authorized by ANEEL.

State utilities commissions have jurisdiction over the supply of electricity to end users.

The scope of this jurisdiction depends on whether the state has a retail choice or not.

In retail choice states, retail customers can choose between the franchised public utility serving their territory and other competitive suppliers when purchasing electricity.

Retail customers with retail choice are not charged for the commodity of electric energy under "cost-based rate regulation". Instead, they can purchase electricity at market-based rates from competitive suppliers (other than a franchised public utility).

While state commissions may regulate the price, terms, and conditions associated with retail electricity from franchised public utilities, state commissions typically do not regulate electricity prices from competitive suppliers (although they typically license the suppliers and impose other conditions on them).

By review the above comparison of these different competitive markets, it is drawn that all three countries have well-established licensing mechanism and requirements. In the case of Turkey and Brazil, country level regulatory bodies exist which practice the regulation of power sector while in case of USA a mixed system of regulatory authorities

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exists i.e., central and state level regulators, which exercise the regulation of electric power industry.

In the context of Pakistan, there is a need to adopt such license requirements which should ensure the establishment of a competitive market in the country whilst keeping in view the ground reality of the country. Therefore, Pakistan may consider the procedures of all the above three countries in different segments of power industry with a core emphasis on electricity markets models of both Turkish and Brazil regarding Electricity Licensing although Turkish and Brazil power market are much developed while the power market of Pakistan is in developing stage.

To select best fit models or some components of it, NEPRA along with other stakeholder’s experts and management should thoroughly study these models with special focus on license mechanism, rules, procedures and issues handling etc.

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6. CONSULTATIONS WITH CPM’S STAKEHOLDERS

The Assessment could not be practical if all the stakeholders of the Competitive Power Market (CPM) had not been consulted. In this regard, Consultant held meetings with, IPPs, GENCO, System Operator (NPCC), Market Operator (CPPA-G), DISCO and Regulator (NEPRA). The Consultant mainly focused to assess their opinion, knowledge, expertise, mental and physical preparedness to work in a CPM environment. After amendment in NEPRA Act, the majority of the players have little idea that Government is moving towards developing CPM in Pakistan as it was observed that most of the stakeholders do not know that what steps are to be taken by them to gear up for such environment. It was observed that they have little idea about the selection of an appropriate wholesale electricity model that is the best fit for Pakistan.

Among the above stakeholders, NEPRA and CPPA-G have better knowledge than the rest of the stakeholders. CPPA-G based on an ADB funded study is working on a Bilateral Trading Competitive Electricity Market model. A concept level Market design and roadmap has been prepared by CPPA-G and submitted to Regulator for approval. A lot of preparation is required in legislation, regulation, contracts modification, Rules and procedures, necessary policy preparation, approvals etc. Amendment in NEPRA Act has already been made however, very few experts have been trained abroad and few experts are being given awareness about the proposed model which may hinder the implementation process.

6.1 System Operator (NPCC)

Similarly, as a concern to System Operator, NTDC license needs functional separation of the Transmission Network Owner (TNO) aspect from the System Operator business. The execution of this License requirements is highly important for the transparency and credibility of the power market. As part of the Roadmap for the CTBCM Implementation, various activities are yet to do for strengthening the performance of National Power Control Center (NPCC) as a System Operator in accordance to requirements of the competitive environment. It is presumed that NPCC being the System Operator should provide non-discriminatory and transparent system operation, planning and dispatch services to all Participants. The System Operator should be independent of any commercial interest and not involved in any trade of electricity. The System Operator (SO) should responsible for a reliable operational planning and coordination of maintenance outages, economic generation scheduling & dispatch, and keeping the system in balance within reliability and security restraints. NPCC should need an advance controlling system, software, data base and data exchanges for implementation of demand forecasting and dispatch while balancing in accordance to market design and full implementation of Grid Code. These facets need to be addressed in system operator license.

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6.2 Market Operator (CPPA-G)

The Economic Coordination Committee (ECC) of the Cabinet in 2015 mandated CPPA-G to prepare and submit a comprehensive plan for transition of the existing power market to a Competitive Trading Bilateral Contract Market (CTBCM) in consultation with stakeholders. For the purpose, the department of Strategy and Market Development (SMD) was formed in CPPA-G. A three phased strategy was devised.

Phase I - This phase includes (a) Research and study of global competitive markets, (b) capacity building of market entities, (c) proposing the market model and CTBCM Plan for Pakistan through a consultative process, (d) building strategic partnerships with Market Operators globally and (e) submission of the CTBCM Plan for obtaining approval. This phase was started in mid of 2016 and ended in June 2017. The CTBCM model and plan was submitted to NEPRA for approval and is in the approval process.

Phase II - The detailed market design phase in which the complete design of the market model and CTBCM Plan will be developed. This phase started on completion of phase I and the team is working on basic must do items while the model is being approved. The detailed design has also been started.

Phase III - During the implementation phase, all entities will implement the initiatives as per the approved timelines in the CTBCM Plan. This phase has also kicked-off in parallel with implementation of certain essential building blocks for any market to operate. Market Implementation and Monitoring Group (MIMG) has been formed and is operational.

Currently, Phase II of the Market Model and CTBCM Plan is in progress and Phase III has been started in parallel which is anticipated to end by mid of 2020.

To discharge its role as an effective Market Operator, CPPA-G has also enhanced its technical capacity by engaging consultants, with the help of Asian Development Bank (ADB). CPPA-G along with its consultants are studying and analyzing various market models in-order to come-up with the proposed model design for Pakistan. Considering the sensitive nature assignment and in the light of the ECC decision, CPPA held consultative workshops and training sessions to get apprised about the CTBCM model and the plan.

CPPA has also started a customized professional training program - Electricity Market Professional (EMP) Program, for power sector entities of Pakistan, in collaboration with Lahore University of Management Sciences (LUMS) and Electricity Market Operator of Turkey (EPIAS). The program focuses specialized courses on competitive electricity markets, policy and regulatory framework, power sector economics, forecasting and planning, tariff regimes and proposed model for Pakistan.

The roadmap given in Table 6-1 shall be implemented within two years after approval and is presented in the context of the new envisaged competitive market for which CPP-G has developed and submitted a plan to NEPRA for approval. Hence, NEPRA’s licensing

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department must prepare for implementation of the new licensing requirements in the CTBCM environment.

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Table 6-1 Roadmap for implementation of CTBCM

S. No

Group of Actions

Stakeholders Directly Involved

Actions and Responsibility

1. Policy on market development, White Paper describing the market conceptual design

NEPRA; CPPA-G (draft); MWP public consultation and with other institutions, and approval

CPPA-G submits the conceptual market design to NEPRA for approval.

CPPA-G prepares and submits to MWP initial draft of the market development policy (the draft White Paper) including rationale, based on the market design approved by NEPRA.

Explanatory workshops by CPPA- G prior to and/or at the start of the consultation process.

MWP consultation of draft White Paper. Additionally, CPPA-G posts in its website notice requesting

comments CPPA-G consolidates relevant comments and feedback to

MWP consultation, and addresses, as relevant, in a final draft of conceptual market design policy. The comments received and the response are published in CPPA-G’s website.

MWP finalizes policy on market development (White Paper) and policy approval

MWP and CPPA -G publishes approved policy in their websites.

2. Amendment to the legal framework

MWP with CPPA-G support

MWP prepares proposed NEPRA Act amendment covering additional text/modifications on competitive electricity markets, based on approved policy

MWP carries out standard consultation process and submits proposed amendments to National Assembly for enactment.

NEPRA Act amendment to incorporate market development policy is approved

3. Modifications to adapt or replace energy policies to be consistent with the market development policy

MWP MWP reviews and modifies or replaces relevant power policies (generation, transmission, among others to be determined) to ensure full consistency with the market development policy

If and as necessary, MWP drafts additional policies to implement the market development policies.

New or amended policies made public in MWP website

4. Modifications (review, amendments, and additions) to power sector regulatory framework to be consistent with the market development policy

NEPRA. NEPRA reviews and issues Regulations on pass through to regulated electricity retail tariffs of distribution licensees of power procurement costs, including approved / competitive contracts and pre-existing PPAs/EPAs, balancing costs, ancillary services costs, fuel adjustments, etc.

NEPRA reviews and if and as necessary amends regulations or rules on competitive bid generation price, approval of PPAs, power acquisition program, and other regulations related to generation tariffs, contracts, and power procurement.

Review and amend Market Operator Rules to harmonize with approved market development policy (conceptual market design and the functions assigned to the Market Operator), and types of Market Participants and Services Providers.

Regulations/ guidelines for the monitoring of a competitive process for new capacity procurement of Discos, and monitoring of the wholesale markets administered by the Market Operator.

Others to be determined by NEPRA in a review of the framework.

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5. Assignment of pre-existing PPAs/EPAs signed or administered by CPPA-G among Discos

MWP and CPPA-G, IPPs and Gencos Imports Discos

Development and agreement of implementation strategy Guidelines for implementation, guarantees adaptation,

assignment distribution factors, etc. Formation of the legal task forces to lead the work Assignments to Discos: competed and effective

6. Separation of CPPA-G into Market Operator and Special Wholesale Supplier Functions

CPPA-G Creation of the Market Operator Business Unit as a service provider in the wholesale market Creation of Special Purpose (wholesaler) Supplier Business Unit (the SPS Business Unit) as the administrator of power purchase from existing PPAs/EPAs on behalf of DISCOs.

Establish functional and accounting separation of both units. Preparations to separate into two companies prior to

commercial start of the wholesale electricity market. Until actions in 5 fully completed, purchaser on behalf of Discos in pre-existing PPAs/EPAs will be assigned to the SPS Unit.

7. Creation of the Market Operator as a separate company

CPPA-G in particular Market Operator Business Unit

After completion of 6, create Market Operator as a company. Start registration of Participants and implement settlement

metering register Market Operator website launched Contract Register implemented Market Management Software, including a calculation for

balancing mechanisms (prices and quantities), and Settlement procured, implemented and tested)

Market Operator capacity building 8. Creation of the

Special Purpose (wholesale) Supplier to be Discos agent and purchaser of any PPA/EPA that has yet not been assigned

CPPA-G, in particular, SPS Business Unit; DISCOs

Following completion of actions in 6, create SPS as a company.

Review and sign new agency agreement between SPS and each DISCO.

Draft back to back t h e contract to resell energy and capacity, and SPS signs with each DISCO

Implement/upgrade generation Invoice verification services (transferred from SPS Business Unit)

9. Creation of the Independent Auction Administrator (IAA) and scheme for credit cover / guarantees for low performing DISCOs

MWP (PPIB); CPPA-G DISCOs

Organization and draft standard auction procedures, templates and bidding documents

Software/ web based system to receive information from Disco and calculate new capacity/contract needs

Develop the required credit cover/ guarantees scheme to low performing DISCOs

10.1 Codes: New Market Commercial Code

CPPA-G draft and consultation, NEPRA review and approval.

New Market Commercial Code drafted, consultation and submission to NEPRA for review and approval

Market operation procedures drafted Market Admission Agreement published in the website New Market Commercial Code published in Market Operator

website after approval, with market operation procedures 10.2 Codes: Update

Grid Code NTDC draft with the Grid Code Review Panel. NEPRA review and approval.

Review the Grid Code to incorporate market design relevant issues, including revise and update the Metering Code of the Grid Code

Grid Code and amendments published in NTDC website.

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11. Strengthening of System Operator, enforce rights and obligations

NTDC and NPCC

Review of NPCC systems, software, database and data exchanges to ensure implementation of demand forecasting, dispatch and balancing in accordance to market design and full implementation of Grid Code,

System Operator website launched and publishes daily, monthly and annual operational planning, demand forecasts, availability, and results of system operation.

System Operator implements arrangements to monitor Transmission Users compliance with Grid Code

NPCC staffing and capacity building. 12. Strengthening

DISCOs creditworthiness and readiness as market participants

DISCOs, MWP in the representation of the owner of DISCOs Special Purpose (wholesale) Supplier

Discos capacity building to determine the demand forecast, and for the management of contract (bilateral) portfolio and power acquisition plans.

Assessment of wholesale payment history, financial situation and efficiency (losses and collection) of each DISCO. Measures for financial strengthening as necessary, and identify worst performing and financially very weak Discos that would be unable to provide credit cover on their own.

13. Open access to transmission services: formalize transmission services rights and obligations

NTDC as Transmission Network Owner NPCC as System Operator.

NTDC drafts standard (template) transmission connection agreement and sends to NEPRA for comments/review;

NTDC agrees with a connected party on Schedules of the transmission connection agreement with each power plant (currently, data mostly agreed in PPAs/EPAs) and signs connection agreements with each power plant, and distribution substation to the grid as required in the Grid Code.

14. NTDC as Planner (Least cost expansion plan) and Metering Services Provider (adequate revenue settlement meters)

NTDC, NEPRA review and approval of the plan CPPA-G (as an observer of meter testing) and metering register for the market

NTDC/NPCC finalizes least cost expansion plan draft and consultation and submits for NEPRA review and approval.

NTDC provides information on Revenue Metering System (types, location, etc.) for CPPA-G / Market Operator to develop and maintain the revenue Metering Register;

NTDC tests existing Revenue meters (CDP) and identify t he need for improvements or calibration

Metering data exchange system implemented CPPA-G / Market Operator establishes formula and calculations

to determine the energy and capacity of each Participant to calculate of market balancing mechanisms.

15. Measures to enhance wholesale t- payment culture: credit cover mechanisms and payment system

CPPA-G/Market Operator’ Discos MWP IAA

MO establishes the market payment system MO develops methodology and formula to determine market

credit cover (collateral). DISCOs together with MWP (in the representation of the

government as owner of the DISCOs) establish for financially bad performing DISCOs (inefficient demands) a payment security cover for contracts and market payments of those Discos, where the guarantee/security cover scheme would be organized through and provided by the IAA.

16. Readiness for commercial operation of electricity market:

Lead by CPPA-G includes all market participants; CPPA-G reporting of readiness tests and results to MWP and NEPRA

Test all Revenue Meters, dispatch software, and market data exchange and management systems

Capacity building of participants and services providers Calculate the credit cover of each Participant and test Pilot shadow market, to test live systems, mechanisms,

information exchange, and procedures. Collect comments and feedback f r o m P a r t i c i p a n t s a n d

Services Providers, and develop improvement or correction. Inform the MWP and NEPRA of test results and whether

readiness has been achieved.

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17. Declaration of date to start commercial operation of the market

MWP Depending on readiness, the market could start with a transition where the implementation of one or more mechanisms or market arrangements is for a period not greater than 12 months.

During the initial 12-24 months, the standard market procedures will be adjusted to address issues identified in practical implementation, ensure feasibility and clarity, and eliminate gaps.

The above roadmap has been developed based on the following main objective:

a. Creation of the conditions for a fair allocation of risk and benefit sharing between investors/sellers and buyers/consumers

b. Development of a level playing field removing the conflict of interest to facilitate entry of new investors and participation of private players, including Bulk Power Customers

c. Creation of the right investment environment to attract investments based on credit cover provided by market participants, without the need of the government providing sovereign guarantees

d. Pressure on the payment discipline

e. Improvement of efficiency arising from competition for the market (new capacity procurement) and in the market (optimization through centralized economic dispatch within system security constraints, to maximize the economic benefits of available resources and promote efficiency)

f. Enhancement of power sector security of supply, generation adequacy, to develop power sector sustainability in the short, medium and long-term

g. Ensure accountability of all Participants and Service Providers

h. Ensure transparency and predictability

i. Open access to information

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7. ASSESSMENT

Keeping in view the state of awareness, expertise and knowledge of stakeholders about competitive power market in Pakistan, the consultant has divided assessment into three parts; (A) General Assessment; for existing situation of Competitive Power Market Environment (B) Specific Assessment; for Licensing Requirements of NEPRA in Competitive Environment (C) Structural Assessment; about Organizational Restructuring of NEPRA. All the three are summarized below:

(A) General Assessment - deliberates current situation of Competitive Power Market environment.

i. Keeping in view all of the above, relevant stakeholders need to be equipped with

adequate knowledge and skills through training/visits to other countries having a

competitive power market in order that they can make informed decisions needed

to develop the CPM in Pakistan.

ii. Presently, Power Sector of Pakistan is not geared up with Competitive Power Market

(CPM) Environment.

iii. Stakeholder entities generally lack awareness about the steps needed to be taken for

the development of a CPM and only a handful of experts are aware of the necessary

steps needed to be taken in order to develop a CPM. Majority of the stakeholders

need capacity building in this area. The level of awareness about CPM with most of

the stakeholders is much below than average.

iv. Political awareness about CPM amongst the stakeholders is also not up to the desired

level.

v. Almost half of the distribution companies are operating at a loss which raises the

question as to how they will survive in a CPM environment.

vi. There is a lack of coordination among the donor agencies as various agencies have

been conducting similar work with overlapping scopes of work thus resulting in

duplication of efforts which wastes resources. Coordinated efforts are required to

ensure efficiency and optimum utilization of resources.

(B) Specific Assessment for Licensing Requirements of NEPRA in Competitive Environment.

i. The licensing, legal and HR department of NEPRA are not yet geared up with CPM

environment.

ii. NEPRA’s management and experts have limited knowledge about strengths and

weaknesses of different models of CPM, about their success and operations,

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therefore, are not in a position to recommend a suitable model as a whole or part

which would be the best fit in Pakistan’s environment.

iii. NEPRA management and experts both have limited knowledge about strengths and

weaknesses of different world class models of CPM; about their success and

operations, therefore, not in a position to recommend which model or part of model

would be the best fit in Pakistan’s environment.

iv. There is a need for specific knowledge and capacity building of NEPRA’s management

and experts which will help them to formulate rules and regulations for the issuance

of licenses to different stakeholders in the CPM environment.

v. There is also a need for training and skill development to handle licensing issues of

different stakeholders in the CPM environment before the selection model best fit

for Pakistan.

vi. After the selection of a model for Pakistan, training related to hardware, software,

online SCADA system, communication system, secrecy and security in bids matching

while purchasing and selling electricity in the CPM and other relevant tools is an

essential requirement. The knowledge of handling long-term bilateral contracts and

spot purchasing in CPM environment is almost negligible. This area needs to be

strengthened.

vii. Specific capacity building is needed with reference to licensing requirements:

Market Operator License System Operator License Power Supplier License Distribution License (wires only) Power Trader License Forward Market Spot Market (a day ahead, Intra-day, real-time, ex-post trading, etc.)

(C) Structural Assessment to rationalize existing Organizational structure of NEPRA

i. Conduct of Business Regulations needs to be formulated by specifying the scope of

work and modus operandi of each department in the existing structure.

ii. Few structural changes are needed which should be capable to handle the activities

of new entrants i.e. supplier, trader, market and system operators.

iii. A delegation of powers to individual members and professionals in light of Section-

12 of the NEPRA Act.

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iv. To avoid persisting lack of coordination among the departments, a liaison officer/focal

person in each department be entrusted with the duty to liaison with other

departments on day-to-day matters.

v. With the aim of improving the efficiency of departments, it is suggested that an e-

office be set up. Implementation of a dynamic online complaint redressal system

linking all stakeholders through a centralized database will help speed up the

complaint resolution mechanism

vi. Legal Department needs to be rationalized according to the CPM environment in the

country.

vii. An R&D department may be introduced in NEPRA, which may help to resolve various

matters related to new technologies, policy, and planning.

viii. The Monitoring and Enforcement department needs to be strengthened, redefined

and should focus on the overall performance of the power sector. However, an

expert in the relevant department should be made mandatory with the monitoring

team.

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8. RECOMMENDATIONS

1) This assessment report deliberates that Model of two countries i.e. Turkey and Brazil

are almost similar to Pakistan’s power sector environment which could be

implemented with some changes based on ground reality and taking in to account

prevailing social and cultural situation of the country.

2) Management, decision makers and main stakeholders (Market Operator and System

Operator) need to study and update their knowledge about the Models mentioned

above, before selection of the best-fit Model for Competitive Power Market

environment in Pakistan.

3) NEPRA after selection of CPM Model for Pakistan will need to get their experts

trained in specific areas of license, tariff, legal, HR and other relevant departments as

per the details provided in Chapter 7 of this report.

4) Similarly, specific training is required for the experts of Market Operator (CPPAG)

and the System Operator (NPPCC) to work in a Competitive power market

environment.

5) As the existing infrastructure is not capable of catering the needs of a CPM, therefore,

before implementation of any CPM Model in Pakistan it needs improvement for which

specific segment studies, e.g. real time online data, improvement in software &

hardware, financial models, etc. are required.

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REFERENCES

1. André Pepitone da Nóbrega (2006), The Free Consumers in the Brazilian Electrical

Energy Sector, Institute of Brazilian Business and Public Management Issues – IBI

2. Asian Development Bank Report (2017) Strengthening the Central Power Purchase

Agency; Market Conceptual Design-Structure and Roadmap.

3. Fabio Cavaliere de Souza and Luiz Fernando Loureiro Legey (2008), Brazilian

Electricity Market Structure and Risk Management Tools, Power and Energy Society

General Meeting - Conversion and Delivery of Electrical Energy in the 21st Century,

IEEE Conference Paper.

4. Faye Steiner (2000), Regulation, Industry Structure and Performance in the Electricity

Supply Industry, OECD Economics Department Working Papers No. 238, OECD

Publishing.

5. Francisco Flores-Espino, Tian Tian, Ilya Chernyakhovskiy, Megan Mercer, and Mackay

Mille (2016), Competitive Electricity Market Regulation in the United States: A Primer,

Technical Report: National Renewable Energy Laboratory

6. Guilherme Schmidt and Bruno M Guedes Ribeiro (2018), Electricity regulation in

Brazil: an overview

7. Kafait Ullah (2013), Electricity Infrastructure in Pakistan: An Overview, International

Journal of Energy, Information and Communications

8. Kenneth L Wiseman, Mark F Sundback, Bill Rappolt and Andrew P Mina (2018),

Electricity regulation in the United States: an overview

9. Maria Vagliasindi & John Besant-Jones (2013), Power Market Structure: Revisiting

Policy Options, Directions in Development--Energy and Mining; Washington, DC:

World Bank.

10. Mark Armstrong and David E. M. Sappington (2006), Regulation, Competition and

Liberalization, Journal of Economic Literature, Vol. XLIV.

11. Neeraj Menon & Riyaz Bhagat (2016), India - The Energy Regulation and Markets

Review - Edition 5

12. NEPRA Amendment Act (2018), Pakistan

13. NEPRA Annual Report (2016-17), Pakistan

14. OECD Report (1999), Regulator/Reform in the United States; Regulatory Reform in

the Electricity Industry

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15. Saif Ullah (2001), Impact of restructuring and privatization of power sector in Pakistan,

MSc Thesis submitted to University of Engineering & Technology Taxila.

16. Zeynel Tunç and Aslı Kehale Altunyuva (2017), Electricity regulation in Turkey: an

overview.

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ANNEX A

International Trainings

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S.N. Training/Seminar/Workshop Date to Date From Venue Sponsor

1 7th Core SAFIR Program on “Infrastructure Regulation and Reform” at Agra.

10/21/2005 10/29/2005 India SAFIR

2

Study tour on General Regulatory Issues organized by National Association of Regulatory Utility Commissioners (NARUC).

8/5/2007 8/17/2007 USA PSCBP

3 Utility Exchange Programs in Distribution Utility Exchange Regulations

9/7/2013 9/14/2013 USA USAID

4 Renewable Energy Grid Integration Workshop 12/7/2015 12/11/2015 Singapore SEAS/NEPRA

5 ERRA Customers and Retail Markets Working Group 6/6/2016 6/7/2016 Budapest,

Hungary NEPRA

6 ERRA Licensing/ Competition Committee Meeting

10/11/2018 10/12/2018 Antalya, Turkey -

7 ERRA Licensing/ Competition Committee Meeting

10/16/2017 10/17/2017 Budapest, Hungary

NEPRA

8 Renewable Energy Regulation 2/22/2016 2/26/2016 Budapest, Hungary

USAID

9 Conferences and Sessions on Energy Law and Policy Reform in South Asia 3/5/2016 3/6/2016 Kathmandu,

Nepal ADB

10 Understanding the Demands of a Power Purchase Agreement 12/20/2017 12/21/2017 UAE CPPA

11 Peer-to-Peer activity on "Toolbox for Tariff Methodologies" 11/5/2018 11/14/2018 Brazil USAID

12 Technical Training on Power System Stability and Control 6/8/2015 6/11/2015 Bali, Indonesia NEPRA

13 Workshop on Solar Roadmap for Policy Makers 8/1/2016 8/5/2016 Singapore ADB/EAD

14 ERRA Licensing/Competition Meeting 3/24/2018 3/24/2018 Russia NEPRA

15 ERRA Licensing/Competition Meeting 3/24/2018 3/24/2018 Russia NEPRA

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ANNEX B

National/Local Trainings

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S.N Training/Workshop/Seminar Venue Date to Date from Sponsor

1 USAID Training Management Development Program "Customer Care Excellence"

USAID Office, F-6/2 Islamabad

11/6/2014 11/6/2014 USAID

2 Workshop on Account for least cost Generation & Transmission Expansion plan

Serena Hotel Islamabad 12/17/2014 12/17/2014 NTDC/JICA

3 Workshop on Regulation of Electricity Networks

Ramada Hotel Islamabad

1/7/2015 1/8/2015 USAID

4 Workshop on Analytical & Research Skills

Marriot Hotel, Islamabad

5/21/2015 5/21/2015 USAID

5 Training on Power Market Development

Marriot Hotel, Islamabad 11/4/2016 11/6/2016 CPPA

6 Training on Power Market Development

Marriot Hotel, Islamabad

11/9/2016 11/11/2016 CPPA

7 Training on Power Market Development

Marriot Hotel, Islamabad

11/18/2016 11/21/2016 CPPA

8 "Introduction to SCP in Pakistan" Workshop & Stakeholder dialogue

Ramada Hotel Islamabad 3/25/2014 3/27/2014

Climate Change Div.

9 USAID Training Management Development Program "Leadership by Intent" (Growth & Care Model)

Hill View Hotel Islamabad

4/8/2014 4/8/2014 USAID

10

Seminar on Awareness Activities Corruption is a threat to Good Governance & Economic Development

AIOU Islamabad 6/17/2014 6/17/2014 NAB

11 Leadership and Management NEPRA HO Islamabad 6/27/2014 6/27/2014 NEPRA

12 Leadership and Management NEPRA HO Islamabad

6/30/2014 6/30/2014 NEPRA

13 Leadership and Management NEPRA HO Islamabad

7/4/2014 7/4/2014 NEPRA

14 Information Technology training on Advanced Excel 2010 for NEPRA Employees

NEPRA HO Islamabad 9/2/2014 9/4/2014 USAID

15 USAID Training Management Development Program "Customer Care Excellence"

USAID Office, F-6/2 Islamabad

11/6/2014 11/6/2014 USAID

16 Benchmarking for Performance Improvement

Ramada Hotel Islamabad

11/18/2014 11/19/2014 USAID

17 Workshop on Regulation of Electricity Networks

Ramada Hotel Islamabad 1/7/2015 1/8/2015 USAID

18 Performance Management NEPRA HO Islamabad

4/24/2015 4/24/2015 NEPRA

19 Workshop on Analytical & Research Skills

Marriot Hotel, Islamabad

5/21/2015 5/21/2015 USAID

20 Maintaining High Performance PMI Zero Point

Islamabad 12/16/2013 12/20/2013 PMI

21 Workshop on "Performance Management System"

Islamabad Hotel 2/25/2014 2/25/2014 USAID

22 USAID Training Management Development Program "Leadership by Intent" (Growth & Care Model)

Hill View Hotel Islamabad

4/1/2014 4/1/2014 USAID

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23 Leadership and Management NEPRA HO Islamabad 6/27/2014 6/27/2014 NEPRA

24 Leadership and Management NEPRA HO Islamabad

6/30/2014 6/30/2014 NEPRA

25 Leadership and Management NEPRA HO Islamabad

7/4/2014 7/4/2014 NEPRA

26 Information Technology training on Advanced Excel 2010 for NEPRA Employees

NEPRA HO Islamabad 9/15/2014 9/17/2014 USAID

27 USAID Training Management Development Program "Customer Care Excellence"

USAID Office,F-6/2 Islamabad

11/6/2014 11/6/2014 USAID

28 Benchmarking for Performance Improvement

Ramada Hotel Islamabad

11/18/2014 11/19/2014 USAID

29 Performance Management NEPRA HO Islamabad 4/24/2015 4/24/2015 NEPRA

30 Workshop on Analytical & Research Skills

Marriot Hotel, Islamabad

5/21/2015 5/21/2015 USAID

31 Learning & Development NEPRA HO Islamabad

5/22/2015 5/22/2015 NEPRA

32 One Week (Part Time) Training Course on Communication Skills & Forms of Communication"

STI H-8 Islamabad 12/26/2012 12/30/2012 STI

33 Regulatory Impact Analysis Stock Exchange

Tower, Isb 4/2/2013 4/2/2013 Finance Div

34 Workshop on Organizational Structure Assessment

Best Western Hotel Islamabad

2/12/2014 2/12/2014 USAID

35 Workshop on "Performance Management System" Islamabad Hotel 2/25/2014 2/25/2014 USAID

36 Four days (part-time) training course on “Stress Management”

STI H-8 Islamabad

5/6/2014 5/9/2014 STI

37 Leadership and Management NEPRA HO Islamabad

6/27/2014 6/27/2014 NEPRA

38 Leadership and Management NEPRA HO Islamabad 6/30/2014 6/30/2014 NEPRA

39 Leadership and Management NEPRA HO Islamabad

7/4/2014 7/4/2014 NEPRA

40 USAID Training Management Development Program "Customer Care Excellence"

USAID Office, F-6/2 Islamabad

11/7/2014 11/7/2014 USAID

41 Benchmarking for Performance Improvement

Ramada Hotel Islamabad 11/18/2014 11/19/2014 USAID

42 Workshop on Microsoft Project 2010

NEPRA HO Islamabad

11/25/2014 11/26/2014 USAID

43 Workshop on Regulation of Electricity Networks

Ramada Hotel Islamabad

1/7/2015 1/8/2015 USAID

44 Power Distribution Network Optimization & Operation

Hospitality Inn Lahore 4/15/2015 4/16/2015 USAID

45 Performance Management NEPRA HO Islamabad

5/8/2015 5/8/2015 NEPRA

46 Workshop on Analytical & Research Skills

Marriot Hotel, Islamabad

5/21/2015 5/21/2015 USAID

47 Learning & Development NEPRA HO Islamabad 5/22/2015 5/22/2015 NEPRA

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48 Variable Renewable Energy (VRE) Integration and Power Sector Planning-Kickoff Workshop

Marriot Hotel, Islamabad 10/1/2018 10/1/2018 World Bank

49 Leadership and Management NEPRA HO Islamabad

4/28/2014 4/28/2014 NEPRA

50 USAID Training Management Development Program "Leadership by Intent" (Growth & Care Model)

Hill View Hotel Islamabad

5/6/2014 5/6/2014 USAID

51 Leadership and Management NEPRA HO Islamabad 5/12/2014 5/12/2014 NEPRA

52 Leadership and Management NEPRA HO Islamabad

5/19/2014 5/19/2014 NEPRA

53 USAID Training Management Development Program "Customer Care Excellence"

USAID Office, F-6/2 Islamabad

11/7/2014 11/7/2014 USAID

54 Workshop on Regulation of Electricity Networks

Ramada Hotel Islamabad 1/7/2015 1/8/2015 USAID

55 Power Distribution Network Optimization & Operation

Hospitality Inn Lahore

4/15/2015 4/16/2015 USAID

56 Performance Management NEPRA HO Islamabad

5/15/2015 5/15/2015 NEPRA

57 Talent Management NEPRA HO Islamabad 6/12/2015 6/12/2015 NEPRA

58

CPD Workshop: Understanding Insulation of High Voltage Power Transmission and Distribution System

GIKI, Topi, Swabi 1/2/2017 1/4/2017 NEPRA

59 Workshop on Analytical & Research Skills

Marriot Hotel, Islamabad

5/21/2015 5/21/2015 USAID

60 Workshop on Net Metering AEDB office,

Islamabad 11/28/2016 11/28/2016 AEDB

61 Training on Net Metering Process LESCO Office, Lahore

1/7/2017 1/7/2017 REAP

62 Sindh Solar Energy Project (SSEP) for Promotion of Solar Home Systems

Movenpick Hotel, Karachi

10/3/2018 10/3/2018 NEPRA

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National Association of Regulatory Utility Commissioners (NARUC) 1101 Vermont Ave, NW, Suite 200

Washington, DC 20005 USA Tel: +1-202-898-2210

www.naruc.org

For questions regarding this publication, please contact  Erin Hammel (ehammel@naruc.org)