To make Pakistan Power Sector customer friendly, efficient, able and responsive in meeting tee electric energy requirements of industry, business and domestic customers, and move to an energy sufficient model from the current energy deficient scenario, on commercially viable and sustainable basis, in order to support the high growth economy and to meet the government's objective of Power for All.
Pakistan Electric Power Company (PEPCO) unveiled new face of Pakistan's power sector with the crisis management objectives to improve the efficiency of the power sector and to meet customers' electric energy requirements on a sustainable and environment friendly basis. The specific objectives of PEPCO are: Stop load shedding, Constructing new grid stations, Reducing line losses; minimizing tripping and theft control, Revamping of generation units and to improve customer services and development of an integrated automated power planning system for generation, transmission and distribution to ensure system stability, fault isolation and upgrade relying, metering and tripping system at NTDC as well as Discos level.
Power Sector Reforms
Over the past 15 years, Pakistan has been following a strategy of deregulation, privatization and transformation of its public sector entities (PSEs), including its two major power utilities – Water and Power Development Authority (WAPDA) and Karachi Electric Supply Corporation (KESC). WAPDA was established in 1958 as a semi-autonomous agency to coordinate the development of Pakistan's water and power resources. WAPDA’s Power Wing is responsible for the planning, construction and operation of power generation, transmission and distribution facilities throughout the country, except the Karachi area which is served by KESC.
Donor agencies like the World Bank (WB) and Asian Development Bank (ADB) have identified key shortcomings of Pakistan’s PSEs: poor governance; political and bureaucratic interference; institutional weakness; and lack of professional management. These multilateral development banks then convinced the government that the country’s fiscal situation could not improve unless and until the losses from PSEs are substantially curtailed or eliminated, and that this was only possible through a massive restructuring of PSEs leading to their privatization.
Pakistan’s power sector has been beset with poor operational and financial performance since the mid-1990s; the government hence decided to restructure the sector “from an inefficient state-controlled monopoly to a competitive, market-driven system.” The competitive power sector is envisioned to consist of (i) competitive generation with independent system operators and a bulk power market; (ii) unbundled, open, and undiscriminating access to transmission and distribution services; and (iii) an independent regulatory body for effective market governance. Some major reforms include the following:
In 1994, the government formulated a power policy that allows the private sector to invest in the power sector to ensure sufficient generation capacity. The policy also allowed full flexibility to independent power producers (IPPs) to bring capacity on line as quickly as possible at predetermined power purchase prices. The government guaranteed implementation, fuel supply, and power purchase. (By 2001, the private sector’s share of installed capacity reached 5,551MW, all of which were oil-fired thermal plants.)
In 1997, the National Electric Power Regulatory Authority (NEPRA) was established. NEPRA is responsible for issuing licenses, franchising monopoly business, setting and enforcing performance standards and codes of practices, enforcing competitive policies, and setting charges for the monopoly parts of the power industry. It is also mandated to protect consumers against monopolistic prices, encourage efficiency in licensee operations through financial incentives, encourage economic efficiency by promoting competition, and eliminate cross-subsidies between regions and consumer groups.
In December 1998, the WAPDA Act was amended, which allowed the creation of Pakistan Electric Power Company (PEPCO), and unbundling of WAPDA’s Power Wing into:
eight (8) distribution companies (formed from existing area boards);
three (3) generating companies (comprising 11 of WAPDA’s generating plants); and National Transmission and Dispatch Company (NTDC). In February 2005, KESC was finally privatized, although the winning bidder withdrew four months later.