The National Electric Power Regulatory Authority (“NEPRA”) has approved Wheeling Regulations for Pakistan (“Regulations”).
The Regulations, which take effect from 13 June 2016, allow licenced generators to sell electricity to bulk power consumers (those who consume 1MW or more at any one premises) anywhere in the country. The electricity is “wheeled” through the distribution system(s) and/or transmission system from the generator to the consumer’s site, and the generator must pay a “Wheeling Charge” for the use of those system(s).
These Regulations are an important milestone in Pakistan’s programme of opening up the market to small and medium-sized generators, and promoting competition in the power market.
Generators will still have to obtain a generation licence. They will also have to obtain authorisation from NEPRA to supply their chosen consumer (a “second-tier supply authorisation”), which will set out details such as the capacity that can be wheeled and the tariff that can be charged for the electricity. The Generator will have to enter into a Wheeling Agreement and commence wheeling within 30 days and 18 months of NEPRA’s acceptance respectively.
- (Undersupply) the Generator delivers less electricity than that forecast (other than due to force majeure (weather fluctuations being excluded from force majeure)), it must reimburse the relevant grid operator(s) for losses suffered; and
- (Overconsumption) the consumer imports more from the grid than the Generator generated and delivered to the grid, then the Generator is liable for such shortage at the applicable tariff rate.
Some other key aspects of the Regulations include:
- The ability for Generators to undertake dedicated grid works themselves, which are then adopted by the relevant grid operator(s), the cost of which is recovered in the setting of the Wheeling Charges; and
- The ability for Generators to “bank” electricity that is not able to be wheeled and/or consumed by the consumer (for example, as a result of grid failure). Our biggest concern was whether there was sufficient capacity on the grid for wheeling to be effective, however, the introduction of the banking provisions appear to address this concern.
Amendments are still required to the Electric Power Act 1997 to enable Generators to supply electricity direct to customers – the draft amendment was published on 12 December 2015, however, it has not yet been enacted.