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Thursday May 30, 2024

National Electricity Plan 2023-27: Govt plans to ensure 100pc energy access to all by 2030

By Khalid Mustafa
October 02, 2023

ISLAMABAD: The caretaker government has notified the five-year National Electricity Plan 2023-27 with 15 years’ perspectives containing a strategic architecture coupled with broad contours focusing on five objectives of diversification, resilience and accessibility, self-sufficiency, financial value ability, and sustainability.

Under the 99-page National Electricity Plan, the government will ensure 100 percent energy access to all by 2030, while the share of indigenous resources in the generation mix shall increase to 60 percent and 75 percent by FY2025 and FY2030.

More importantly, protected consumers of the residential category will be progressively transitioned toward direct subsidies, and the cross-subsidy by the productive consumers, to subsidise residential and agricultural consumers, will be restricted to 20 percent of the respective cost of service of such consumers by June 30, 2026.

In addition, an efficient and robust tariff design would be introduced to cope with the rapidly evolving techno-commercial model of the power sector.

Tariff design will be regularly revisited to foster market interventions, cross-subsidy rationalisation, bill and revenue stability, and customer satisfaction through multi-part tariff structures, creation/restructuring of slabs in existing categories of the consumers, and creation of new categories.

The government will introduce a forward fuel-cost adjustment (FFCA) mechanism based upon historical and/or future fuel price adjustments with the predetermined control period and appropriate tolerance bands.

The Nepra will allow recovery of financial charges to the DISCOs arising on account of the systematic time lag between the period of generation invoicing and payment thereof by the consumers. The upfront tariff regime shall be discontinued for all future generation and transmission projects and fixed charges will be incorporated in the tariffs of all consumer segments except consumers of the protected category

Fixed charges will be incorporated in the tariffs of all consumer segments except consumers of the protected category. Such fixed charges shall duly account for the share of capacity cost in the cost of service, market interventions, consumption behaviors, and affordability of consumers. It is aimed that by FY-2027, the fixed charges will account for at least 20 percent of the fixed cost of the respective categories evaluated through a cost-of-service study.

The Ministry of Energy (Power Division), in consultation with the relevant stakeholders, will carry out a detailed assessment for the participation of the private sector in the supply and distribution business of DISCOs. For this purpose, a transaction advisor will be engaged no later than July 31, 2024. The modalities of provincialisation of DISCOs will also be evaluated to deliver a better value proposition for the distribution companies.

With the aim of ensuring 100 percent energy access for all by 2030, the government through this National Electricity Plan has launched the Universal National Electrification (UNE) programme to enable the attainment of the 100 percent electrification target by 2030. Central Electrification Registry (CER) will be developed by June 3, 2024, and to this effect, a roadmap to be developed by December 31, 2023, to achieve a 100 percent electrification target by 2030.

Private Power and Infrastructure Board (PPIB), on every three-year basis or as the case may be, will re-evaluate/evaluate the low BTU gas fields for power generation on a least cost basis for inclusion in the respective iteration of the Indicative Generation Capacity Expansion Plan (IGCEP).

PPIB will complete the detailed feasibility study for conversion of imported coal-based power projects to local coal, latest by October 2023. The modalities shall be explored to reduce the burden on the Forex on account of energy imports. The detailed feasibility study will be completed by October 31, 2023, about assessment study for imported coal-based generation projects. The development of the Power Sector Indigenisation Plan (PSIP) will be developed and submitted to the government for approval by June 30, 2024 and Hydrogen strategy will be developed by December 31, 2025

In pursuance of phase-III of targeted subsidy reforms for the electricity consumers, protected consumers of the residential category shall be progressively transitioned towards direct subsidies. It is aimed that by FY-2026, subsidies to the residential protected consumers shall be provided under the approved subsidy disbursement mechanism.

To this effect, the Power Division will devise a detailed action plan to enable direct payment of subsidies. It will integrate Electricity-CNIC Database (ECD) with National Socio-Economic Registry (NSER) as developed by Poverty Alleviation and Social Safety Division of the government (PASS Division) and develop an integrated welfare score comprising of socio-economic aspects, energy poverty, and electricity consumption for the purpose of subsidy eligibility.

The Ministry of Energy (Power Division), in collaboration with MoNFS&R, will devise a detailed action plan to enable subsidy disbursements to eligible agricultural consumers. Accordingly, subsidy qualification criteria for targeting agricultural subsidies shall be finalised by May 2024, while the devised mechanism along with the implementation plan will be approved by the government by July 2024, and by FY-2025, subsidies to the agricultural consumers will be provided in pursuance to the approved implementation plan. The MoNFS&R will develop and integrate, in collaboration with PITC, the requisite database of agricultural consumers with the ECD for the purpose of mapping of agricultural consumers to respective categories.

Furthermore, the cost of integration of ECD with a database of agricultural consumers shall be borne by the government through appropriate budgetary mechanisms.

Under the plan, tariffs for residential consumers shall be progressively adjusted to align with the principle of cost-of-service, while the subsidies to the protected categories of residential consumers will be disbursed directly. The residential consumers (below cost recovery) shall be cross-subsidised by industrial and commercial consumers and other residential consumers (above cost recovery).

Tariff structure for agricultural consumers shall be segmented into sub-categories, taking into account the factors that include subsidies to the agricultural consumers shall be disbursed, agricultural consumers (below cost recovery) shall be cross-subsidised by industrial and commercial consumers, and other agricultural consumers (above cost recovery).

Mentioning the liberalisation of electricity markets and disruptive technological innovations pose significant challenges in recovering costs of existing generation assets, the NEP 2023-27 devises appropriate mechanisms based on the co-optimisation of competing objectives of financial viability, affordability, and competition, which is crucial for ensuring sustainable transition of the sector with the afore-mentioned interventions.

Under the plan, the open access charge will be recovered from all consumers, opting for open access, through competitive suppliers till the currency of this National Electricity Plan or as amended by the government. As per the mechanism that includes grid charges, including the use of transmission and distribution system charges, market and system operator fee, cross-subsidy charges, and metering service charges shall be applicable to all such consumers, and cost arising on account of open access, comprising of capacity costs, shall be applicable to all such consumers.

In case the government decides to reduce the open access charges or any of its components for the consumers opting for open access, it shall provide the funding to bridge the differential costs. While taking any such decision, the Ministry of Finance shall hire a third-party consultant to evaluate and verify the impact of such change on the national exchequer and consumers of suppliers of last resort.

The reduction or removal of such charges shall only be approved where fiscal space is available in the budget to support such reduction and consumers of suppliers of last resort are not burdened with these charges.

Till the application of uniform tariff across the country, the government will continue to maintain and notify a uniform tariff for all consumers of Supplier of Last Resort. The same shall be applicable for existing XW-DISCOs even after privatisation in any mode. The government will initiate necessary amendments in the Nepra Act to enable consolidation of revenue requirements of all the Supplier of Last Resort for the purpose of determination and notification of single national uniform consumer tariff.

The Ministry of Energy (Power Division) shall develop a mechanism to adjust the revenue differentials arising on account of consumer uniform tariff and respective determined tariff of each Supplier of Last Resort. The decision of continuation/abolishment of the uniform tariff shall be evaluated every five years based on the principles, including affordability, transparency, economic efficiency and market evolution.

The DISCOs shall initiate the process to reduce the bad debt on account of permanently disconnected consumers through the mobilisation of recovery initiatives, comprising representatives from respective local and provincial governments/entities and law enforcement agencies.

The DISCOs, in consultation with the Designated Entity and System Operator, shall incorporate the demand for the projected deployment of EV charging stations in their respective designated areas. Accordingly, the regulator along with the relevant stakeholders shall regularly explore various tariff and non-tariff measures to proliferate the induction of EVs in the system.

The distribution code 2005 shall be revised to enable alignment of the planning, operations, design, and allied roles of the distribution business with the other functions of the value chain. The scope of the revision shall include the alignment with National Electricity Policy, NE-Plan and CTBCM.

The CASA-1000 interconnect (primarily designed for import of electricity) shall also be utilised for the export of electricity through bilateral/multilateral arrangements. In this regard, the CASA open access rules shall be formulated latest by July 2024. Future opportunities for cross-border export and import of electricity shall be explored to enable efficient utilisation of available capacity and/or energy, system stability and geo-spatial diversity. To this effect, a high-level feasibility study shall be carried out for assessment of potential avenues for regional integration.

All relevant entities/ministries shall provide necessary support to the designated entity for the purpose of operationalising the strategic risk management framework through, the institutionalisation of processes, knowledge and data sharing, nominations, and implementation.

All power sector entities shall ensure compliance with the relevant directives of the National Cyber Security Policy and its subservient frameworks developed thereunder, to proactively prevent and mitigate possible cyber risks. The strategic risk management function will be institutionalised till June 30, 2024 and strategic risk management framework will be developed by December 31, 2024.

In a bid to achieve decarbonisation, the government aims to gradually achieve 65 percent of the generation mix through clean energy sources by FY-2030.

Talking about energy efficiency and conservation, the government shall, by notification in the official gazette, establish an Energy Conservation Tribunal as per Section 19 of the National Energy Efficiency and Conservation Act 2016, latest by March 2024.