NEPRA to hear CPPA petition on market operation fee for new electricity model

ISLAMABAD: Power regulator NEPRA will hold a public hearing next week on a petition by the Central Power Purchase Agency (CPPA) to charge a market operation fee to consumers who will participate in a new competitive electricity market.

The CPPA asked on Wednesday for a market operation fee of Rs2.51 per unit per month without legal charges and Rs4.96 per unit per month with legal charges to effectively run the Competitive Trading Bilateral Contract Market (CTBCM) --- a multi-buyer market model that will be in place in the future as the existing electricity model is based on a single-buyer model under which CPPA alone procures electricity from power plants.

NEPRA has admitted the petition seeking a market operation fee from those consumers who will be part of CTBCM to meet annual expenditures estimated at Rs2.144 billion for Financial Year 2023-24.

According to the breakdown of Rs2.144 billion mentioned in the petition, the CPPA pleaded that Rs1.660 billion would be consumed on general establishment costs, Rs278 million would be used on administrative charges, Rs136 million on office operations, Rs4 million on insurance and Rs2 million on financial charges, and Rs64 million as capital expenditures.

CPPA already asked for wheeling charges of Rs27 per unit for multi-buyer electricity transportation and NEPRA has already held a hearing on wheeling charges or use of system charges (UoSC) some days ago. However, NEPRA is in the process of due diligence on the petition of CPPA with inputs from other stakeholders, particularly from the export industry, and working on the wheeling charges acceptable to both the highly inefficient power system backed by the government and the industrial players who want to bring down their input cost through BtB contracts for electricity using the T&D infrastructure of the NTDC and DISCOs.

Now, under the latest scenario, CPPA submitted its petition with NEPRA seeking a Market Operation Fee of Rs2.51 per unit per month without legal charges and Rs4.96 per unit per month with legal charges as its expenditure to be incurred on administrative costs.

In the petition, CPPA came up with eight rationales for asking for the market operation fee to bear the administrative expenses to be incurred on running the CTBCM.

In order to meet the expenses for discharging the functions and plans mentioned in the CTBCM model, the petitioner requires revenue to be approved by the Authority in terms of clause (e) and (j) of subsection 2 of Section 7 of the NEPRA Act and chapter 11 of the Commercial Code.

The petition also says that Chapter 11 of the Commercial Code deals with the Market Operation Fee and clause 11.1.1 provides that the existing cost associated with CPPA of NTDC shall be separated from the Use of System Charge (the "UoSC") of NTDC. In this manner, the UoSC of NTDC, already being paid by the ex-WAPDA DISCOs, shall be reduced by the amount corresponding to the expenses of CPPA-G.

The total revenue requirement shall comprise the existing cost separated from the UoSC of NTDC, additional operating cost in view of present operations independent of NTDC and the Capital cost required for effective operations of CPPA-G for compliance with present and future requirements of the Market Rules and Commercial Code, which shall form the Market Operation Fee of the petitioner.

These guidelines also provide that the formula for calculating the Market Operation Fee shall be similar to the formula of calculating the UoSC, i.e. dividing the total determined cost by the peak demand of ex-WAPDA DISCOs. Rule-9 (1) (d) of the NEPRA Market Operator (Registration, Standards and Procedure) Rules, 2015 (the "Market Rules") states that "In addition to the obligations in the applicable documents, each market participant shall have the obligation to pay the market operation fee as per the Commercial Code and such other charges as specified by the Authority."