This article was written some time before promulgation of the amendments to NEPRA Act in 2018. We are now updating the write up. RASIKH CONSILIUM (2023 June)

1. Sheikh Muhammad Ali
(Advocate Supreme Court)
Rasikh Consilium
28-Jul-16
Power Sector of Pakistan

2. Power Sector Of Pakistan
The power sector of Pakistan has evolved it present form after passing through
various phases. The Electricity Departments under Provincial Government were
transferred to Water & Power Development Authority (WAPDA) on its creation in
1958 as a statutory corporation to perform various functions as detailed in Pakistan
Water & Development Authority Act, 1958 including those related to (a)
generation, transmission and distribution of power, and (b) construction,
maintenance and operation of all power plants and grid
stations. WAPDA was structured in three wings, i.e. “Water
Wing”, the “Power Wing” and the “Finance Wing”. The
functions stated above were performed by the Power Wing and
for the distribution of power to the consumers “Area Electricity
Boards (AEBs)” were constituted. On realization of the future
requirements of the power sector and its limitations, the
Government of Pakistan (GOP) started efforts.
Reforms
In mid 80s GOP issued policy with aim, inter alia, to attract investment from
private sector, encouraging competition with accountability and administrative
independence besides countering the inefficiencies.
In 1992 the GOP approved plan for reforms in power sector and envisaged
participation of private sector in a competitive regulatory power market. The plan
is commonly known as “WAPDA’s Strategic Plan – Privatization of the Pakistan
Power Sector” (Restructuring Plan).
The Plan, as envisaged, was to be executed in different phases, i.e.
(i) First Phase: wherein the policies were to be formulated, procurement of
power was to be increased by support of private investors, the
generation and distribution related belongings of the Government were
to be selected for privatization with approval of Council of Common
Interest (CCI).
(ii) Second Phase: wherein the Power Wing of WAPDA was to be
restructured in various corporate entities and privatized to the extent of
generation and distribution companies to ensure a competitive market
with no monopoly and open sale and purchase of power. The regulated
tariff market was eventually to be taken to the competitive market
regime. The market therefore would require presence of an independent
regulator.
(iii) Third Phase: wherein autonomous generation and distribution
companies, whether privatized or not, could render their services and
develop their future strategies and plans as per their requirements and
sources; a wholesale market would be established; residue WAPDA was

3. to be limited to the extent of hydle including generation there from;
separate transmission company (as National Grid Company) would
perform the commercial and technical functions unless the development
of Competitive Market.
(iv) Fourth Phase: wherein the Competitive Market was to be established
In 1993, the CCI approved the summary of Ministry of Water & Power (MWP) and
allowed amendments in WAPDA Act as well as the privatization plan for
restructured WAPDA’s Power Wing.
In 1997 the summary moved, with title of ‘Privatization of Utilities and other State-
owned Entities’, by the Privatization Commission of Pakistan was approved by
CCI.
In 1998 Economic Coordination Committee (ECC) approved the steps taken for the
restructuring’ where after the Prime Minister Secretariat issued an Executive
Instruction (GOP Instructions) for implementation of the approval of CCI in 1993.
By those GOP Instructions it was conveyed that the role of WAPDA would be
limited to Water Wing, the shares of the Ex-WAPDA corporate entities would be in
name of the President, the Chairman of the Board of Directors Pakistan Electric
Power Company (PEPCO) would exercise the voting rights of President on proxy,
PEPCO would nominate the Board of Directors for the EX-WAPDA corporate
entities who were to be administratively and financially independent, PEPCO was
to implement the restructuring and reform of WAPDA.
Results
The Restructuring Plan has, as such, resulted in:
 Bifurcation of the Power Wing WAPDA in corporate entities where under
the assets were transferred and manpower of WAPDA was transacted to
those entities. The opening balance sheets for the newly incorporated
companies were prepared.
 The AEBs were converted in to Distribution Companies (DISCOs) with
control over the distribution system. Initially there were 8 DISCOs however
at present there are ten (10) government owned DISCOs operating in
Pakistan.
 The thermal generating units were transferred to the newly incorporated
government owned Generation Companies (GENCOs). Initially there were
3 GENCOs however at present there are five incorporated government
owned GENCOs however the lastly incorporated company (Nandipur
Thermal Power Generation Company Limited) has so far not acquired the
assets.

4.  National Transmission & Despatch Company Limited (NTDCL) was
incorporated and licensed to act as National Grid Company for the
integrated power market of Pakistan and control commercial operations of
the sector. NTDCL was allowed to buy electricity through its internal
agency i.e. Central Power Purchasing Agency (CPPA) for and on behalf of
the DISCOs incorporated after converting from AEBs and commonly called
as Ex-WAPDA DISCOs.
 Incorporation of Pakistan Electric Power Company Limited (PEPCO).
 Execution of various agreements including those (a) between WAPDA &
Ex-WAPDA corporatized entities, for instance, Business Transfer
Agreement (BTA), Supplementary Business Transfer Agreement (SBTA), &
Operation and Development Agreement (ODA); (b) Memorandum of
Agreement between WAPDA & PEPCO; (c) Energy Sale Agreement (ESA)
between DISCOs & WAPDA wherein later on WAPDA was replaced by
NTDCL; (d) Power Purchase Agreement between NTDC & GENCOs.
 Launching of various power policies including those commonly known as,
Power Policy 1994; Power Policy 1995; Power Policy 1998; Power Policy
2002; Power Policy (RE) 2006 & 2013; Power Policy 2013 and the erstwhile
Policy of Rental Power 2006. The most recent is ‘Power Policy 2015’.
 Power policies by WAPDA & PEPCO, while working under supervision of
Ministry of Water & Power (MWP), including those commonly known as
Captive Power Policy 2006; New Captive Power Policy 2009; and Small
Independent Power Producers Policy 2010.
 Introduction of the federal regulatory authority under the Regulation of
Generation, Transmission & Distribution of Electric Power Act, 1997
(NEPRA Act) whereby NEPRA was created as the regulator which grants
licenses to and determines tariffs for Ex-WAPDA corporatized entities as
well as the private owned generation and distribution companies.
 Investment from the private sector in generation as independent power
producers (IPPs).
 Establishment of one window facilitator for private investors in name of
Private Power and Infrastructure Board (PPIB).
 Establishment of the facilitator for private investors in renewable energy in
name of Alternate Energy & Development Board (AEDB).
 The GENCOs Holding Company Limited (GHCL) has also been
incorporated.
 One Power Holding Private Limited (PHPL) has also been got
incorporated.

5.  Karachi Electric Supply Corporation that was in existence side by side of
WAPDA as the vertically integrated utility has been privatized and now
renamed as K-Electric.
 In 2015, CPPA has been carved out from NTDCL and its functions have
been handed over to Central Power Purchase Agency (Guarantee) Limited
(CPPA-G) that was incorporated in 2009. CPPA-G has now to perform
market functions. Moreover, except in cases of direct sale and purchase of
power, the CPPA-G shall act as the sole agent of DISCOs in procurement of
power from Generation Companies.
Recent developments:
In equipping CPPA-G with market functions after carving out from NTDCL, the
power market of Pakistan has undergone major legal and regulatory changes,
including:
 Modification of NTDCL Transmission License;
 Approval and notification of the Market Rules by NEPRA and thereby
authorizing CPPA-G to perform the market functions;
 Approval and notification of Commercial Code by NEPRA for regulating
the payment and settlement;
 Execution of BTA between NTDC and CPPA-G;
 Execution of the Power Procurement Agency Agreements (PPAA) between
CPPA-G and each of the DISCOs;
 Execution of the Administration Agreement between CPPA-G and NTDC to
authorize the CPPA-G to administer and deal with PPAs executed between
the existing Generation Companies and WAPDA/NTDC.
The GOP completed development, execution and issuance of various basic legal
and regulatory documents required. Further, there will be novation of the PPAs
between the IPPs and NTDC to CPPA-G and execution of fresh PPAs between
CPPA-G and each of the GENCOs and WAPDA. The Connection Agreements as
well as Transmission Service Purchase Agreement between NTDCL and GENCOs,
IPPs and DISCOs will also be executed. Grid Code will also be revised.
The CPPA-G has to prepare the plan of Competitive Trading Bilateral Contract
Market (CTBCM) i.e. whole sales market. Assignment of the role of Market
Operator to CPPA-G will have affect on Privatization.
As aimed, the future power market of Pakistan shall be competitive wholesale as
there will be sale – purchase agreements registered with Contract Registrar and
Power Exchange Administrator (NTDC TL).