NEPRA urged to amend licensing rules for private sector participation in Disco sell-off process

The Power Division has approached the National Electric Power Regulatory Authority (Nepra) to amend the licensing regulations of power Distribution Companies (Discos) to facilitate private sector participation in the sell-off process. 

According to a news report, the amendments aim to align Supplier and Distribution Licenses with the federal government’s prescribed rules and eliminate regulatory inconsistencies that could deter potential investors.

As per the proposed changes, electric power suppliers may sell electricity to other suppliers through bilateral agreements. However, if a Supplier of Last Resort sells power to another supplier, the terms and conditions of the transaction, including rates and charges, must be approved by Nepra.

The Power Division highlighted that Nepra had issued Supplier and Distribution Licenses to all Discos except TESCO and SEPCO between April and December 2023. These licenses require the legal separation of supply and distribution functions by 2025. 

The Power Division argued that legal segregation should be subject to future developments in the electricity market, as outlined in the National Electricity Policy (NE Policy) 2021 and the Eligibility Criteria Rules notified in September 2023.

During a recent review panel meeting, concerns were raised about regulatory inconsistencies and their impact on private sector participation in Discos. The panel noted that discrepancies between federal government rules and issued licenses posed risks to investors and could delay the privatization process.

The Power Division proposed that the requirement for legal separation of supply and distribution functions be replaced with functional separation, ensuring compliance with the Eligibility Criteria Rules. The proposed amendments would also address investor concerns by reducing legal risks and uncertainties.

Additionally, the Power Division emphasized that future policy amendments should guide any legal separation, ensuring alignment with the evolving electricity market. GEPCO has already submitted a review petition seeking similar modifications, and the Power Division has requested Nepra to incorporate these changes for other Discos.

Nepra has been urged to act on these proposals to eliminate barriers to private sector participation and ensure a smooth transition toward market competition. The amendments aim to strengthen investor confidence and accelerate the development of Pakistan’s electricity market.