Tuesday, August 17, 2010

Time to somewhat open up Electricity sector ?

Currently Electricity sector is totally regulated in terms of price ,investment,quality ,service etc.I do not mean this regulatory framework to go away in Pakistan,although in most developed countries , at least ,electricity generation is an open non-regulated activity whereby whole-sale electricity prices are determined through open market operations via electricity exchanges just like stock exchange.Thus demand and supply determines price.These are called spot prices and market.For spot markets to operate efficiently, there has to be in general an excess of supply over demand,which may perhaps never be the case in countries like Pakistan.Besides,there is a strong threat of collusive price-setting behavior on the part of our businessmen and traders.The bourses in Pakistan could never be exonerated from the charges of foul practices,this being the case where number of market actors is fairly large.In electricity sector the number of market actors would be very small.We have problems in maintaining fairly and efficiently functioning markets in the commodity sector like sugar etc.

Between the extremes of a free spot market and a totally regulated sector , there are midway options for optimization of the sector.A parallel unregulated sector may be allowed for large customers like large industry and real-estate sector.In this sector pricing and investments would be without control and the prices would be mutually negotiated.A legal framework would have to be created whereby Transmission and distribution companies would be under obligation to provide T&D services to this sector under a regulated tariff.Several developing countries have begun to install this parallel electric market ,including India,Thailand,Philipines,Malaysia ans Singapore.

There are following situations,and by no means an all inclusive list, which call for such an intermediate arrangement:
1)Often there is an underutilized or underutilized generation capacity in the captive plants and facilities,which can sell power either to the grid or to a specialized customer located in a different geographical location at mutually acceptable and negotiated prices.
2)Geographically dispersed industries under one or several mutually cooperating businesses may be able to install large facilities at one site and distribute it to their owned facilities throughout the country.This would foster scale economies among captive generation sector and would stimulate electricity investment ob a self-help basis.A technical name of such arrangements is Electricity cooperative.
3)Often there are ready industrial and commercial customers who are willing to pay higher than regulated prices and are already paying higher prices through uneconomic self generation facilities.
4)Rental Power controversy could be partially done away with through this open parallel market.
5)There are stranded energy sources not worthy of a large utility investments like stranded gas or small hydro sources.Electrical cooperatives of the large industrial customers may be inclined to cooperatively invest in installing the generation facilities on these sources under this arrangement.
6)There are highly competitive sectors which require cheap electricity and may be able to help themselves through such arrangements where ever feasible.

I nutshell,it is the consenting businesses,if not consenting adults,who are permitted to generate or acquire electricity from whatever source at mutually consented terms and conditions,without the restraint or protection of a regulating bureaucracy.This may save time and money that goes into the regulated and intermediated process.

1 comment:

  1. I really appreciate you for all the valuable information that you are providing us through your blog.

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