Power sector: hits and misses 2017 (ii)

The year gone by saw a lot of shake-ups in the power sector. Some highlights have already been covered by this column such as the rising circular debt and the changing fuel mix. Another important development during the year was the shift towards competitive bidding for determination of energy tariffs. This will encourage competition in the power sector and ultimately reduce the cost of electricity for the end consumer.

However, at the same time the government has recently decided to retain “take or pay” long term power purchase agreements for government and CPEC power projects while shifting to “take and pay” mechanism for others. This has apparently been done to reduce the capacity payments in the future which are paid even if the government through the Central Power Purchasing Authority (CPPA) does not buy any power from the project.

Published in Business Recorder, 3rd January, 2018