ISLAMABAD(National Times)- In a first, the National Electric Power Regulatory Authority (Nepra) on Friday awarded DHA City, located on M-9 motorway, two parallel licences for electricity distribution and supplier of last resort (SoLR) for a period of 21 years.
This is the first of its kind move under which a privately owned entity — DHA Energy Supply Company (Desco) — got licences to have both responsibilities of distribution of electricity and the supplier of last resort under the revised Nepra regime for competitive trading bilateral contract market (CTBCM) other than legacy utility distributors and SoLRs like ex-Wapda distribution companies and K-Electric.
Initially, Desco’s jurisdiction for the distribution licence would be in DHA City Karachi (DHACK), located about 56 kilometres from Karachi city in district Malir.
In its application, Desco reported that there was no infrastructure that may connect it to the national grid or KE network and the only source of supply available nearby was that of the Lucky Cement Limited with which it had reached an understanding for procurement of six megawatts (MW) of electricity and supply to residential, commercial and other consumers located in DHACK through KE.
Nepra rejects objections of KE, Gepco and CPPA to grant distribution and SoLR licences to DHA Energy Supply Co.
The state-owned Central Power Purchasing Agency (CPPA) — the commercial arm of Power Division — Gujranwala Electric Supply Company (Gepco) and K-Electric (which has both these licences until June 2044 for entire Karachi, though non-exclusive after its monopoly ended in 2023) raised objections over the application of Desco.
However, Nepra overruled the objections, saying the applicant had a case for consideration of the grant of distribution and SoLR licences. It issued the two licences strictly for its facilities located within DHACK.
Desco shall charge a person availing distribution services only the tariff including use of system charges or connection charges with the approval of Nepra.
While CPPA, Gepco and KE questioned the Desco’s requests on grounds of financial health, technical capabilities and proven track record, Nepra ruled that amendments to its Act envisaged introduction of reforms to liberalise the various segments of the supply chain of the electric power sector, including de-licensing of generation segment, allowing provincial grid companies in the transmission segment, carving out supply segment from the distribution (the wire business) and eliminating the exclusivity associated the with distribution segment of the supply chain.
Also, the regulator ruled that being a relatively new company and not in actual operation, Desco “is not fulfilling this requirement at this moment however, at the same time its parent company — DHA Karachi — has strong financial credentials and shall bail out its special purpose vehicle whenever required”.
It is also a common corporate practice to incorporate the company with minimum capital requirement of the Securities and Exchange Commission of Pakistan (SECP) and increase the paid up capital once the company commences its operations, it added.
Moreover, the financial strength of the company was also expected to improve upon the grant of licences and commencement of its business which may not reasonably be achieved prior to undertaking the distribution/supply business in the first place, the regulator said, adding that the new company would now be under legal obligation to comply with all standards for which a special provision would be added in the standard terms and conditions of the distribution licence.
