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Orientation Session for HonorableBrothers from AfghanistanSAARC Training for Professionals of Afghanistan20th Sept, 2019www.cppa.gov.pk

Scheme of PresentationLegal Regulatory FrameworkPart-1Part-2Strategic Plan of CPPA (2018-20) & CPPA FunctionsPart-3Part-4Part-5Regulatory ComplianceMarket Model and Future EvolutionTake-aways / Recommendations / Q&Awww.cppa.gov.pk

PART – 1Legal / Regulatory FrameworkAn Overviewwww.cppa.gov.pk

Power Sector OverviewHistorical Development of Pakistan’s Electricity MarketPakistanWaterandPowerDevelopment Authority (WAPDA) wasestablished through an Act ofParliament in 1958. It was anautonomous and statutory body underthe administrative control of theFederal Government. The Authorityconsisted of a Chairman and threeMembers (Water, Power and Finance)1947-581958Localized generationand distribution ofpower1982In order to reform power sector and transitionfrom monopoly to privatization and fromintegration to disintegration, the Government ofPakistan approved the WAPDA Strategic Plan in1992 to privatize the Power Sector. There werethree Critical Goals of the Strategic Plan: 1.Enhance capital formation, 2. Improve efficiencyand rationalize prices, and 3. Move over timetowards full competition by providing thegreatest possible role for the private sectorthrough privatization1992Provisional Electricity Departmentswere transferred to WAPDA andaccordingly Area Electricity Boards(AEBs) were established in 1982www.cppa.gov.pk

Power Sector OverviewWAPDA was unbundled into separatecompanies for generation, transmissionand distribution. WAPDA was bifurcatedinto DISCOs, NTDC and GENCOs. DISCOswere given Distribution Business includingsecondary transmission systemNTDC was formed to perform fivefunctions namely, TNO, SO, Planner,Meter Service Provider and ContractRegistrar / Power Exchange Administrator19971998Enactment of NEPRA Act in 1997NEPRA's main responsibilities are to:1. Issue Licenses for generation, transmissionand distribution of electric power;2. Establish and enforce Standards to ensurequality and safety of operation andsupply of electric power to consumers;3. Approve investment and power acquisitionprograms of the utility companies; and4. DetermineTariffsforgeneration,transmission and distribution of electricpower.2002CPPA was separated from NTDC andformed as in independent companyowned by GoP. It is presentlyfunctioning as the Market Operatorand performing following functions:1. Billing and Settlement2. Power Procurement3. Legal4. Market Development2015NTDC was granted Transmission Licenseto perform five functions namely, TNO,SO, Planner, Meter Service Provider andContract Registrar / Power ExchangeAdministrator. NTDC was given theresponsibility to develop the whole salemarket as per the timetable given in thelicense.www.cppa.gov.pk

Pakistan’s Electricity Market FrameworkPakistan’s Electricity Market FrameworkLegalNEPRA Act 2018PolicyNational ElectricityPolicy & MarketOperatorDistributionMarketsMarket Rules, PowerProcurement RulesElectricity Act 1910Power Policy 2013Grid, Commercial andDistribution CodesWheeling, Competitive Bidding,Import RegulationsSystemOperator (SO)K-ElectricPlannerDistribution WireBusiness (Regulated)Single BuyerMetering ServiceProviderOperational PlanningSupply DemandAgency Role1994, 2002, 2015Public SectorIPPsTransmission NetworkOperator (TNO)ConstitutionParliamentCCI/MoENEPRARegulated toCompetitionNTDC RegulatedService ProviderNPCC RegulatedService ProviderBilling & SettlementMarket & ProductDevelopmentCPPA RegulatedService ProviderMetering ServiceProvider (Regulated)Sales or Supply Business(Competition)DISCOs/KECompetitive WholesaleCompetitive RetailIncreaseCompetition

CPPA G in the Power MarketServiceProvidersGovernment of nAtomic EnergyCommissionPower te SectorIPPsSO TNOGENCOsDISCOsNTDC(TNO SO)SPPs/CPPsKElectric

Electricity Market: Service Providers and ParticipantsWholesale Electricity Market OperatorEnergy purchased in FY2018 121 TWhGenerators as Market ParticipantsTransmission Service- Total Generators Online 96Provider NTDC- Installed Capacity 35,961 MW- Total PPAs/EPAs signed 112 - DISCOs: Wire Business & Supplier - BPC 1MW- Participants as Retail Suppliers- Others non-eligible10 DISCOs and KEcustomer- Service Provider forwire business/distributionwww.cppa.gov.pk

Power Sector OverviewKey Figures June 2019PESCOInstalled Capacity(35,961 MW)IESCOGEPCOTESCOFESCOLESCOMaximum Demand(25,627 MW)MEPCOTotal Traded Volume(123 TWh)QESCOSEPCOHESCOwww.cppa.gov.pk

Inter-Regional Arrangements (Existing and Proposed)CASA 1000TAPITAPImportwww.cppa.gov.pk

Development through Cooperationwww.cppa.gov.pk

Power Sector OverviewDistribution Companies (DISCO’s)High Loss DISCO with seriousrecovery and collection issues.Feeds TESCO area, law and orderissuesLarge % of government consumers,collection issue with feeding KashmirPESCOIESCOGEPCOWell-run DISCO with steel industry andcottage industry as consumer baseFESCOAdministrative issues, 80% of loadis tube-wells, rural delivery issuesBest run DISCO, many industrial textilefactories as consumer baseLESCOMEPCOQESCOSEPCOHighest density service areaLargest number of consumers(5 mill), 25% of all tube-wells inPakistanRelatively newDISCO, inherited highestloss areas of HESCOHESCOK-ElectricHigh losseswww.cppa.gov.pk

Current Wholesale Market StructureMarket Structure: Pakistan has a single-buyer market structure in place.Buyer: Central Power Purchasing Agency Guarantee (CPPA-G) Ltd.Types of Agreements: Three major types of purchase agreements are in place: Power Purchase Agreements (PPAs) with take or pay Capacity only Power Purchase Agreements (PPAs) with take or pay Capacity and Energy Energy Purchase Agreements (EPAs) which are must runGeneratorsInvoicesCTR & ETRCPPA-GDISCOswww.cppa.gov.pkPayments

Power Dispatch IllustratedE.g. Demand: 19,000 MW---19,000All other plants according to economicmerit dispatch orderGets priority in the meritdispatch order due tocontractual set-upRLNG Plants---15,000Local Coal PlantsImported Coal PlantsNuclear---5,000SolarOut of merit order,must runWindBagasseHydel---0www.cppa.gov.pk

Power & Commercial FlowsGenerationPortfolioKDISCOsElectric650 MW2002 &onward IPPsIESCOGENCOsWAPDA(Hydel)PPAsLESCONTDCCPPA-G1. SystemOperationMarket Rules1. Market Operator2. Market Operations2. TransmissionNetworkOperatorCommercial Code1. Meter Reading Verification2. Billing3. Settlements4. PaymentsGrid Code1994 IPPsRenewables(EPP & CPP) UoSC MOF(EPP & CPP) UoSCFESCOGEPCOMEPCOSEPCOHESCOQESCOPESCOTESCOEPP & CPPPower FlowFinancial Flows(EPP & CPP) UoSC MOF DMENDCONSUMER

Contractual CanvasDISCOsDistribution Code2002 & onwardIPPsPPAsNTDC1. System OperationGENCOsWAPDA(Hydel)PPAsPPAPower Procurement &Agency Agreement(PPAA)2. TransmissionNetworkGridOperatorCodeCPPA-GBusiness TransferAgreementAdministrationAgreementsof Portfolio PPAsPPAs1994 IPPsMarket Rules1. Market Operator2. Market OperationsCommercial Code1. Meter Reading Verification2. Billing3. Settlements4. PaymentsModified Version ofPPAsAdministrationArrangement1994 IPPsConnectionAgreementsFutureGeneration

PART – 2CPPA’s Strategic Plan & Functionswww.cppa.gov.pk

CPPA Strategic Plan (2018-2020)ObjectivesoThe Strategic Plan sets out key delivery strategies for CPPA in its role as Market Operator andPower Purchaser over the three years to 2020.oThe Strategic Plan encapsulates the CPPA’s Vision, Mission, Core Values and Strategic TargetsoIt summarizes the company’s strategy for the next three years. During the next three years CPPAwill strive hard for not only to build its internal capacity in-terms of people, processes andtechnologies but also assist the other power sector entities to become partners during this journey.www.cppa.gov.pk

CPPA Strategic Plan2018-2020Vision“To become a world-class power Market Operator by providingthe optimum environment for trading electricity in the PakistaniPower Market”www.cppa.gov.pk

CPPA Strategic Plan2018-2020Mission“To achieve our vision, we are determined to become one of the best-run publicorganizations in the world, a place where people love to work, developingcapacity of stakeholders and providing systems, tools and processes forenabling an transparent and competitive power market. During the transition period,our company will also procure the required energy on behalf of the DistributionCompanies for retail sales to their customers transparently and efficiently”www.cppa.gov.pk

CPPA Strategic Plan2018-2020Core Values1. Transparency2. Teamwork2. Excellence4. Being Respectfulwww.cppa.gov.pk

CPPA’s 3 Year Strategic PlanVision6To become a world-class power Market Operator by providing the optimum environment fortrading electricity in the Pakistani Power Market.To achieve our vision, we are determined to become one of the best-run public organizations in the world, aplace where people love to work, developing capacity of stakeholders and providing systems, tools andMissionprocesses for enabling an transparent and competitive power market. During the transition period, ourcompany will also procure the required energy on behalf of the Distribution Companies for retail sales totheir customers transparently and efficiently1.2.3.Targets for 4.5.next 36.years7.8.StrategicImprove the current business operations and ensure adherence to existing businesscompliancesDevelop healthy Corporate CultureInvest in good peopleData institutionalization and publishingStrengthen relationships with Market Participants and Service ProvidersDesign and facilitate implementation the wholesale Competitive Market ModelIT transformation of CPPARebrand CPPACorporate www.cppa.gov.pk

Functional Transition: In Past, At Present, For FutureLegacyExistingGetting Prepared ForBilling and SettlementBilling and SettlementBilling and SettlementTreasuryTreasuryTreasuryAgent for Power Procurmt.Agent for Power Procurmt.Agent for Power Procurmt.Market DevelopmentMarket DevelopmentTaxationTaxationPG & CorporatePlanningInformation Tech.Corporate PlanningHR and Corp. Govern.HR and Corp. Govern.Information Tech.Contract RegistrarCompetitive Wholesale MarketSPS, MO and IAA20152015-20182018-2020

CPPA’s Current OrganogramCPPAFunctions FinanceTechnicalITLegalHRSMDPG & CPCompanySecretarywww.cppa.gov.pk

Composition of CPPA-G Board of DirectorsS. No.NameDesignationStatus in CPPA-G Board01.Mr. Irfan AliFederal Secretary Ministry of Energy(Power Division)02.Mr. Zargham Eshaq KhanJoint Secretary (Power Finance) MinistryNon-Executive Directorof Energy03.Dr. Khaqan Hassan NajeebDirector General Economic Reforms UnitNon-Executive Director(Ministry of Finance)04.Mr. Zafar AbbasManaging Director NTDCLNon-Executive Director05.Mr. Muhammad Imran MianChief Executive Officer, GENCO HoldingCompanyNon-Executive Director06.Mr. Shahid Iqbal ChaudhryChie Executive Officer, IESCONon-Executive Director07.Mr. Abid Latif LodhiChief Executive Officer, CPPA-GExecutive Director08.Ms. Ayla MajidPrivate Sector09.Mr. Hamid Ali KhanPrivate SectorIndependent Director10.Mr. Ghias Ud DinPrivate SectorIndependent DirectorChairman / Non-Executive DirectorIndependent Directorwww.cppa.gov.pk

CPPA’s Board Committees1.2.3.4.5.6.7.8.9.Human Resource CommitteeProcurement CommitteeFinance CommitteeRisk Management CommitteeEnterprise Resource Planning (ERP) Implementation CommitteeAudit CommitteeNomination CommitteeSpecial Committee on K-Electric IssuesMarket Implementation Support Committee (MISC)www.cppa.gov.pk

Rules Power Energy Procurement as Agent of DISCOsMarket Rules 2015Regulations IPPR 2005Grid Code NTDC IndicativeCapacity Expansion Plan(IGCEP)NTDC DemandForecastingCPPA-GProcurement of PowerCalculate Power PoolPrice through TransferPrice MechanismGuidelines NEPRA RenewableGuidelinesCPPA-G ProcurementGuidelinesPower ProcurementAgency Agreement(PPAA) with DISCOsCommercialCodeDISCOs