Green Paper Vol-1 (V 2 January 12, 2015)

VOLUME-1
GREEN PAPER
Electricity Wheeling
and
Private Grids
CONSULTATION ON THE CASE FOR A

PRE-PACKAGED FRAMEWORK
Volume 1 – Regulatory and Technical

Volume 2 – Financial
CONSULTATION ON THE CASE FOR A PRE-PACKAGED FRAMEWORK
VOLUME-1 REGULATORY & TECHNICAL
Table of Contents
1. COMMENTS AND FOLLOW-UP ....................................................................... 3
2. GLOSSARY ..................................................................................................... 4
3. BACKGROUND .............................................................................................. 6
4. ABSTRACT ..................................................................................................... 8
5. CONSULTATION POINTS ...............................................................................10

5.1 WHEELING FRAMEWORK .............................................................................................. 10
5.2 PRIVATE GRIDS ............................................................................................................. 11
6. RECOMMENDATIONS - WHEELING ...............................................................13
7. RECOMMENDATIONS - PRIVATE GRIDS.........................................................16
8. WHEELING – AN OVERVIEW..........................................................................18
8.1 DESCRIPTION ................................................................................................................ 18
8.2 SYSTEM LOADING IMPACT ............................................................................................ 18
8.3 TREATMENT OF LOSSES ................................................................................................. 19
8.4 SYSTEM AUGMENTATION COST ALLOCATION ............................................................... 20
8.5 RELIABILITY OF SUPPLY ................................................................................................ 21
8.6 WHEELING CHARGES .................................................................................................... 22
9. PRIVATE GRIDS – AN OVERVIEW ...................................................................23
10. CURRENT REGULATORY FRAMEWORK.........................................................25

10.1 SALES EXCEPTION TO DISCO‟S EXCLUSIVITY .............................................................. 25
10.2 NEPRA LICENSING (DISTRIBUTION) RULES, 1999........................................................ 26
10.3 THE DISTRIBUTION CODE ............................................................................................ 27
10.4 DRAFT ENERGY WHEELING AGREEMENT ................................................................... 30
10.5 PRIVATE GRIDS ........................................................................................................... 35
10.6 ISSUES WITH PRIVATE GRID PROCESS .......................................................................... 37
GREEN PAPER 2
ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

1. COMMENTS AND FOLLOW-UP
(i) The intention of Energy Department, Govt. of Punjab (EDP) in issuing this Green
Paper is to stimulate public debate on the topics of power wheeling and private
grids, and to disseminate the contents of this debate. The comments on this Green
Paper and any counter-comments thereon are vital to this public debate.
(ii) Your comments are valued and will be factored in the follow-up White Paper.
You are invited to submit your comments and counter-comments in writing to the
EDP, preferably in electronic format, so they can be posted without delay on
EDP‟s website (www.energy.punjab.gov.pk).
(iii) Comments and any counter-comments should be delivered or sent by post, fax or
e-mail to:
Attention: Mr. Liaqat Iqbal, Additional Secretary, Technical

Energy Department, Government of Punjab
EFU House, 8th Floor
Jail Road – Lahore
Tel: 042-99268017 & 99268019
Fax 042-35790721
Time Frame for follow-up on Green Paper
Event Final Date
Submission of Initial Comments 10 February 2015
Submission of Counter-Comments 20 February 2015
Publication of Draft White Paper (factoring in March 2015

the findings of the public debate)
Workshop on Draft White Paper April 2015
White Paper with Recommendations to NEPRA May 2015
(iv) Any confidential information should be submitted separately and clearly marked
as confidential.
GREEN PAPER 3

2. GLOSSARY
BPC Bulk power consumer as defined in the NEPRA Act

CC Connection Code, a sub code provided in the Distribution Code,
2005
DC The Distribution Code, 2005, a planning and operating code for the
DISCOs approved by NEPRA
DISCO Distribution Company, licensed by NEPRA under the NEPRA Act
to undertake electricity distribution business within its concession
territory
Distribution The National Electric Power Regulatory Authority Licensing
Rules or DR (Distribution) Rules, 1999
DM Distribution Margin, the tariff component allowed to the DISCOs on

distributed kWh basis
DPC Distribution Planning Code, a sub code provided in the Distribution
Code, 2005
EWA The draft Energy Wheeling Agreement placed by NEPRA on its web-
site for consultation
EWF Energy Wheeling Framework (recommended)
Generation The National Electric Power Regulatory Authority Licensing
Rules or GR (Generation) Rules, 2000
Grid Code The Grid Code 2005, dealing with planning and operation of the
national high voltage transmission system
IPPs Independent Power Producers
NEPRA The National Electric Power Regulatory Authority
NEPRA Act The Regulation of Generation, Transmission and Distribution of
Electric Power Act, 1997 (XL of 1997)
NTDC The National Transmission and Dispatch Company - the national
grid company
NTDC Licence The licence granted to NTDC by NEPRA for the ownership and
operation of the national grid
Performance The National Electric Power Regulatory Authority Performance
Standards Standards (Distribution) Rules, 2005
(Distribution)
Rules
PESCO Peshawar Electric Supply Company
EDP Energy Department, Government of Punjab
GREEN PAPER 4

Second-tier A generator or a distribution company authorized by NEPRA to

Supplier supply electricity to BPCs under the Generation Rules
SPPs Small Power Producer(s), generally less than 100 MW who were
already engaged in supply on 22nd April 2000
Sellers As used in this paper, a generator requiring wheeling service to sell
power direct to a BPC under a bilateral sales contract
Transmit As used in this paper, means to transport electricity over a network,
regardless of it being a distribution or transmission network.
UOS Use of System
UOSC Use of System Charge
Utility As used in this paper, means either a DISCO or the NTDC, or both,
as the context requires.
GREEN PAPER 5

3. BACKGROUND
(i) The conference organised by the Energy Department, Govt. of Punjab and the
International Finance Corporation in April 2014 at Lahore led to the private sector
participants‟ consensus that the bulk power consumers were constrained in the
choice of their electricity suppliers despite the Regulation of Generation,
Transmission and Distribution of Electric Power Act, 1997 (NEPRA Act)
envisaging freedom of choice of supply. The participants made the case that the
current case-to-case based „regulatory approvals‟ for wheeling and private grids
ought to be replaced with a robust „pre-packaged framework‟ with unambiguous
directives to the players to minimise transactional negotiations within pre-defined
timeframes.
(ii) Wheeling is no longer a demand of the private sector alone. Recent Requests for
Proposals by IESCO, SEPCO and HESCO inviting well head gas generation
leaves it to the generators to transmit up to the point of interconnection. The
Government of Khyber Pakhtunkhwa is moving to wheel power from its 16 MW
Pehur Hydel Station, a public sector project.
(iii) Given the financial

New Load, New Generation
constraints of the public
sector utilities, New Load, Current Generation
exacerbated by Current Load, New Generation

overwhelming reliance on
large scale IPPs backed by Current Load, CurrentGeneration
sovereign guarantees indirectly increasing contingent public debt and the circular
debt, there is an arguable case for shifting incremental demand to bilateral
contracts to manage the financial burden on the utilities. Such bilateral contracts
should also cater to network augmentation of utilities with private investment
dovetailed with the wheeling transactions. Even if the case for shifting of existing
demand to wheeling is debatable, the case for meeting of new incremental load
under bilateral contracts is a good one.
GREEN PAPER 6

(iv) This Green Paper is the first step in that direction. Regulatory consultation on
these topics has been scant. Apart from seeking public comments on the draft
energy wheeling agreement developed specifically for the Fatima group for
wheeling in the territory of MEPCO, there has been little targeted public
consultation1 on pre-identified issues on these two topics in the context of the
Pakistan power sector.
(v) DISCOs and bulk power consumers are constrained in their choice of electricity
sellers, currently being the „basket‟ comprising WAPDA allied generation and
long-term PPA-locked Independent IPPs2, with minor exceptions being small
semi-isolated grids with largely affiliate-captive generation. This state of affairs
prevails despite:
 legal opening for a thriving bi-lateral contracts market under sections 22 and 23
of the NEPRA Act,
 clear instructions by NEPRA in NTDC‟s transmission licence to establish the

institutional and allied arrangements for a power-exchange by 1 July 2012 (still
not established), and
 the Licensing Rules, the Grid Code and the Distribution Code envisaging a
robust open access regime.
1
Other than comments during public hearings, which are generally focused on the specific case under consideration.
2
The SPPs contribute minute quantities, dwindling further with gas shortage.
GREEN PAPER 7

4. ABSTRACT
(i) This Green Paper proposes that the primary cause for a robust bilateral contracts
market not developing is the absence of „pre-packaged‟ and „ready-to-go‟ wheeling
and private grids frameworks designed to:
 create a win-win for all players by:
o first tabulating the potential issues affecting the DISCOs, the BPCs and
the Sellers
o then proposing a framework that is feasible and practical with a fair

balance amongst the competing interests
 make network information of NTDC and DISCOs available in the public

domain in a manner that facilitates efficient investment decisions
 minimise regulatory intervention by eliminating the need for case-to-case

regulatory approvals
 prevent the need for protracted negotiations amongst the players
 penalise dilatory tactics
 encourage private investment in transmission
 send economic signals for new generation and loads, and efficient use of
transmission resources, and
 be simple and predictable.
(ii) The consensus is there that wheeling and private grids are contributory measures
to address the national power deficit, as they can increase the choice and reliability
of supply for bulk power consumers and create incentives for private investment in
small to medium scale embedded generation. It is also generally agreed that there
is a market for reliability of supply whereby BPCs are willing to pay a premium.
(iii) Wheeling and private grid initiatives will get an impetus if the current case-to-case
approvals approach of the regulator that entails protracted timelines (while leaving
GREEN PAPER 8

the opaque transactional details to the parties) is replaced with a robust „pre-
packaged‟ framework that (a) consolidates and places in one document the
regulatory answers to most of the transactional details, (b) mandates predefined
timelines for utilities‟ response, and (c) is strictly enforced by the regulator.
(iv) The case for meeting new incremental load under bilateral contracts is a good one,
even if the case for shifting of existing demand to wheeling or private grids is
debatable.
(v) No framework will work without diligent enforcement by NEPRA. It is

recommended that NEPRA establish a tribunal under section 11 of the NEPRA
Act with a well-defined mandate to settle disputes relating to wheeling and private
grids. The tribunal should work on the basis of a publicly announced and
mediation-oriented alternative dispute resolution framework.
GREEN PAPER 9

5. CONSULTATION POINTS
5.1 WHEELING FRAMEWORK
(i) Where wheeling spans several utilities‟ networks, the wheeling charges can
become very high due to the percentage adders phenomenon, whereby each
intervening utility‟s losses get factored in the total wheeling charges.
(ii) In the absence of a short-term bilateral contracts market or a spot market, how
should the Seller or the BPC be compensated for lost energy in a firm wheeling
arrangement?
(iii) The case-to-case approvals approach of NEPRA is time-consuming and adds a

needless layer of authorisation that is no longer required in view of the expiry of
the 15 year time period under section 22 of the NEPRA Act.
(iv) In the absence of an annually updated charges statement of DISCOs for wheeling
approved by NEPRA3, it is not possible for the prospective Sellers and BPCs to
make investment decisions impacted by the wheeling and connection charges4.
(v) The allocation of system average losses for the wheeling charges operates unfairly
especially where both generation and load are proximate to each other. The losses
allocation should be based on load flow studies for the proposed transaction.
The current postage stamp method for losses allocation is unrealistic, for the
DISCOs are spread out over very large areas and their system average losses are
pulled down due to domestic load.
(vi) The 496 days timeframe for connection to utility’s system is too long. The
connection process is convoluted, requiring a fresh round of negotiations (and
rejection right) to the utility at the end of the process, despite having made a
connection offer.
3
As required under Rule 11 of the Distribution Rules
4
Currently, the wheeling charge set for DISCOs in their tariffs gives only a Rs/kWh charge for units transmitted, but does
not address the key ingredients of the charges statement, in particular the connection charges component.
GREEN PAPER 10

(vii) The mandatory requirements under the Distribution Code relating to 5 year rolling
load forecasts with annual updating, network expansion information, digital
system files, digitised network maps, and the like are not in the public domain,
depriving prospective Sellers and BPCs of key technical information for investment
decisions.
(viii) The draft energy wheeling agreement placed by NEPRA as its proposed „standard
agreement‟ requires broader consultation to make it a balanced document and fit
for use by equity financed or corporate financed projects also. Leaving the
specifics of the connection agreement to negotiations between the Seller and the
utility without a pre-approved template by NEPRA enables stonewalling by an
unwilling utility.
(ix) Utility system augmentation where required for wheeling can be a disincentive for
the willing but financially constrained utilities for swift implementation of
proposed wheeling transactions. The solution may lie in rebate in the wheeling
charges that enable recovery of system augmentation costs.
(x) Wheeling will not succeed without swift monitoring and enforcement by NEPRA.
A tribunal under section 11 of the NEPRA Act should be set up. The tribunal
should operate under a clearly defined process with timelines, and instead of a
purely adversarial approach (like the courts) should follow the modern structured-
mediation approach.
5.2 PRIVATE GRIDS
(i) As private grids are not truly isolated (the BPCs are connected to the host utility),
there will be lost power at times of low or no demand of BPCs if flow-through to
the host utility’s network are not allowed, especially for non-curtailable sources
such as hydro, wind and solar.
(ii) Leaving the details of network configuration and operation and maintenance
obligations to the parties to negotiate creates uncertainty and transactional delays.
Documented regulatory guidance is required on the network configuration,
construction, operation and maintenance of wires that traverse a utility‟s service
GREEN PAPER 11

territory, to eliminate uncertainty for a prospective private grid operator or an

existing private grid seeking to expand its reach.
(iii) The case-to-case approvals approach of NEPRA is time-consuming and adds a

needless layer of authorisations that are no longer required in view of the expiry of
the 15 year time period under section 22 of the NEPRA Act.
(iv) Private grids will not succeed without swift monitoring and enforcement by
NEPRA. A tribunal under section 11 of the NEPRA Act should be set up. The
tribunal should operate under a clearly defined process with timelines, and instead
of a purely adversarial approach (like the courts) should follow the modern
structured-mediation approach.
GREEN PAPER 12

6. RECOMMENDATIONS - WHEELING
REGULATORY
Wheeling Consolidate the dispersed collection of rules and the draft energy wheeling agreement
Framework in a consolidated, user-friendly, pre-packaged framework
Replace case-to-case approvals approach with simple registration of wheeling

arrangements - no approvals should be required
Announce that there will be no tariff regulation of bilateral sale contracts
Get DISCOs to publish the Connection Charges Statement, and update on annual
basis
EWA Remove LDs on DISCOs (except for dedicated feeders) - replace with return energy
obligation
Revise the EWA for equity-based and corporate-financed transactions
Prescribe a Connection Agreement (embed in the EWA)
Allow output energy minus input energy on actual losses basis where load flow
predicts lower losses than system average loss of the DISCO
Current approved EWA caters only to “firm, bilateral” wheeling. It should also cater
to “non-firm” and “multi-lateral” wheeling for large-scale generation located far from
the load.
Enforcement Enforce the Distribution Code provisions on interconnection and public availability of
key network information – updated regularly – to signal appropriate wheeling
opportunities
Make Section 11 tribunals, with modern regulatory mediation skills (replacing „penal‟
approach with „structured negotiation‟ approach).
FINANCIAL
Wheeling Charges Allow load flow based losses allocation where demanded by the project, or allow
„nodal pricing‟ (replacing the current system average loss methodology).
Allow privately financed system augmentation costs, with rebate against wheeling
charges
TECHNICAL
Reduce the current 496 days timeframe for interconnection application process under
the Distribution Code – Revise the process
Enable private transmission/distribution lines investments
GREEN PAPER 13

(i) The Energy Wheeling Framework (EWF) should address the percentage adders
issue, in the form of a lower wheeling charge where the wheeling is over
multiple utilities’ networks. Wheeling charges for multilateral wheeling should
be cost-based, and not an indirect function of the overall system average losses of a
utility (whereby the wheeling charge is worked backwards to meet the utility‟s
revenue requirement on the basis of its target losses for the test year).
(ii) Liquidated damages proposed in the draft EWA approved by NEPRA for lost-
energy compensation in a firm wheeling arrangement is a sub-optimal solution, as
the utilities are already financially challenged. Energy banking may be a solution,
but the timelines for return energy should be over the horizon of a year, to enable
the utility to benefit from high-energy seasons.
(iii) The EWF should require only registration with NEPRA – as opposed to a case-
to-case approval – for wheeling transactions.
(iv) The utilities should publish the charges statement as required under Rule 11 of
the Distribution Rules making transparent the basis for calculation of wheeling and
connection charges. The EWF should list
 The principles for the connection charges

 The permissible ranges for the costs of wheeling-specific system
augmentation
 The time and manner for payment of connection charges
 The time-frame for DISCO to implement the augmentation
 The principles for reimbursement of system augmentation costs (e.g. by set-
off against UOSC)
 Annual updating method
(v) The EWF should enforce the mandatory requirements under the Distribution
Code relating to 5 year rolling load forecasts by DISCOs with annual updating,
network expansion information, connection points, digital system files, digitised
network maps, and the like, enabling prospective Sellers and BPCs to make siting
and investment decisions.
GREEN PAPER 14

(vi) The Connection Sub-Code in the Distribution Code needs to be improved as

follows:
 the 496 days timeframe for connection to utility‟s system should be

curtailed to no more than 90 days, assuming the required network
information is in the public domain (as required under the Distribution
Code)
 add to the Connection Flowchart another step for accurate requisite
network information to intending applicants within stated timeframes
 the EWF should stipulate fines for each day of delay beyond the stated
timeframes
 the application process should be redesigned so that it ends with the
Connection Offer instead of another round of “further evaluation” by the
DISCO and “invitation for negotiations” 30 days after such further
evaluation
 specify design parameters by reference to operating parameters
 amend Performance Standards (Distribution) Rules (or provide in the
EWF) the sanctions for non-compliance with the Connection Flowchart
timeframes
 further detailed review in consultation with intending sellers should be
carried out to identify and remove excessive or redundant process and
information requirements
 the utility‟s right of rejection should be subject to NEPRA‟s approval.
(vii) The EWF should provide a template connection agreement for use in wheeling.
Preferably, it should be an integral part of the energy wheeling agreement.
(viii) Losses allocation should be based on cost. Pending appropriate cost studies, the
„postage stamp‟ method should be rationalised by dividing each utility territory
into several „stamps‟ (zonal or nodal pricing) and/or by basing losses allocation
on load flow studies for the smaller stamps.
(ix) The EWF should allow rebate of privately financed system augmentation costs
against the wheeling charges according to set principles.
GREEN PAPER 15

7. RECOMMENDATIONS - PRIVATE GRIDS
Pre-Packaged Consolidate the dispersed collection of rules and determinations in a consolidated,

Framework user-friendly, pre-packaged framework.
Replace case-to-case approvals approach with simple registrations.

No approvals should be required for private grids or for adding BPCs.
Remove the need for „licence modification‟ for adding BPCs.
Pre-approve a template O&M Agreement for lines traversing utilities‟ Service

Territory (don‟t leave to the DISCO to negotiate)
Expressly announce no tariff regulation of bilateral sale contracts
Allow flow-through of non-curtailable power to host utility
Reduce the current 496 days timeframe for interconnection application process under
the Distribution Code
Mandate time lines for application processing by DISCOs. Add these to the
Performance Standards.
Enforcement Enforce the Distribution Code provisions on interconnection and public availability of
key network information – updated regularly
Make Section 11 Tribunals, with modern regulatory mediation skills (replacing „penal‟
approach with „structured negotiation‟ approach).
(i) Flow-through of power to the host utility should be allowed for non-curtailable
power sources at times of no or low BPCs demand, at basket-tariff rates at which
the utility purchases power from the national power pool.
(ii) The permitting process can be streamlined for swift private grid implementations
by
 eliminating a case-by-case approvals process, and replace it with a simple

registration requirement
 eliminating the need for regulatory approval each time a new BPC is to be
added
 announcing a pre-approved O&M Agreement template for adoption by all
private grid operators and utilities to avoid protracted negotiations or
stonewalling by the utility.
GREEN PAPER 16

(iii) The 5-year distribution and sub-transmission investment and development plans of
utilities should be publicly available on the DISCOs‟ websites (along with system
studies electronic data files) and updated on a 6 monthly rolling basis for
prospective investors. Distribution Planning Code 4 list of the key follow-on
technical data to be developed by NTDC should also be made public.
GREEN PAPER 17

8. WHEELING – AN OVERVIEW
8.1 DESCRIPTION
(i) The Distribution Licensing Rules refer to „use of system obligation‟ of the
DISCOs, mandating them to provide connection to third parties proposing to use
their system. Use of System (UOS) therefore refers to a wider obligation than
wheeling.
(ii) For the purposes of this paper, we propose to define wheeling as follows:
“The simultaneous transfer of electricity over facilities owned by a utility, that does
not own the transferred electricity, to a third party who does not purchase the
transferred electricity from the utility.”
(iii) A wheeling arrangement may be between two utilities (bilateral wheeling), or

among a number of utilities (multilateral wheeling).
8.2 SYSTEM LOADING IMPACT
(i) General discussions over wheeling usually ignore the key element that a wheeling
operation cannot be analyzed as an isolated occurrence on the utility‟s system.
Instead, the operation represents a new set of system conditions that must be
analyzed from an overall system standpoint. Both generation and the power
delivery system including distribution, sub transmission, and transmission systems,
can be affected by wheeling.
(ii) A wheeling utility will experience altered utility system loading as a result of
wheeling operation. Wheeling in any significant quantity will also impact overall
system generation unit commitments. The former will impact the wheeling utility
directly, whereas the latter will impact the overall production costs of the power
pool.
(iii) Both real and reactive power loading can be affected by a wheeling transaction.
Wheeling agreements can require that the wheeling utility be compensated for
changes in reactive power loadings.
GREEN PAPER 18

8.3 TREATMENT OF LOSSES
(i) Electricity flows along the path of least resistance, which means that wheeled
power may not flow along the shortest or most direct path between two points.
Furthermore, system wide transmission losses may increase, decrease, or be
unaffected by a wheeling transaction. For these reasons, wheeling losses are
typically based on system wide analyses rather than on analyses of specific
transmission lines.
(ii) That being said, though rare, a „flow-through‟ assumption may sometimes be valid
to represent a wheeling transfer if the transfer is small or if the connecting lines are
strong.
(iii) Load flow simulation studies will give a more accurate estimate of losses between
the receiving and delivery points for the wheeling transaction. Because losses are
so specific to a particular transaction this method gives a more accurate
representation of the actual losses involved in a transaction.
(iv) Since load flow studies are generally static (snap shot on assumptions), they do not
entirely reflect the true picture over medium to long term wheeling arrangements
because losses will become variable as system loading conditions change due to
other power flows on the system. Continuous system simulation information is
ideally required for large and medium-to-long term wheeling transactions.
(v) For the foregoing reasons, treatment of losses in wheeling arrangements is usually
based on system average losses (also known as “postage stamp” allocation,
currently in vogue in our regulatory regime). Losses vary according to the loads
(kWs) on particular transmission lines.
(vi) However, postage stamp allocation of losses may discourage wheeling altogether,
especially where the „stamp size‟ is very large (as currently in DISCOs) and where
the „flow path‟ is short. The case for displacement of postage stamp method is
strong for new generation built specifically close to load for a wheeling transaction
(e.g. embedded generation). In such cases, there is a case to argue for (i) reduction
in postage stamp sizes (divide each DISCO in several stamps – zonal or nodal
GREEN PAPER 19

pricing), and (ii) allocate actual losses only based on load flow study for the smaller
stamp.
(vii) A case in point is Pehur Power Project currently contemplating wheeling to the
BPCs in Gadoon Amazai Estate over a distance of approximately 2 km only and
where the entry and exit points exist in the same 132 kV Gadoon Amazai grid
station - the allocation of 28% losses in a wheeling transaction in PESCO‟s area
(based on system average losses) under the present UOSC charges mechanism
where the generation facility is at the door step of PESCO and the BPC is quite
unfair.
8.4 SYSTEM AUGMENTATION COST ALLOCATION
(i) The regulatory framework currently does not provide guidance on the cost
allocation of system augmentation.
(ii) A proposed wheeling arrangement may necessitate addition or augmentation of

existing facilities (e.g. higher capacity transformers, capacitors for voltage support).
However, because the new facilities may provide other benefits beyond just
making the wheeling operation feasible, a problem may arise in determining
whether the entire cost of the new facilities, or only part of that cost, should be
considered a cost of wheeling.
(iii) The main benefit of the new capacity, beyond allowing wheeling to take place, will
probably be an increase in overall reliability of the wheeling system. If the new
facilities do not provide any needed benefits beyond wheeling, then the entire cost
of the new facilities is a result of the wheeling transaction.
Evaluative Studies
(iv) Both static load flow and continuous load flow studies can be used to evaluate
prospective wheeling operations. Together with stability studies, the following
questions will generally be addressed:
 Is a proposed wheeling operation technically feasible?
 Which power sub-systems will be affected by the operation (reliability of

supply for the DISCO‟s other customers is as relevant a concern as reliability
GREEN PAPER 20

of the wheeled supply for the BPC)?
 To what extent are various portions and elements of affected systems involved?
8.5 RELIABILITY OF SUPPLY
(i) Wheeling customers may or may not rely exclusively on wheeled electricity. For
non-firm interruptible wheeling, both the DISCO and the customer need to plan
for alternative supply. For DISCO, this would mean drawing on the pool, which
necessitates spinning reserves in a market where spinning reserve service is not
priced separately. For the consumer, this may necessitate (i) self-supply, (ii)
DISCO supply, or (iii) an alternative seller.
(ii) Wheeling arrangements can be “firm” or “non-firm”. Intermediate categorisation

is possible with varying shades of „firmness‟. Generally speaking, service may be
interrupted under a firm arrangement on very limited grounds being:
 catastrophic or emergency situations beyond the control of the utility (for

example, extreme weather, system failure, un-anticipated power flows in the
system, etc.), or
 scheduled maintenance.
Non-firm arrangements will enable the utility to interrupt service also for a broader
range of „non-catastrophic‟ events such as preference of the utility to increase its
power flows from alternate sources for its own customers that necessitate
interruption of the wheeled supply.
(iii) It is a fair assumption that the impetus for wheeling in the current power deficit
scenario will favour firm arrangements, both for the BPC and the Seller (more so
where the Seller is a new facility built with the long-term wheeling transaction in
view). Non-firm arrangements will only become financially feasible if the
wheeling utility offers adequate and bankable compensation arrangements for
interrupted wheeling and where there is a short-term or spot market for
unscheduled energy exchanges.
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8.6 WHEELING CHARGES
(i) NEPRA currently determines the Use of System Charges, the wheeling charges,
on „incentive regulation‟ basis, whereby the utility‟s revenues increase if it reduces
its losses. This approach however is not conducive to multilateral wheeling, as it
results in the „percentage adders‟ phenomenon whereby each utility‟s wheeling
charges get added to the total wheeling charges payable for a transaction.
(ii) Wheeling charges for multilateral wheeling should be cost-based, and not an
indirect function of the overall system average losses of a utility, whereby the
wheeling charge is worked backwards to meet the utility‟s revenue requirement on
the basis of its target losses for the test year.
(iii) Further discussion on wheeling charges is in volume 2 of this Green Paper.
GREEN PAPER 22

9. PRIVATE GRIDS – AN OVERVIEW
(i) By private grids is meant localised distribution networks for affiliate and non-
affiliate supply by industrial concerns, housing estates, and the like. The impetus
of private grids is the reliability of supply, in preference to the price of supply. It is
assumed that with the proliferation of new technologies, such as biomass and
solar, embedded generation has a good business case for BPCs who prefer reliable
supply even if at a premium.
(ii) It is not entirely correct to refer to private grids as „isolated grids‟. Most of the
BPCs taking supply from private generators are also connected for supply to the
utilities‟ networks – both for redundancy of supply sources and for generally lower
utility tariffs.
(iii) Private grids therefore enhance reliability of supply by providing redundancy. The
also raise issues of system stability and security for being indirectly connected to
the utility‟s system through their customers‟ facilities. Any supply by private grids
that cannot be curtailed (such as a hydro or solar facility) without financial loss to
the generator at the time of low or no demand of the BPCs must be allowed to
flow-through in the utility‟s system at the basket-rate at which the utility is
purchasing power from the power pool.
(iv) NEPRA has a liberal approach towards private grids and several private grids are
operating. However, leaving the details of network configuration and operation
and maintenance obligations to the parties to negotiate creates uncertainty and
transactional delays. The regulatory framework can be streamlined by clearly
spelling out the parties‟ roles and responsibilities, preferably in a draft O&M
Agreement pre-approved by NEPRA.
(v) There are already 17 known self-distribution arrangements in place; and others are
in the offing:
Sr. No. Name Generation Distribution

License License
1. Bhanero Energy Ltd. Yes No
2. Crescent Mills Limited (Crescent Bahuman Yes No
Energy Ltd.)
GREEN PAPER 23

3. Crescent Powertec Ltd. Yes Yes

4. Ellcott Spinning Mills (Ellahi Electric Yes No
Company Ltd.)
5. Genertech Pakistan Limited Yes No
6. Gulistan Power Generation Ltd Yes Yes
7. Ibrahim Fibers Limited Yes Yes
8. ICI Pakistan PowerGen Ltd. Yes No
9. Ideal Energy Yes No
10. Kohinoor Mills Ltd (Kohinoor Weaving Mills Yes Yes
Ltd.)
11. Kohinoor Power Company Ltd. Yes No
12. Mahmood Textile Mills Limited Yes Yes
13. Monnoo Energy Ltd. Yes Yes
14. Quetta Textile Mills Ltd Yes Yes
15. Sapphire Power Generation Ltd Yes Yes
16. Sitara Energy Ltd. Yes Yes
17. Zeeshan Energy Limited Yes No
GREEN PAPER 24

10. CURRENT REGULATORY FRAMEWORK
10.1 SALES EXCEPTION TO DISCO’S EXCLUSIVITY
(i) The exclusive right to distribute electricity (that includes sales) given to a
distribution licensee under section 21 of the NEPRA Act has sales exceptions
carved out under sections 22 and 23 in the following terms:
“…[P]rovided that a generation company may make sales of electric power to bulk-
power consumers within such territory as the Authority may subject to section 22, for
a period of fifteen years, allow…”5
“(1) Notwithstanding anything contained in section 21, for a period of

fifteen years from the commencement of this Act, the Authority may permit a
generation company or a distribution company to sell electric power to bulk power
consumers located in the service territory of another distribution company and such
permission shall be granted:
(i) on a case to case basis on an application made in writing by a
generation company or a distribution company; and
(ii) if the bulk-power consumer has not defaulted in previous charges of electric
power to any other distribution company.
(2) Where a bulk power consumer intends to stop purchase of electric
power from a distribution company, it shall convey its intention by notice in writing
three years before such stoppage:
Provided that such consumer shall continue to make payments to the distribution
company equal to the amount of cross-subsidy for uneconomic service for which it
would otherwise have provided through purchase of electric power by the bulk power
consumer.”
Second-Tier Supply
(ii) A generator intending direct sale of electricity to a BPC requires a second-tier supply
authorization from NEPRA under rule 7 of the Generation Rules. Second-tier
supply authorization is defined in rule 2 of the Generation Rules as follows:
“Second-tier Supply Authorization means an authorization to engage in the second-

tier supply business.”
“Second-tier Supply Business” means the authorized business, if any, of the licensee
… to a bulk-power consumer.”
5
Proviso to Section 21(2)(a) of NEPRA Act
GREEN PAPER 25

10.2 NEPRA LICENSING (DISTRIBUTION) RULES, 1999
10.2.1 Wheeling obligation
(i) Every distribution licensee is under obligation to provide wheeling on request to

any person authorized as second-tier supplier by NEPRA. Rule 116 stipulates the
following in this behalf:
“The licensee shall offer to enter into an agreement for use of system and connection
to the system to any person authorised in this behalf by the Authority on, inter alia,
such terms and conditions and with such details as may be specified in the
distribution licence, the second-tier supply authorisation of such other licensee or the
NEPRA rules and regulations, provided that the obligation of the licensee stipulated
in this sub-rule shall continue in full force and effect beyond the time period
mentioned, if any, in the distribution licence after which a second-tier supply
authorisation shall no longer be required by any licensee proposing to engage in the
second-tier supply business for supply of electric power to one or more bulk-power
consumers within the Service Territory.”
10.2.2 Wheeling Charges; Connection Charges
(i) Rule 117 imposes the obligation on distribution licensees for seeking the approval
of wheeling or use-of-system charges as follows:
“Within ninety days following the date of issue of the distribution licence, and if so
provided in the distribution licence, the licensee shall, if and to the extent not covered
in or comprising part of the tariff, prepare and submit to the Authority for approval,
statements in a form approved by the Authority setting out the basis upon which the
use of system charges and connection charges in each case, as part of the distribution
business, shall be calculated (hereinafter referred to as the "charges statement") in all
cases in such manner and with such detail as shall be necessary to enable any licensee
seeking to become a second-tier supplier in respect of the Service Territory to make a
reasonable estimate of the charges which may be payable by such person for the use of
system.”
(ii) Each DISCO is therefore required to file with NEPRA a Charges Statement
covering both UOSC and Connection Charges “…in such manner and with such
detail as shall be necessary to enable any licensee … to make a reasonable estimate
of the charges which may be payable by such person for the use of system.”
6
Sub Rule 7 of Rule 11 of NEPRA Licensing (Distribution) Rules, 1999
7
Sub Rule 1 of Rule 11 of NEPRA Licensing (Distribution) Rules, 1999
GREEN PAPER 26

(iii) The Charges Statement is a DISCO document. It is to be updated on annual basis.
(iv) The Connection Charges component of the Charges Statement is meant to make
transparent, on upfront basis, any additional cost-based charges that may be payable
for a prospective seller “…in the provision, procurement, installation, operation or
maintenance of the facilities for use of system or the connection … in respect of any works
extension, replacement or reinforcement of the distribution system … together with a
reasonable rate of return on the capital represented by such costs”8.
(v) Currently, the UOSC set for DISCOs in their tariffs gives only a Rs/kWh charge
for units transmitted, but does not address the key ingredients of the Charges
Statement noted above, in particular the Connection Charges component. This
impacts both:
 the DISCO, in not being able to demand and recover system augmentation costs
transparently to cater for a wheeling request, and
 the prospective seller, for being unable to evaluate the DISCO‟s costs
components for the purposes of its wheeling decisions.
(vi) The DISCO‟s reluctance to invest in system augmentation to cater to wheeling is

understandable in view of their financial constraints and in view of the current
tariff process whereby any system augmentation costs would be recovered ex-post
facto after one year and would be further subject to prudency review by NEPRA.
10.3 THE DISTRIBUTION CODE
(i) The DC already mandates the DISCO to “…plan, design, construct, maintain and
operate its network to allow the transfer of electricity between the systems of
parties which are connected to or have access to its network9.”
(ii) The Distribution Planning Code (DPC) has one of its stated objectives “…to
facilitate the use of Licensee distribution system by BPCs and other licensees for
competition purposes10.”
8
Rule 11(3) - DLR
9
DPC 12.1 – Distribution Open Access Provisions
GREEN PAPER 27

(iii) The DC also requires dissemination of its network information by each DISCO on
its website with periodic updating obligations11.
10.3.1 Forecasting of load
(i) The DC already provides detailed load forecasting requirements, which can serve
to signal appropriate wheeling opportunities. However, such studies (assuming
these are prepared) are not in the public domain.
(ii) DISCO are required to prepare annual short term load forecasts for the next 5
years for loading on the 132kV system and to use these forecasts to prepare load
flow and short circuit studies. With this, an expansion plan coordinated with
NTDC is to be prepared, and delivered to NTDC alongwith system studies
electronic data files. Following this exercise, NTDC is to prepare necessary load
flow, short circuit and transient stability studies with the following technical data:
 Loading profile of 132/66kV lines and grid facilities
 Critical modelling including analytical assessment of the insertion/replacement

of new equipment with impact on the performance of the system and the
interconnection points
 Switching complexity and coordination between 132kV and 11kV system and
lower voltage level12.
(iii) At the same time, DISCOs are required to prepare annual operating load
forecasts for its Service Territory and the Concession Territory, adopting
appropriate and established load forecasting methodology using reliable data and
relevant indices. The load forecasts “…shall define a specific load area and type of
consumers and for a specific timeframe…identified as residential, commercial, light
industrial and heavy industrial…[with] time period identified as short to medium term (1-5
10
DPC – 3.3(h)
11
CM 13
12
DPC 4
GREEN PAPER 28

years).” As a result, “the Licensee shall work out the annual energy requirement and Peak
Demand for each of the coming five years relating to each point of interconnection….”13
(iv) DISCOs are also required to prepare digitised maps of their networks and make
them available with responsibility to verify their accuracy and periodic revision14.
To the best of our knowledge, these are not prepared yet, and, if prepared, are not
in the public domain.
10.3.2 Shortcomings in the Connection Code
(i) The Connection Code (CC)-6 sets out a 496 days timeframe15 for the application
process for 11 kV and above connections, with the DISCO being mandated to
provide its network data that would help the applicant prepare the application.
There are no sanctions on the DISCO stonewalling the process.
(ii) The timelines for interconnection application processing are extremely dilatory for
a robust wheeling framework. The reference in the Connection Code to
Performance Standards (Distribution) Rules is erroneous, as there is no
performance standard stated there in relation to processing of applications from
embedded generators and externally connected parties16.
(iii) The Connection Flowchart in the CC does not include any step for provision by
DISCO of its network data in the “pre-application” stage. This makes the
application process a circular formulation, as the applicant is unable to file the
application without the Licensee‟s network data being available in the first place17.
(iv) The applicant is required at the final stage to submit documents which it appears
should be with the DISCO before it is obligated to make the Connection Offer18.
There is every opportunity for the DISCO to fail the application – for instance the
13
DPC 5
14
DPC 6
15
CC 6.7
16
CC 1, 2 and 6.7
17
CC 6.2 – last paragraph.
18
CC 6.4
GREEN PAPER 29

contents and scope of the “Technical and Commercial Feasibility Study” are not
specified and an obstructive DISCO can snowball its objections.
(v) The CC then makes the very open statement that the “design of the connection
between the Licensee‟s distribution system …and the Users shall be in accordance
with the principles set out in the Grid Code, Distribution Code, Performance
Standards (Distribution), Consumer Eligibility Criteria and Consumer Service
Manual, as applicable19. A better formulation would have been to simply require
that the design should ensure conformance to the operating parameters (voltage,
protection, etc.) laid down in the Grid Code and the Distribution Code.
10.4 DRAFT ENERGY WHEELING AGREEMENT
(i) The only precedent transaction for wheeling is that of Fatima Sugar Mills, which
applied to NEPRA for a true wheeling arrangement. NEPRA fully supported
Fatima‟s case and allowed a second-tier supply authorisation premised on the
wheeling arrangement. However, despite the signing of the energy wheeling
agreement between Fatima and MEPCO, the wheeling arrangement has
reportedly still not been implemented for over a year now, signifying that NEPRA
needs to take a more active and forceful role in fostering wheeling transactions and
to grandfather (and not leave to the parties to decide contractually) the more
detailed issues that derail wheeling transactions.
(ii) NEPRA placed the Fatima‟s proposed wheeling agreement on its web site for
comments, and after about a year made revisions to the draft wheeling agreement
again inviting public comments (draft EWA).
(iii) NEPRA‟s draft Energy Wheeling Agreement requires a separate Connection

Agreement under the Connection Doe to be made between the Seller and the
wheeling utility. It is not clear why NEPRA requires a separate connection
agreement to be made. The absence of a workable and regulator-approved format
of the connection agreement or its terms leaves it open to the DISCOs to stonewall
negotiations over the terms.
19
CC 6.6
GREEN PAPER 30

Fa ma – Wheeling Configura on
(Implementa on Pending)
Fazal Tex le Reliance Weaving
1 MW, 11 KV independent 1 MW, 11 KV independent

Feeders, 1 km Feeders, 5 km
MEPCO 132 kV Grid Sta on MEPCO 132 kV Grid Sta on

Muzzafar Garh Khanewal Road
5 MW supply is
used in the local MEPCO 132 kV Grid Sta on
network and not Qasba Gujrat Town
“directly” wheeleed
onward
5 MW supply on 11 KV line, 17 km
Generator – Cap ve Power Plant

(Fa ma Sugar, Bagasse Fired, 23.55 MW)
10.4.2 General Comments on the draft EWA
(i) NEPRA seeking comments on the EWA is a welcome measure. It would have
been more useful (consistent with international best regulatory practices for like
consultations) to include a working paper elaborating the background to the EWA
with reference to its provisions, the reasons for preferring the given formulation
against alternatives (e.g. the choice of liquidated damages instead of price of
alternatively sourced energy, postage-stamp losses allocation instead of mileage or
zone based allocation, etc.).
(ii) The EWA appeared to be a cut-and-paste job in large part (almost two thirds) of
the power purchase agreements used for IPP transactions. It grew out of the
specific needs of the Fatima group, and was therefore specific for Fatima
GREEN PAPER 31

transaction; its proposed use as an industry-wide template for the many variants of
wheeling was questionable.
(iii) The draft EWA is very specific for a project-financed generation facility, and is
complicated for this reason (e.g. direct agreement with financiers under clause 20).
It is inadequate for a corporate financed or equity financed generator requiring a
wheeling arrangement. It is inadequate for a utility-to-utility wheeling (multiparty
wheeling). If NEPRA proposed to provide an industry standard EWA, it should
not have been project-finance specific, but should have been “lender-rights-
neutral” – any required lender rights could appear in an appendix which could be
included or excluded as the circumstances warrant.
(iv) The concept of (possible) dedicated interconnection facilities under an EWA is

illogical and contrary to the scheme of use of system provisions in the Distribution
License Rules (and internationally accepted norms for wheeling).
(v) The EWA is somewhat unfair and harsh for the wheeling DISCO, as, inter-alia:
 it obligates DISCO to take the risk of shortfall in the committed generation

capacity – a failure of supply by the supplier (section 4.3). The rationale for
this is quite incomprehensible in an energy deficit scenario,
 given the “firm” nature of this EWA, DISCO is obligated to reserve

transmission capacity, then why should it not also be compensated in terms of
a capacity charge, as it would not be able to free-up that capacity for other
users. Conversely, the minimum kWh transmission guarantee by the Supplier
that would enable the DISCO to recover its capacity costs does not seem to be
addressed,
 DISCO is required to pay liquidated damages twice, once for failing to

transport the input energy (section 9.1), and second on failing to return the
„Banked Energy‟ within 30 days (section 11.1). This is clearly a case of double-
recovery for the Supplier (and is compounded by the ability of the Seller to sell
the banked energy to DISCO without a corresponding rebate obligation for the
liquidated damages paid.),
 DISCO is required to enter into a direct agreement with the Financiers (and
GREEN PAPER 32

perform other acts towards them) without being privy to the financing
documents. The borrowing of these provisions from the IPP PPAs is uncalled
for, as in the PPAs the financing has to conform to the tariff given by NEPRA
and the term sheet approved by Private Power and Infrastructure Board (PPIB)
– in this case the DISCOs have no control over the financing terms.
(vi) On the other hand, the EWA as drafted appears unfair for the Supplier in that the
Use of System Charge (UOSC) formula is an incentive-tariff – the lower the losses,
the higher the Distribution Margin (DM) for the DISCO. However, it is not a fair
formula where the actual losses are much lower – in such case, the actual losses (or
a fair approximation thereof) only should be allowed to be deducted from the input
energy based on a load-flow study.
10.4.3 Comments on specific clauses of the EWA
Definitions
Input Energy (read with 4.2 (Transport) and 5 (Transfer of Title))
The concept of “transport of Input Energy … to the Exit Points” is problematic, as this raises
issues of legal title to Input Energy and it is technically impossible for a DISCO to agree that it
will be the Input Energy that will be supplied at the Exit Point. Instead, the concept of
“equivalence” needs to introduced in the EWA.
(The Federal Energy Regulatory Commission of USA in • rejected the argument on title to the
Input Energy vesting in the Supplier beyond the Entry Point.)
--------------------------------------
Excusable Event
How would the exceptions under the Grid Code and the Distribution Code to supply energy
(such as a contingency event) work if they exceed the Unscheduled Outage Allowance? Is a
.01% (120/8760 hours) Unscheduled Outage Allowance acceptable to the DISCOs and is this
borne out by the high level of system incidents that occur in DISCOs especially in high
demand periods (summers, for instance?
3.1 The EWA is not a typical wheeling agreement. The concept of permitting „dedicated
interconnection facilities‟ between the Supplier and the BPC is completely alien to the concept
of wheeling or even the Use of System provisions in the NEPRA Distribution Rules where
wheeling utilizes the system of the DISCO. There is no international precedent or analogy to
support this approach.
4.3 The EWA is not a typical wheeling agreement; rather, it is a transmission services agreement
where the DISCO is accepting the obligation to make-up for shortfall in input energy by
supplying energy sourced from other sources. In an energy deficit scenario, this arrangement
GREEN PAPER 33

imposes an unreasonable burden on DISCO.

The concept of liquidated damages for supply of shortfall energy is legally incorrect, as in such
case DISCO will be charging the price of alternatively sourced energy, which is not a pre-
agreed compensation for loss suffered (the definition of LDs). Under the Contract Act,
liquidated damages require proof of loss, and in case of dispute the Supplier can demand proof
of loss occasioned to DISCO.
6.9 The purpose of BPC being present at meter readings, sealing, calibration, etc. at the Entry
Point is not clear – isn‟t the Input Energy a matter solely between the DISCO and the
Supplier? Further, BPC is not a party to the EWA.
7 The most important provision – calculation of UOSC Payment – is meant to be in Schedule 1

which is not provided. It was not possible to give any meaningful comments without Schedule
1 structure and contents, though not the values. For example, what are the loss adjustments?
Is this mileage based? Are there any capacity reservations? How are the augmentation costs
adjusted, and so forth.
9.1 How are the LDs for failure of DISCO to receive energy calculated in Schedule 4? What are
the applicable principles? Is it a fixed LD rate or is it variable, say, based on any shortfall
energy met by DISCO from other sources?
Further, why are Force Majeure and Contingency Events on the network not an excuse for
DISCO to not receive the Input Energy?
9.2 What is the rationale for a 2-month limitation period to raise the invoice dispute notice? It is
customary for such period to be 6 months to a year.
11.1 A 30-day time limit to return Banked Energy is too short in an energy deficit scenario, and is
unfair to the DISCOs who are constrained in sourcing supply especially in winter months.
The Banked Energy return period should be optional for DISCO with a cap of one year.
11.2 The concept of sale of Banked Energy to the DISCO is a good one. However, it is not clear
why in that case should the DISCO not be entitled to a set-off of the liquidated damages
already paid under 11.1. This seems to be a case of double recovery for the Supplier. Further
still, NEPRA still has to determine the rate of sale of Banked Energy – will it be a one time
determination or on a case-to-case basis? It is preferable for NEPRA to prescribe the rate
within this EWA.
11.3 This is adding a needless layer in the entire process necessitating a Power Acquisition Request
(PAR) from DISCO. DISCO is not “procuring” power – it is “wheeling” power - this key
conceptual difference is important. Why should NEPRA intervene if the EWA in approved
form is signed between the Supplier and the DISCO?
14.1(a) The exclusion of breakdown of the Distribution facilities from Force Majeure is surprising –
this is exactly what should constitute Force Majeure Event and is regarded as a contingency
event under the Grid Code and the Distribution Code. Assuming the purpose is to make the
DISCO responsible for maintaining its system and therefore taking the risk of its functioning,
events such as lightning, burglary, arson or like events beyond the control of the DISCO
should constitute Force Majeure.
GREEN PAPER 34

10.5 PRIVATE GRIDS
10.5.1 Established Practice
(i) Private distribution networks are an established phenomenon in Pakistan. A

separate distribution license is required from NEPRA for setting up and operating
private distribution networks.
(ii) On promulgation of NEPRA Act in 1997, there existed already several private
generation-cum-distribution networks, primarily being industrial manufacturing
concerns with captive generation selling surplus generation to affiliate or
proximately located non-affiliated concerns under the Electricity Act, 1910. After
the NEPRA Act, all these concerns were called upon to obtain separate licenses for
generation and distribution activities.
10.5.2 Exclusive Service Territorial Rights of DISCOs
(i) The DISCOs were conferred an exclusive right under section 21 of the NEPRA
Act to distribute electric power in their service territories and bill the consumers
and collect the tariff thereof. A conflict surfaced when the newly established and
licensed DISCOs sought to question the small private networks‟ right to continue
distributing electricity within the DISCOs‟ service territories.
(ii) NEPRA ruled that the geographical territory earmarked for the DISCOs was their
„concession territory‟ while their „service territory‟ for the purposes of section 21 of
the NEPRA Act was a much narrower electrical facilities footprint. The exclusive
service territory rights of DISCOs were addressed by NEPRA by defining their
service territories in the distribution licenses in the following words:
“The Service Territory of the licensee shall extend up to eight Km on either side and
tail and end points of its exiting 11 kV distribution system as shown in Schedule I to
this License. This Service Territory shall stand extended on expansion of the licensee’s
11 kV distribution system within its Concession Territory as indicated in Article
3.2(iii) below.”20
20
Article 3.2(i) of distribution licenses of all DISCOs
GREEN PAPER 35

(iii) As a counter-balancing measure, while granting distribution licenses to the entities

operating private grids, their service territory in their distribution licenses was
defined as follows:
“The Service Territory of licensee is limited up to three (3) meters on either side of the
11 KV Distribution as shown in Schedule-I of this licensee; and restricted to the
extent of movement or delivery to Consumers as authorized in the Second-tier Supply
Authorization provided in Generation License No. ---, dated ---, granted to ---- in
respect of consumers listed in Schedule-II of this license.21
(iv) In case of conflict in services territories of DISCO and a self-distributing entity,

NEPRA ruled that:
“At the time of grant of this license, where the line part of a Distribution System
owned/operated by any XW DISCO, as its existing Distribution system operating at
11 KV or less is located within three (3) meters of spatial distance on either side of the
11 KV Isolated Distribution System of the licensee as shown in Schedule-I of this
license, such 11 KV Distribution System of the Licensee shall be converted into an
underground system in accordance with applicable IEC/IEEE standards for the area
where such proximities exist.”22
(v) NEPRA thereby saved the day for the already operating private grids (referred to
by NEPRA as Small Power Producers or SPPs) and then continued to extend the
logic to new private grids applicants too. The regulatory stance on private
distribution networks vis-à-vis- DISCOs service territorial exclusivity emerges as
follows:
 A DISCO has a geographic concession territory
 Within the concession territory, a DISCO‟s service territory extends to 8 km

on either side of its distribution network; the service territory grows
corresponding to the expansion of its distribution system
 A DISCO has the exclusive right of distributing electricity within its service
territory
 Any eligible person can establish a private grid within the concession territory
of a DISCO
 If the private applicant‟s network happens to fall within 3 meters of either side
21
Section 3.1.2 of distribution licenses of all SPPs
22
Section 3.1.3 of distribution licenses of all SPPs
GREEN PAPER 36

of any existing facilities of a DISCO, the private applicant is required to bury

its facilities underground
 Impliedly therefore, underground facilities even if they traverse the service

territory of a DISCO, do not violate the service territorial exclusivity of a
DISCO.
10.6 ISSUES WITH PRIVATE GRID PROCESS
(i) While the private grid regulatory process is well developed in comparison with the
wheeling framework, scope for improvement remains if the following issues are
addressed.
(ii) NEPRA still requires case-to-case approvals for private grids. After 2012, the case-
to-case hearing and „customer-specific‟ approvals should no longer be necessary.
The language of the Distribution Rules also supports this conclusion.
(iii) The requirement for an application and „licence modification‟ each time a private
grid operator desires to add a new BPC to its list of customers is a pointless
exercise. For the reasons in the foregoing paragraph, this should no longer be
necessary and should be replaced with a simple registration requirement.
(iv) Leaving the issue of private grid lines traversing the DISCO‟s service territory to be
addressed by negotiations between the parties, without providing ex-ante guidance
as to what would be „unacceptable‟ stonewalling practices is undesirable. In the
absence of an industry standard O&M Agreement, protracted negotiations remain
a bottleneck to swift private grid implementation initiatives.
GREEN PAPER 37

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VOLUME-1

CONSULTATION ON THE CASE FOR A

Volume 1 – Regulatory and Technical

1. COMMENTS AND FOLLOW-UP ....................................................................... 3

5. CONSULTATION POINTS ...............................................................................10

6. RECOMMENDATIONS - WHEELING ...............................................................13

7. RECOMMENDATIONS - PRIVATE GRIDS.........................................................16

9. PRIVATE GRIDS – AN OVERVIEW ...................................................................23

10. CURRENT REGULATORY FRAMEWORK.........................................................25

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

1. COMMENTS AND FOLLOW-UP

Attention: Mr. Liaqat Iqbal, Additional Secretary, Technical

Time Frame for follow-up on Green Paper

Event Final Date

Submission of Initial Comments 10 February 2015

Submission of Counter-Comments 20 February 2015

Publication of Draft White Paper (factoring in March 2015

Workshop on Draft White Paper April 2015

White Paper with Recommendations to NEPRA May 2015

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

BPC Bulk power consumer as defined in the NEPRA Act

DM Distribution Margin, the tariff component allowed to the DISCOs on

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

Second-tier A generator or a distribution company authorized by NEPRA to

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

(iii) Given the financial

exacerbated by Current Load, New Generation

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

 clear instructions by NEPRA in NTDC‟s transmission licence to establish the

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

 create a win-win for all players by:

o then proposing a framework that is feasible and practical with a fair

 make network information of NTDC and DISCOs available in the public

 minimise regulatory intervention by eliminating the need for case-to-case

 prevent the need for protracted negotiations amongst the players

 penalise dilatory tactics

 encourage private investment in transmission

 be simple and predictable.

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

(v) No framework will work without diligent enforcement by NEPRA. It is

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

5.1 WHEELING FRAMEWORK

(iii) The case-to-case approvals approach of NEPRA is time-consuming and adds a

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

5.2 PRIVATE GRIDS

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

territory, to eliminate uncertainty for a prospective private grid operator or an

(iii) The case-to-case approvals approach of NEPRA is time-consuming and adds a

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

Replace case-to-case approvals approach with simple registration of wheeling

Announce that there will be no tariff regulation of bilateral sale contracts

Revise the EWA for equity-based and corporate-financed transactions

Prescribe a Connection Agreement (embed in the EWA)

Enable private transmission/distribution lines investments

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

 The principles for the connection charges

ELECTRICITY WHEELING AND PRIVATE GRIDS WITHIN A DISCOs’ SERVICE TERRITORY

(vi) The Connection Sub-Code in the Distribution Code needs to be improved as