Learning from Power Sector Reform
Policy Research Working Paper 8842 Public Disclosure Authorized Learning from Power Sector Reform The Case of Pakistan Public Disclosure Authorized Robert Bacon Public Disclosure Authorized Public Disclosure Authorized Energy and Extractives Global Practice May 2019 Policy Research Working Paper 8842 Abstract Pakistan’s power sector underwent a substantial, if pro- 2015. Despite these major steps, Pakistan has continued tracted, reform process. Beginning with an independent to suffer from inadequate capacity and other constraints, power producer program in 1994, the full unbundling of leading to large and frequent blackouts. At the heart of the national vertically integrated power and water utility, the impasse is the so-called “circular debt” crisis, whereby the Water and Power Development Authority, and the distribution utilities struggling to collect revenues and meet establishment of a regulatory entity, the National Electric regulatory targets for transmission and distribution losses Power Regulatory Authority, followed in 1997, paving the default on their payments to generators, and the sector way for the eventual privatization of one major distribu- is periodically bailed out by the government once losses tion utility, Karachi Electric, in 2005. Plans to privatize accumulate to intolerable levels, at high cost to the exche- the remaining distribution utilities were shelved following quer. This dynamic has undermined incentives for utilities the controversy surrounding the Karachi Electric transac- to improve their efficiency, while discouraging generators tion. A single buyer model has been in operation since the from investing in new capacity to address supply shortages. sector restructuring, with the Central Power Purchasing In the meantime, little has been done to accelerate access to Agency fully separated from transmission and dispatch (the electricity to the significant share of unserved population National Transmission and Dispatch Company) in June in rural areas.
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