Tariff Setting for Independent Hydro Power Producers in Perspective of Pakistan’s Electric Power Market /

Abstract

This thesis presents an overview of the economic regulation of the electric market in Pakistan, which can generally be categorized into three market segments, i.e. generation, transmission and distribution of electricity. In addition, it evaluates the currently employed mechanism for tariff setting for an important generation segment, the Independent Power Producers in the field of Hydro power generation, and proposes various recommendations to enhance transparency, simplicity, efficiency and stability in the tariff setting mechanism. Hence offering an attractive opportunity to the investors to invest in Pakistan’s energy market by reducing and controlling their risks as well as protect the interests of the consumers. Emphasis is concentrated on hydropower power generation, especially by the private sector Independent power producers. Tthe guidelines for tariff setting as given by the NEPRA is discussed for hydro-power generation sector. Tariff setting guidelines along with development of a tariff model is discussed. The major goal of the thesis is to analyze and discuss a tariff setting mechanism that attracts investors like foreign Independent Power Producers to invest in the market’s generation sector whilst eliminating regulation uncertainties and encouraging companies to elaborate their investment plans for the energy starved country's electric market and at the same time protects the end consumer interests as well. In order to illustrate the proposed approach, a case study is done, where the feasibility of an IPP (Star Hydro PVT LTD) is studied. Finally, an attempt is made to discuss the regulatory issues in the said sector. The difficulties in practical implementation of the defined theoretical framework that are and can be encountered are presented. The possible solutions to eradicate the potent irregularities are enumerated at the end of the thesis.