Learning from Power Sector Reform: The Case of Pakistan

Robert W. Bacon

No 8842, Policy Research Working Paper Series from The World Bank

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

Keywords: Energy Policies&Economics; Economics and Finance of Public Institution Development; Privatization; De Facto Governments; Democratic Government; Public Sector Administrative&Civil Service Reform; State Owned Enterprise Reform; Energy Privatization; Public Sector Administrative and Civil Service Reform; Energy and Mining; Energy Demand; Energy and Environment; Energy Sector Regulation; Power&Energy Conversion (search for similar items in EconPapers)
Date: 2019-05-06
New Economics Papers: this item is included in nep-ene and nep-reg
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