Barrister Asghar Khan

The federal government has tabled proposals for the amendments in the NEPRA Act 1997 (Nepra Act) which will, in my view, undermine independence of the National Electric Power Regulatory Authority. It has been attempted that the policy and plans of the federal government are made binding on the regulator. The committee formed by the Council of Common Interests (CCI) has deliberated the issues raised through the amendments but despite the apparent acceptance of the suggestions put forward by the provincial governments, the devil is in details, which tend to eliminate the tariff determination powers of the Nepra and makes it subservient to the directives of the federal government. On the other hand it undermines the powers of the CCI under the Constitution of Pakistan. The entire amendment exercise seems to be aimed at bailing the federal government out of its present morass of circular debt, inefficiencies and high losses plaguing the power sector. The amendments are intriguingly silent on the roles, responsibilities and functions of the generators, distributors, transmitters and traders in competitive market which is the pillar of any transparent, cost effective and quality oriented electric power services and fails to provide a roadmap.

Arrogating the powers of policies, plans and rule making in the electricity sector to the Federal Government is an express breach of Article 154 of the Constitution which mandates the CCI to formulate and regulate the electricity policy and exercise supervision over the institutions in the power sector. The most damaging provisions relate to doing away with powers of Nepra in determining the eligibility criteria of the licensees and eliminating the requirements of the generation licences irrespective of the size of power project and who the shareholders and the generation company are. This poses risk to the national security and will lead to setting up of unwarranted power generation companies without supervision and regulatory controls. It will open floodgates of the power generation companies especially when it is being stated that there shall be surplus power in near future. A licence-free regime should be applicable to small power projects and subject to national security checks on their shareholders.

While the generation activity has been deregulated and de-licensed, traders and suppliers have been brought for the provision of electric power services. With the introduction of traders and suppliers in a market which is hit by structural asymmetries, lack of basic information on the size of supply and demand and weak regulatory enforcement, the risk of price manipulation shall be probable and real to the detriment of consumers. While all the power entities without exceptions (including the CPEC power projects) are having long-term contracts for sale and purchase of capacity and energy, the admittance of trader and supplier is unsuited to the capacity and energy market. Given that the provinces have complete autonomy and independence in regulation, generation, transmission and distribution of electricity within the province, the introduction of business of trading and supplying is alien to the scheme as envisaged in the Constitution and it will certainly add to the cost of electricity which is already exorbitant. This is not in the public and consumers interest alike.

The Nepra Amendments give an unlimited discretion to the Federal Government to impose surcharges for a variety of reasons which will ensure that the inefficiencies, corruption, low recoveries and circular debt of the power sector entities are passed on to the consumers without the regulatory oversight and without the right of the consumers to participate in the rate making. Any component of tariff disallowed by the regulator shall be made up through the surcharge. A novel provision has been introduced whereby the Nepra is bound to give effect to the wishes and desires of the Federal Government in setting tariff rates which again tantamount to eliminating the role of Nepra to apply prudency checks and balances. Furthermore, the Government has included an express clause whereby Nepra shall award single uniform tariff on a consolidated basis to the government-owned distribution companies which militates against, in letter and spirit, the unbundling plan of power sector by CCI in 1994 and such provision is violative of the Companies Ordinance 1984 where each distribution company is a distinct and separate legal entity and is furthermore against the principle of regulatory law where the consumers of a service territory are entitled to billing in accordance with the cost of service and cannot cross subsidize the theft and losses of other distribution companies.

The huge missing element in the proposed amendments is the lack of understanding that the Nepra Act is only a regulatory law and on the contrary it is likely to be bedeviled with provisions of law that are executive in nature and have to be made part of and included as part of electricity laws and not regulatory laws which have more incisive and particular powers, duties and functions. Perhaps the confusion stems from following the Indian Model which has different constitutional provisions and structural elements of the power sector and any superimposition and replication of Indian Model on and to the Pakistan electricity sector will give rise to enormous imbalances between the executive and regulatory powers, functions and duties with attendant fallout in terms of service failures, unreliability and increased costs borne by the consumers. The proposed amendments fail to appreciate that there are a number of existing stakeholders in the shape of private power generation companies, special purpose transmission licenses and distribution companies conferred with exclusive rights in providing services in their respective service areas. Impairing and overriding their special interests will result in litigation and breach and defaults of sovereign rights and obligations with attendants cost passed on to the taxpayers and consumers.

The concept of Appellate Tribunal with limited authority has been included. The Appellate Authority is a toothless organization that shall add to the cost and time of quasi judicial process without adding any value. The function of appellate authorities as reflected in applicable laws where the entire proceedings are transferred to higher forum for determination of issues on merits and legal propositions is missing. The amendments do not recognize Appellate Tribunal as equivalent to the High Court and to which forum an appeal from the Appellate Tribunal shall lay which will give rise to multiplicity of proceedings and decisions or orders at cross purposes. Similarly, the powers of investigations conferred on Nepra are unclear as to what are the offences, with material omission of the theft of electricity and, whether the investigations shall be civil or criminal in nature and whether civil or criminal procedure codes are applicable.

The Provinces have been crowded out of their executive powers under Article 157(2) of the Constitution as the licence for the transmission and distribution activities is vested in the Nepra which is a federal entity and eligibility criteria is to be determined by the Federal Government. The entire exercise of amendments and negotiations by the Federal Government and the Provinces is to defend their respective turfs in matters of appointments, getting share of the pie and setting up of projects whereas the professionalism of the regulator and interests of the consumers have been sacrificed at the altar of political expediencies. Provinces have been unable to argue so far that there shall be an entire scheme of arrangement whereby the generation, transmission, distribution, supplies and trading activities carried out by the Government of a Province shall be regulated by a provincial regulator and Provincial Government will also be responsible for the establishment and operation of provincial electric power sector markets. In fact the amendments are reverse of the progress made so far and look towards federalization of the electricity sector contrary to the, provisions of the Constitution that aims to promote equitable and consultative sharing of executive and regulatory powers between the Federal and Provincial Governments and, worldwide trends of making electric power services consumer oriented, cost effective and accountable.

(The writer is practicing attorney of law in the corporate and energy sector and has advanced degrees in laws, business and engineering from Imperial College London, Kings College London, UET and Inns of Court School of Law London)