Nepra being empowered to pass on cost inefficiencies on to consumers

ISLAMABAD: Ministry of Finance has reportedly clubbed amendments in Nepra Act with the Finance Bill 2020-21 to get it passed before July 1, 2020 as per agreement with the International Monetary Fund (IMF) aimed at empowering the regulator to pass on cost inefficiencies of power sector to the consumers through imposition of Debt Servicing Surcharge (DSS), well informed sources in the Ministry of Finance told Business Recorder.

In January this year, the Economic Coordination Committee (ECC) of the Cabinet had approved a proposal of the Power Division for issuance of notifications of quarterly and annual increases in tariffs.

The sources said that Secretary Finance, Naveed Kamran Baloch wrote a letter to Secretary Power Division, urging the clubbing of Nepra Act amendments with the Finance Bill 2020-21.

This attempt was made public at a recent meeting of National Assembly Standing Committee on Finance which is reviewed the Finance Bill 2020-21.

The Secretary Finance, sources said, was of the view that one of the structural benchmarks agreed with the International Monetary Fund (IMF) under the Extended Fund Facility 2019-22 was the submission to Parliament by end-December 2019, amendment in the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 to : (i) give the regulator the power to determine and notify quarterly tariff;(ii) ensure timely submissions of quarterly and annual petitions by the Discos;(iii) eliminate the gap between the regulator annual tariff determination and notification by the government; and (iv) reinstate the power of the government to levy surcharges over and above the system’s revenue requirements under the said Act.

According to the Secretary Finance, this structural benchmark was achieved, albeit with delay, on January 14, 2020 when the Ministry of Energy (Power Division) submitted the Amendment Bill to the National Assembly Secretariat.

Subsequently, however, on the advice of the Law and Justice Division, the Ministry of Energy (Power Division) had to re-submit, in its letter of April 21, 2020, the Amendment Bill to the Law and Justice Division with the request to introduce it in the National Assembly under rule 28(7) of the Rules of Business, 1973.

As a result- and also because of the delay expected due to the impact of the Covid-19 pandemic on routine legislative work of the National Assembly and Senate - tbe possibility for the amendments to be adopted by the Parliament by end-June 2020, which is another structural benchmark agreed with the IMF under the EFF 2019-2020, maybe a challenge.

“Since achieving this structural benchmark is of utmost importance, and because the amendments in question are critical for systematic efficiency in terms of power sector tariff determination and notification, optimal revenue collection, and reduction in circular debt, the Finance Division has advised that the amendments in the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 be included in the Finance Bill 2020,” the sources added.

Last month, the Economic Coordination Committee (ECC) of the Cabinet had approved allocation of Rs 10 billion from the PM’s Covid-19 relief package as a stop-gap arrangement for the payment of interest on the Pakistan Energy Sukuk-11 for six months or amendment to the Nepra Act whichever is earlier. The government has now shown this amount in the budget documents of 2020-21 as a subsidy for Corona.—MUSHTAQ GHUMMAN