Power sector regulatory reform

There have been some important regulatory developments in the power sector in the past year. However, the power sector regulator Nepra has not been too happy with some of the changes. The bone of contention is mostly with provisions of the recently passed Regulation of Generation, Transmission and Distribution of Electric Power (Amendment) Act, 2018.

According to the Act, the qualifying experience for the post of Nepra Chairman and members has been reduced from 20 years to 12 years respectively while retirement ages have been reduced from 65 to 60 years. Even though this will ensure more frequent turnover of the senior management of the regulator, these are the senior most positions of Nepra and one would assume the qualifying experience to be more for posts of this sensitivity.

Other changes pertain to introduction of the concepts of National Electricity Policy and National Electricity Plan. As Pakistan’s power market moves towards the market operator model, the required legislative changes are the first steps in a long transition. The new law has introduced new entities such as the Market Operator, Energy Supplier and Energy Trader.

Another interesting development has been the provision of bringing an end to generation licenses and removing the exclusivity of distribution companies as sole power purchasers. This bodes well in the long term when competitive bidding is the preferred mode for determining power tariffs in line with a specified plan which takes into account the total demand and supply available in the system.

Perhaps, where the shoe pinches most for Nepra is the introduction of a framework for establishment and functioning of an appellate tribunal which will have the power to entertain appeals against all orders and determinations of the regulator. Nepra believes this will curtail its autonomy considerably and make it subservient to the policy and plan as well as these appellate tribunals.

In the SOI 2018, the regulator has highlighted that this tribunal will be comprised of three members who will adjudicate on decisions by Nepra which has a dedicated team of more than a 100 people. It also believes that there are various inconsistencies in the recently passed legislation. Examples include no parameters for the National Electricity Plan, omission of the role of the Electricity Trader Licensee and treatment of consumer-end tariffs under the new law.

Given that the power sector regulations have evolved over a considerable period of time with most experts agreeing on the conducive role, which the regulator has performed in the power sector, it would be a good idea for the new government to get the regulator on the same page and remove its concerns. More on this in the coming days.