Usurping regulator independence

When it comes to promoting the independence of regulatory bodies, the PML-N certainly won’t’ be winning any laurels. Be it the PEMRA, NEPRA, OGRA, SECP or the SBP, autonomy is frowned upon and control has been rarely ceded.

Recently, there has been much hue and cry over the clipping of NEPRA’s powers following changes to the NEPRA Act. In addition, the administrative control has been transferred from the Cabinet Division to the Ministry of Water and Power (MoWP) which clearly poses a conflict of interest.

The government remained adamant in its resolve to bring NEPRA under its directives claiming the regulator had started to regulate government institutions instead of the private sector. But that will be that natural outcome when the government is the major player in the power sector at the moment.

In its recently issued 2017 Article IV Consultation report, the IMF has also stressed the importance of a strong regulatory framework to ensure the power sector’s operational and financial soundness as well as to maintain investor confidence.

The Fund notes “preserving NEPRA’s independence and maintaining an appropriate tariff-setting process will be important in the context of planned amendments of the NEPRA Act. In parallel, swiftly resolving the on-going litigation with the regulator on DISCOs’ benchmark distribution losses and recoveries is necessary to resume regular tariff setting.

“In addition, moving forward with establishing a multi-year tariff framework is key to strengthen the regulatory framework, attract private sector investors, and support the planned IPOs of DISCOs.”

However taking away the regulator’s powers when it comes to regulation of DISCOs or transmission indicates that the government does not see its role diminished in the future when it comes to operating in the power sector. This is alarming to say the least because the pathetic state of the power sector is primarily on account of poor governance, something NEPRA also mentioned in its recently released State of the Industry (SOI) report 2016.

To top it all of the government has been actively pursuing changes to the NEPRA Act which will pass on the actual cost of electricity delivered to consumers including all losses and non-recoveries to settle the circular debt. Over the years the inefficiencies of the government have led to imposition of surcharges which have led to judicial intervention to protect consumer interest.

Therefore, rendering the regulator toothless will provide perfect cover for unabated negligence and poor governance to continue its run in successive government tenures.

Operational and financial soundness will take a backseat as always with the end consumer being the eventual scapegoat.