ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has maintained exclusivity of Karachi-Electric (KE) till expiry of its distribution licence on July 2, 2023 with some conditonalities.
In terms of Regulation 10(1)(a) of the Nepra Licencing (Application and Modification Procedure) Regulations, 1999 read with Section 26 of the NEPRA Act, an Authority Proposed Modification (APM) was communicated to the licencee/KEL on November 23, 2018 wherein a proposed modification to Article 7 of distribution licence of KEL was forwarded for comments and feedback. The proposed modification attempted to remove exclusivity from the distribution licence of KEL and to incorporate the deemed licence granted to KEL for "sale/supply" under the new bifurcated Section 23E of the Amended Nepra Act.
In its response, KEL, in a letter of December 07, 2018 did not concur with the APM and pointed out that it will have an adverse effect on its performance and on its service obligation. Further, KEL also highlighted that the provisions of the amendments of the Nepra Act of May 02, 2018 do not have retrospective effect therefore the terms and conditions of its distribution licence cannot be changed.
Later on, due to excessive/unannounced load shedding and electrocution cases in Karachi, Supreme Court of Pakistan initiated suo moto proceedings and directed Nepra on September 1, 2020 to proceed under Section 26 of the Nepra Act and make its determination.
In compliance with the directions of Supreme Court of Pakistan, the APM proceedings were reinitiated to exclude the exclusivity from the distribution licence of KEL. The APM was communicated to KEL on September 03, 2020 in terms of Regulation 10(1)(a) of the licencing regulations read with Section 26 of the Nepra Act.
The Authority in terms of Regulation 10(6) of the Licensing Regulations decided to hold a public hearing at Karachi on September 21, 2020.
The Authority considered the submissions and carried out its own due diligence on the pros and cons of removing the exclusivity. In this regard, the Authority was of the considered opinion that there are valid reasons to remove the exclusivity and at the same time there are strong arguments to maintain the same due to potential implications on the future investments in KEL as well as lack of immediate alternate arrangement.
The Authority noted that it is cognizant of the fact that Section 21 of the Nepra Act has been amended after the Nepra (Amendment) Act, 2018 and the exclusivity has been done away with, therefore KEL, as such, cannot claim exclusivity in its service territory. Further, KEL cannot claim one sided right to exclusivity when it has failed to fulfill its legal obligations to the consumers. Accordingly, the Authority believes that KEL has no exclusivity after the Nepra (Amendment) Act, 2018.
However, considering the potential implications on the future investment of KEL, privatisation and other related matters as highlighted by Privatisation Commission and Ministry of Energy and exclusivity of KEL as provided in Article 7 of its distribution licence, the Authority decided to honour the terms of distribution licence of KEL and maintain its exclusivity till the expiry of its distribution licence i.e. July 02, 2023 subject to the following conditions: (i) service and concessional territories of KEL will be strictly governed in terms of Article 3 of its existing distribution licence July 21, 2003. (ii) the exclusivity of KEL will be strictly in terms of Article 7 of its existing distribution licence which categorically allows BPC(s) to obtain the supply from any generating company, and (iii) KEL will be obligated to allow use of its system to any third party for supplying/wheeling of electric power to any BPC in terms of Article 9 of its distribution licence.
Copyright Business Recorder, 2021