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Coronavirus
VERY HIGH Source: covid.gov.pk
Pakistan Deaths
27,374
4724hr
Pakistan Cases
1,230,238
2,33324hr
4.56% positivity
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452,267
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32,796
Islamabad
104,472
KPK
171,874

ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has raised questions over the existence of Pakistan Electric Power Company Private Limited (Pepco) in the presence of Cabinet decision and Peshawar High Court (PHC) order.

This question was asked by Registrar, Nepra, in a letter to Secretary Power Division, Ali Raza Bhutta. Presently, an Additional Secretary of Power Division is acting as Managing Director of Pepco.

Pepco was incorporated in 1998 in pursuance of the “Strategic Plan for Restructuring of Pakistan Power Sector” to facilitate the transition process in Wapda power wing and effective corporatization of new entities after unbundling of Wapda. In pursuance of this mandate, Pepco signed a Memorandum of Agreement (MoA) with WAPDA for a period of 2 years.

Pepco was established for a specific mandate for a period of two years and was to be dissolved thereafter. However, after lapse of two years Pepco continued to function. Later on, Peshawar High Court in its suo motu action on unscheduled load-shedding in 2010 directed to dissolve Pepco and the Cabinet decided in October 2011 to dissolve Pepco.

New subsidy mechanism: Power Division moves Nepra for approval

A notification was also produced before the Peshawar High Court in this regard. The relevant excerpts from the decision of June 30, 2011 passed in writ petition No. WP-2723/2010 by Peshawar High Court are as follows: “Pepco would be dissolved by June 30, 2011 but it has not been done so far; the Secretary stated that the second phase of the process is in progress and in the third phase, the winding up of the Pepco would be concluded which requires two months’ period. The way, the Government and the Ministry of Power and Water is dealing with the issue is not at all acceptable. Clear and unqualified comments and undertaking were given on the previous date that PEPCO would be dissolved positively by June 30, 2011.”

According to Nepra, it was observed that the decision of Cabinet and the court has not been implemented. Pepco to date continues to function and operate. Therefore, it is unclear in what legal authority and capacity (if any) Pepco is at present functioning.

The regulator argued that since inception, Pepco has assumed the role of overseeing and managing government owned distribution and generation companies with the objective to improve their quality of service, reduce line losses and load shedding, minimize tripping and theft, constructing new grids and other such related matters. That being the case, it is pertinent to highlight that over the years the Discos’ performance key indicators have shown deterioration with respect to losses, interruptions, voltage fluctuation, recovery, safety and consumer complaints. This aspect has been highlighted in State of Industry Reports and Performance Evaluation Reports of Nepra from time to time. As such, it is evident that Pepco, in its capacity as the overseeing and management body of public sector entities has failed in achieving its targets. Recently, while determining the tariff of Gepco for FY 2019-20, the Authority noticed that Gepco has claimed a fee under the head of “Pepco Management Fee” which, in the opinion of the Authority, was not legally justified. Accordingly, the Authority passed the following decision on December 24, 2020: “regarding Pepco fees, the Authority observed that each Disco is an independent entity having its own board of directors, thus, allowing any cost on the pretext of Pepco management fee is not logical. Further, the then Ministry of Water & Power, itself in the Peshawar High Court submitted that Pepco shall be dissolved after June 2011. In view thereof, the Petitioner is also directed to provide details of Pepco Management Fees, if any, claimed previously so that it could be adjusted in the subsequent tariff determinations.”

Nepra’s Registrar further stated that foregoing facts raise serious concerns that warrant examination. More importantly, the entire energy sector has recently been reformed by way of the Regulation of Generation, Transmission and Distribution of Electric Power (Amendment) Act, 2018. Under the reforms, the energy sector is envisioned to be liberalised by way of de-regulation, market operations, and expanded monitoring and enforcement by the regulator. However, Pepco’s effective role in these reforms and trajectory of the energy sector remains unclear.

The Authority has sought the following information on the issue of Pepco: (i) Pepco’s mandate and role in the energy sector; (ii) legal authority under which Pepco is functioning, particularly in light of the 2011 direction by Peshawar High Court and decision by the Cabinet for dissolution of Pepco; and (iii) future role and function envisioned (if any) for Pepco, particularly in light of the recent Nepra Amendment Act.

Nepra has sought expeditious response from the Secretary Power Division on the role of Pepco which would be beneficial for the regulator in exercising its functions under the law.

Copyright Business Recorder, 2021

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