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ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has reportedly been censured for its two decisions on Net Hydel Profit (NHP) of provinces, as Power Division says that both determinations are in violation of decisions of Council of Common Interests (CCI) taken in 2016 and 2017, sources close to Chairman Nepra told Business Recorder.

Sharing the details, sources said, Power Division maintained that in its determination of April 5, 2021, Nepra while recognizing that the CCI was the relevant body when approving the NHP, cited the report on power sector prepared by the Committee for Power Sector Audit, Circular Debt Resolution & Future Roadmap which stated “The Committee did not; however, find any record which shows that the CCI has approved such indexation.”

Power Division, sources said, argues that owing to the fact that the CCI was the body competent to approve the NHP – and the indexation thereof – Nepra held that “NHP rate of Rs.1.10 per kWh (as approved by the CCI) has been assumed by the Authority… and excess past payment made as a result of the application of 5% indexation should; therefore, be adjusted by the Petitioner on a yearly basis.” It went on to state that should the CCI render a decision on the matter, Nepra would consider it as per the applicable law. In its determination of August 23, 2021 Nepra quoted the decision of the CCI on the matter of December 16, 2016 as amended on November 24, 2017, which stated that “payment of NHP to Government of Punjab @ Rs.1.10 per unit on the analogy of Government of KPK, generated from hydel power station located in Punjab for FY 2016-17 and the same rate may be continued as an interim for subsequent years till the finalization of revised rate.”

Nepra approves 5pc annual NHP indexation for Punjab, KP

Further, Nepra – recognizing the role of the CCI in the matter – noted that were the CCI to grant indexation to the NHP CCI’s clarity would be sought “on the issue of indexation of NHP rate for both the province of KPK and Punjab” and that the CCI ought to “clarify since when such indexation should be given”.

However, despite having recognized the CCI’s constitutional role in the matter, and the fact that the CCI itself had previously decided in its 2016 decision – as amended in 2017 – that “the same rate may be continued… till the finalization of revised rate” Nepra proceeded to grant indexation on NHP on an interim basis for a six-month period from the date of the notification of its determination.

According to sources, Power Division has maintained that this is cogent considering that the Ministry – cognizant of the constitutional supremacy of the CCI in the matter – had prudently refrained from notifying the determination. However, upon the amendment of the Nepra Act, 1997 wherein subsection 31(7) of the Act was amended to enable Nepra to unilaterally “direct immediate application of its recommended and approved tariff or uniform tariff, as the case may be, by way of notification of the same”, Nepra in contravention of the CCI’s 2016 decision – amended in 2017 – proceeded to notify its indexation of the NHP.

On January 13, 2022 the government of Khyber Pakhtunkhwa presented the matter as an ex-agenda item before the CCI during the latter’s meeting of the same date, the minutes of said meeting state: “regarding the issue of 5% annual indexation on NHP, already approved by the CCI, it was agreed that the government of KP may move a summary on the subject in the next CCI meeting as it was not on the agenda of the present CCI meeting”. This statement is of particular concern given the fact that – to date – the CCI has not rendered any decision on the indexation of the NHP; despite this concern; however, Nepra once again proceeded to “approve 5% annual indexation of NHP over the rate of Rs.1.10/kWh to the government of Khyber Pakhtunkhwa and government of Punjab from FY 2015-16 and FY 2016-17, respectively, subject to its adjustment, if any, in light of the CCI decision”, and directed the GoKP to “move/ pursue its summary before CCI in order to secure explicit approval, in the matter” and holding that “till receipt of any CCI order/ decision in the matter, the 5% annual indexation of NHP shall be continued…”.

Given Nepra’s own admission that the CCI is pre-eminent in the matter, and where it acknowledges that the CCI is pre-eminent in the matter, and where the CCI itself has held that the same rate – sans indexation – is to be maintained for subsequent years till such time as the CCI subsequently renders a decision on the matter, “it is legally and constitutionally untenable for Nepra to mask the CCI’s constitutional role and proceed to unilaterally decide upon a matter left by the constitution itself to the provinces by way of the CCI,” the sources quoted Power Division as saying.

Nepra, Power Division further stated, is aware of the fact that the CCI plays a crucial constitutional role as the forum before which inter-provincial matters – such as the treatment of NHP – are to be deliberated, and for Nepra to perform the CCI’s role in this manner, by rendering its determinations of August 23, 2021 (2) and September 9, 2022 (1), is not constitutionally appropriate.

On the basis of available facts with Nepra, being a regulatory – and not a decision-making – authority, Power Division has stated that the determinations of August 23, 2021 and September 9, 2021, are in violation of the CCI’s decision of 2016 as amended in 2017.

Power Division has also urged Nepra to reconsider these determinations, and reserves its rights to proceed further with the matter as per the law.

Copyright Business Recorder, 2022

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