Reformation of NEPRA a must to end power crisis

The government should take immediate steps for reforming the National Electric Power Regulatory Authority (NEPRA) by appointing Chairman and members of the authority purely on merit based upon the criteria laid out in the NEPRA act for introducing good electricity governance in the country.
A research study on Pakistan’s electricity regulation conducted by eminent energy expert Arshad H. Abbasi of Sustainable Development Policy Institute (SDPI) finds that the root cause of NEPRA’s failure to conform to its vision has been fundamentally the problem of good electricity governance in Pakistan. The author is of the view that in order to make NEPRA a vibrant and proactive organisation, immediate reforms are needed, whereby this needs to start with the appointment of the Chairman and members on merit. There is also a need to develop key performance indicators for NEPRA, so that its performance can be gauged with the best power regulatory practices.
There is an immediate need to set a real-time mechanism to monitor the public sector hydropower development projects. There is also a need to develop hydropower projects on priority to export hydroelectricity to Central Asia and India. The country has hydropower potential of more than 120,000 MW out which around 57,000 MW is economically and technically viable and can export more than 30,000 MW of hydroelectricity.
The study is based upon a number of interviews with experts, employees of NEPRA and different stakeholders. It finds that the NEPRA Act has given enough mandate and power to set good electricity governance in Pakistan but the appointment of chairman and members under political influence is the root cause of all ills. The fair, unbiased, unprejudiced appointment on merit could have had a positive impact. The criteria for the appointment of Chairman and Members for NEPRA were clearly laid out in section 3, of NEPRA-1997. In the initial act, it was mandatory for chairman to have a degree in engineering and waste experience in energy sector.
The current incumbent has influence and joined NEPRA on February 15, 2008, violating the act and then amended the act on February 21, 2008. The Senate of Pakistan passed a resolution on February 25, 2008 to cancel the appointment of Chairman NEPRA against the accepted norms but so far have failed to remove him. The current authority of NEPRA has made the organisation virtually a sub-ordinate department of Ministry of Water and Power (MOWP). It is NEPRA’s mandate to attract investment in the power sector. Except for thermal power plants, so far there has been insignificant addition of projects that are generating electricity from renewable sources. It is worth noting that according to the annual financial statement of years, 2008-9 and 2009-10, NEPRA made investments amounting to Rs855 million and Rs1.30 billion in banking entities. However, NEPRA ought to make investment in renewable energy sector so as to set a precedent for the private sector.
In the act, a mandate was given to NEPRA to prescribe separate performance standards for generation, transmission and distribution for safe, efficient and reliable supply of electric power. There is a provision of penalty in NEPRA act to power service providers not adhering to prescribed standards. According to Section 7(2)(c) and 34 of NEPRA Act (XL of 1997), NEPRA has established performance standards for generation, transmission, and distribution and has also developed grid code and distribution code. Despite the fact that NEPRA has formulated these standards, the DISCOs have failed to comply with it. Violations of standards could be either because the terms set out in them were non-realistic or essentially the organisation’s failure to set an enforcement mechanism. It says the current assignment of NEPRA is mainly tariff determination and issuing of licenses without focusing much on any mundane issues. The determination of tariff can be performed with the help of an energy tariff calculator, which is available online. The online calculator is designed for screening power projects. Additionally, this calculator can help to calculate the annual fuel consumption and CO2 emissions that are yet to be done by NEPRA. Consumer protection is a primary mandate for any regulator. To fulfill this mandate, regulators must ensure effective consumer participation in the regulatory process. The Mission statement of NEPRA is also an emblem with commitment to set regulatory frameworks, which ensure the provision of safe, reliable, efficient and affordable electric power to the electricity consumers of Pakistan. In Pakistan, the total consumers of electricity as on December 31, 2010 were 19.58 million and in same year as per record of NEPRA the total complaints received were only 1350 from all over the country, which is only 0.0069 per cent of total consumers. This shows the weak interaction with consumers.
The management of NEPRA claims that it has played an effective role in the power sector, but the reality is very different when its performance is compared with India’s Central Electricity Regulatory Commission (CERC) that was constituted on July 24, 1998. The CERC has played a substantial role in power development in India, especially in the promotion of cheap and green hydropower and other renewable sources. On the advice of CERC, the share of hydropower and other renewable energy source has constantly been increasing while the share of thermal and nuclear sources is decreasing. For instance, during 2008-9, the share of hydroelectricity increased by 27 per cent while the nuclear sources declined by 5.6 per cent.
Under Section 45 (J) of the NEPRA Act, 1997, the Authority clearly has mandate to advise MOWP about effectively saving electricity. NEPRA has endorsed and issued an appropriate policy for rental power projects but also approved tariff of five rental power projects in year 2009-2010. Additionally, NEPRA has meted out advice in such ways that allude to the notion that rental power projects are only panacea for the prevailing energy crisis. After clearance from NEPRA, MOWP has made a contract with five IPPs to rent 580 MW for five years with a total contract cost of $1.24 billion and so far, only $36.45 million has been paid as down payment to five different IPPs. In another violation of the same clause, NEPRA is suggesting that coal is another solution to bring down the cost of electricity generation. Keeping into account the costs and environmental hazards of coal, industry and domestic electricity, consumers cannot afford an expensive and a potential environmentally damaging source of energy. In 2007-08, NEPRA offered 7.81/kWh an indicative tariff, and in 2009-10, as an incentive to low cost generation, NEPRA has allowed 17 per cent IRR to hydro and indigenous coal power projects and 16 per cent to imported coal power projects. On the other hand, on advice of CERC, at the end of 12th five-year plan, 30,000 MW of hydroelectricity will be added to decrease the share of thermal especially coal based electricity generation in India.
Under Section 7(3-d)[1], NEPRA has an authority to tender advice on public sector power projects. In light of this section, the regulatory body is considerably negligent due to which the country has arrived at a situation of immense destabilisation and anarchy. Under Power Policy-2002, 19 different hydropower projects having gross generation capacity of 4325 MW were approved. This target was slashed into short, medium and long term plans. As for the short term plan, 15 different run-of-river hydropower projects having a total capacity of 1358 MW were scheduled to be completed in June 2007, and rest of the projects were scheduled to be commissioned in June, 2010. In the 2004 Medium Term Development Plan, the government had envisaged that 900 MW of electricity would be generated from renewable energy sources at end of June 2010. The AEDB was given responsibility but the institution failed to add any single megawatt on the national gird. Privatisation of Karachi Electric Supply Company (KESC) has not been beneficial as load shedding is still endemic to Karachi. This has inevitably affected 2 million industrial consumers, severely stifling the city’s industrial activities. KESC has failed to meet Karachi’s electricity demand due to dismal performance. NEPRA can take action on Section 28 of Act, however, except for imposing a fine of Rs200,000 the authority has never appointed a competent administrator, to give relief to Karachi.