Proposed Nepra Act amendments to strengthen regulator



  • Changes proposed to strip NEPRA of its authority
  • Much sought after ‘indemnity’ clause added

The government has included the much sought after “indemnity” clause in the draft National Electric Power Regulatory Authority (NEPRA’s) Amendment Act 2017; however, rest of the regulatory powers have been taken away, e.g. power to interpret the policy, determination of tariff, rejecting government advice on surcharges, and imposition of penalty— which could be challenged before an Appellate Tribunal.

The government has tabled the draft of Regulation of Generation, Transmission, and Distribution of Electric Power (Amendment) Act, 1997, to the National Assembly Standing Committee on Energy, for consideration and approval.

The former Minister for Water and Power, Khawaja Asif, had earlier stated before the Council of Common Interests (CCI) that the splitting of WAPDA was done in the late 1990s in order to attract private sector investment; however, this task was never accomplished.

He attributed the failure in part to the regulatory framework, which was only paying attention to tariff setting by the regulator, instead of focusing on ways to increase competitiveness.

Ministry of Water and Power drafted the bill after getting the go-ahead from the government. It is being touted that the new bill will be focusing more on competition rather than regulation and hence, shall adopt policies and establish tariffs towards that end.

The main objective of the draft bill is to curtail the vast powers of NEPRA and to make it abide by the government’s instructions on the imposition of the tariff.

The bill proposes to set fresh criteria for the hiring of members of the authority, limiting it only to professionals having experience in the industry.

The chapter III (B) covers the most important segment of power tariff.  Section 31 of the act shall be substituted with, Section 31. Tariff (1) The Authority shall in the determination, modification or revision of rates, charges and terms and conditions for the provision of electric power services, be guided by the national electricity policy, the national electricity plan and such guidelines as may be issued by the federal government in order to give effect to the national electricity policy and national electricity plan.

Under section 31 (2) subsection (e), the Authority, in determination, modification or revision of rates, charges and terms and conditions for the provision of electric power services shall keep in view the economic and social policy objectives of the federal government.

Under section 31 (3) subsection (b), the tariffs should generally be calculated by including a depreciation charge and a rate of return on the capital investment of each licensee, commensurate to that earned by other investments of comparable risk.

And sub section (c), tariffs should allow licensees a rate of return which promotes continued reasonable investment in equipment and facilities for improved and efficient service.

It calls for an addition of Section 31 A to the main section, mainly relating to surcharges. The federal government may, in addition to the tariff determined by the Authority, impose a surcharge on such consumer categories as may be notified in the official gazette. The surcharges collections may be imposed for (a) for discharging such public service obligations of electricity consumers towards elimination of electricity poverty, as may be determined in national electricity plan and promoting security of energy supply (b) raising funds for development projects (c) to give effect to any tariff rationalization or subsidy management guidelines.

The draft bill has a chapter II B on National Electricity Policy and Plan. The section 14A sub-section (1) says the federal government, shall from time to time, with the approval of the Council of Common Interests, prepare and prescribe a national electricity policy for the development of the power markets.

The sub-section (4) says the federal government in consultation with provincial governments shall prepare a national electricity plan in accordance with the policies prepared and prescribed under sub-section (1) and notify such plan once in five years. The sub-section (5) says the Authority (NEPRA) shall perform its functions in accordance with the national electricity policy and national electricity plan.

The amendment in section 3 of Act XL of 1997 makes the criteria for the appointment of chairman as well as members of the authority more stringent and professional. Amendments in sub sections 3 and 4 say that the chairman shall be a person known for his integrity and eminence, having an experience of not less than ten years in any relevant field including law, business, engineering, finance, accounting, and economics preferably in the electric power services business. The same conditions apply for members. The amendments put a bar on appointing members older than 62 years of age.

The members will have to disclose a conflict of interest, in any matter to be discussed or decided by the Authority or any of its committees, prior to any discussion of the matter, disclose in writing to the Authority, the fact of his interest and nature. It would be recorded in the minutes of the Authority, prior to a discussion. Any member who fails to disclose his interest shall be guilty of an offense and shall on conviction be liable to imprisonment for up to one year or fine up to Rs 10 million.

For indemnity an article 10A has been introduced that says; no suit, prosecution or other legal proceedings shall lie against the chairman, members, officers or any employee of the Authority for anything done in good faith or intended to be done in pursuance of this Act or any rules and regulations made there under.”

A section 12A is added to the establishment of the appellate tribunal by the federal government for exercising jurisdiction under this Act. A former judge of High Court shall be the chairman, for a single term of three years. Member Finance, a qualified chartered accountant or qualified chartered financial analyst and a member energy, member of Pakistan Engineering Council would be other members. All the members will be appointed on the nomination of provinces on rotation. The decisions and determinations of the appellate tribunal shall be taken by the majority.

According to officials, the setting up of the appellate tribunal is sought, as at present under the existing law there is no remedy available against NEPRA determination other than going to the court.  The presence of an appellate tribunal will help streamline the sector. Under section 12G, any person aggrieved by a NEPRA decision or order can appeal within thirty days of the decision and the appellate tribunal will decide such matter within three months.

The appellate tribunal is allowed to maintain a panel of national and international experts in the power sector to assist it in the discharge of its functions under the Act and when deemed fit.

Under a draft amendment of section 7, Act XL of 1997, the Authority shall be exclusively responsible for regulating the provision of electric power services. Under sub section (iii) (b) it shall specify procedures and standards for investment programmes by generation companies and persons licensed, (c) specify and enforce performance standards for generation companies and persons licensed, (d) specify accounting standards and establish uniform system account by generation companies and persons licensed under the act.

In a major amendment, the government has proposed doing away of generation licenses for various projects of generation companies. It is an important revenue earning stream for NEPRA. The tough questions asked by the authority sometimes make matters difficult for some of the new projects.

The generation of electricity, chapter II C, says under section 14 B, any generation company may establish, operate and maintain a generation facility without obtaining a license under this act, if it complies with the technical standards relating to connectivity with the grid as may be specified.

However, the conditions are retained for hydel power projects about which it is said provided that a generation company intending to set up a hydro-generating facility shall prepare and submit a detailed scheme covering all financial, geological, hydrological, technical, safety and environmental aspects to the Authority for its concurrence.

The section 18A (1) allows the establishment of provincial grid company. The authority may, subject to the provisions of this act and after such enquiry as it may deem appropriate, grant a license authorizing a company owned by a provincial government to engage in the transmission of electric power within the territorial limits of such province.

The chapter III A covers enforcement. The section 27 A (1) says the authority may appoint not less than two officers to conduct investigations in respect of any matter that is a violation of this act, the rules and regulations made thereunder or the conditions of a license issued or registration granted under this act.

The sub section (2) says the authority in the order of appointment of investigation officers under subsection (1) shall specify (a) reason for initiation of the investigation, (b) possible violations which are to be investigated and (c) time frame within which investigation is to be completed.