ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Monday disallowed recovery of Rs145 billion from electricity consumers on account of past-year system losses and inefficiencies of distribution companies (Discos).

In a series of a total 20 tariff determinations, the power regulator did not find any legal, financial or procedural ground to allow recovery of about Rs103bn sought by the distribution companies on account of “prior year adjustments” in consumer-end tariff and Rs42bn demanded by the federal government to charge higher transmission and distribution losses to consumers.

The regulator said that it would be unfair and against the clear decisions of the Supreme Court to allow recovery of the cost of bad debts, non-recovery of bills, higher system losses, bad governance, theft and pilferage from honest and paying consumers.

Nepra issued tariff determinations in January this year and was required to be appealed for review within 15 days.

Ex-Water and Power Development Authority (Wapda) distribution companies previously raised some objections over the Nepra determinations with minor delays. The regulator, however, condoned the delay but rejected the request for allowing higher increases in tariff. This was followed by reconsideration request of the federal government through the Ministry of Water And Power.

It said it appeared that the government itself was interested in delaying the process despite clear instructions of the Lahore High Court (LHC) to dispose of reconsideration requests. An official said that in view of declining tariffs determined by Nepra, the government wanted to absorb its impact without passing on its benefit to consumers to reduce financial problems in the power sector and ensure sector sustainability.

The regulator said it was a statutory requirement for Nepra to decide the reconsideration request within a period of 15 days from the date of filing of the request which was repeatedly delayed on the request of the distribution companies and then by the government. The delay came despite the fact that the LHC had ordered conclusion of the issue by June 30.

The power ministry, however, kept on requesting delays even after the deadline which “prima facie may be an attempt to defeat the orders of the court which were passed in concurrence of the federal government”.

On the request for allowing higher system losses in tariff, Nepra held that it was of the “firm view that the actual reported level of transmission and distribution (T&D) losses of ex-Wapda Discos include the impact of inefficiencies, poor governance and theft, etc” while the principle of prudence required that consumers should not burdened with the costs that arise due to inefficiencies and poor management in power companies.

It said the Nepra’s determination of January meant that supply of electricity to the paying consumers has been encouraged, meaning that the burden of non-paying consumers may not be passed on to the paying consumers rather the unauthorised consumers be discouraged.

“Therefore, the request of the federal government to allow any margin for non-recoveries in the tariff does not merit consideration and if allowed will be in violation of the orders of Honourable Supreme Court of Pakistan”.

Nepra noted that in view of the increasing gap between the assessed and the actual level of T&D losses, the issue of over-billing and theft directed all the Discos to conduct a study of their distribution network of 132 kilovolts (KV), 11KV and below by an independent expert. But they failed to complete such studies or were themselves not satisfied with their results.

The power regulator said the Supreme Court had ordered the government to improve its affairs rather than asking Nepra to build in the inefficiencies of the system in the tariff. It reminded that the apex court had in fact adjudged Nepra’s failure to protect the interest of the consumers, therefore, passing on inefficiencies of the Discos and the government to the consumers.

Moreover, it held that Discos were currently functioning in a monopolised environment and in case of default the connection of the premises, if disconnected, cannot be restored till the outstanding dues were paid, thus transferring the risk to the third party which is occupant of the premises.

Furthermore, the distribution company always has the option to recover the outstanding amount through sale of the property after following the due process of law. In addition, at the time of connection, Discos also collect one month’s billing from the consumers in the shape of security deposits, which also acts as a deterrent for a consumer to default.

Nepra said it could not accept the government request for 85-89 per cent recovery rate for distribution companies to avoid creation of circular debt, saying it considered it a pure operational inefficiency on the part of Discos. Also, the write-off against receivables of any government cannot be allowed considering the fact the government is a going concern.

Published in Dawn, July 12th, 2016