ISLAMABAD: The government is contemplating bringing an amendment to the National Electric Power Regulatory Authority (Nepra) Act 1997 to make it binding on the regulator to implement policy guidelines of the federal government.

Informed sources told Dawn that a draft amendment to the Nepra Act has been circulated to the stakeholders concerned for comments before it could be tabled before the Council of Common Interests (CCI) for approval.

These sources said Nepra has strongly opposed the draft act because it viewed the proposed changes against the basic spirit of the regulatory bodies. The proposed amendment seeks to change the status of the regulator from an independent quasi-judicial forum to an advisory body of the Ministry of Water and Power, the regulator is reported to have conveyed.

Also, it said the institutions need to be strengthened with passage of time to build trust of the markets as the government planned to progress towards a deregulated regime going forward instead of going on a backward journey, these sources said.

The sources said the changes to the law have originated from the Ministry of Water and Power, which has been irritated by the repeated resistance from the regulator on allowing higher inefficiency standards in consumer tariff. The sources said the ministry had drawn its arguments from a book on Indian regulators and suggested the regulator should guide the sector through its advisories to the government instead of exercising executive powers to setting rates and standards.

The ministry believed Nepra was trying to regulate the government, meaning by its generation and distribution companies instead of regulating the private sector, primarily K-Electric.

A continuous rift in the matter of final settlement of Nandipur power project’s tariff, Matiari-Lahore Transmission line and renewable energy projects were also a few recent example of an ongoing unease. The government led distribution companies are already in court against implementation of Nepra determinations suggesting Rs2-3 per unit reduction in base tariff.

“The changes proposed are wide-ranging but crux of the matter is that the policy guidelines issued by the ‘federal government’ would be binding on Nepra without any excuse,” an official who read the amendments said. He said the comments from the provincial governments were yet to come on the issue but the provinces had historically opposed such moves during the PPP and Musharraf tenures.

He recalled that an attempt to bring similar changes to the Ogra Act were blocked by then law minister Farooq H. Naek at the eleventh hour during the PPP period.

In the famous rental power case, Nepra had wrote to the government that its directives were not binding on the regulator if these were against the spirit of the Nepra act, rules and regulations.

The apex court had ruled that the federal government should improve its affairs and impress upon power companies to reduce theft and inefficiencies instead of asking Nepra to build in inefficiencies in tariff and has censured the regulator for failing to protect consumer interest while following government directives and directed not to implement government directives if these were against the law or the principle of prudence.

Interestingly, the current government has been advocating merger of two energy sector regulators — National Electric Power Regulatory Authority and the Oil and Gas Regulatory Authority — into a single regulator, with slightly compromised powers and had made this part of the Annual Plan 2015-16.

The plan was slightly delayed for fears that the merger at a time of massive investment in the energy sector would create uncertainty among investors. Many within the government believed the energy crisis was not only because of the demand and supply gap but also due to a deeper problem in energy policymaking, governance and regulation. This means the regulation and capacity-addition will not deliver unless decision-making and public-sector management is simultaneously improved.

Some of these changes would normally require the clearance of the CCIs. Both Nepra and Ogra have been resisting government pressures for the last 10 years to allow higher system losses and the non-recovery of bills to be made part of the electricity and gas tariffs. Consequently, the government has been using its executive authority to impose various surcharges.

On top of the energy regulator, the new legal framework would also create dedicated appellant tribunals, which would have the power to scrutinise the regulator’s decisions. These decisions can currently be challenged before the high courts and the Supreme Court, which normally uphold the regulators’ decisions rather than the government’s policy desires.

On the administrative side, there would be regulatory advisory committees for the reorganisation of both the regulators during the transition period. These would then keep a check on their performance through federal oversight and ‘merit-based transparent and efficient appointment process’. These powers are currently with the quasi-judicial and autonomous regulators without any interference from the government, except in the case of members and the chairmen.

Some other reforms would relate to the tariff-setting regulatory process, which has been the sorest point for political governments trying to build all the inefficiencies into the consumer tariffs, except for resistance by the two regulators.

Published in Dawn October 11th, 2016