ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Thursday issued notices to the ministries of finance and water and power over alleged unauthorised withdrawal of Rs52 billion from the accounts of distribution companies (Discos) to meet circular debt target set by the International Monetary Fund (IMF).

The regulator is currently in the process of public hearings to set multi-year tariff (MYT) for all the distribution companies for five years ahead of their scheduled privatisation to provide predictability to the prospective bidders. On Thursday, Nepra Chairman Tariq Sadozai presided over the hearing for the MYT of Islamabad Electric Supply Company (IESCO).

Iesco representatives told the hearing that the company had transferred Rs10bn profit from its accounts to Central Power Purchase Agency-Guarantee (CPPA-G) on the orders of the Ministry of Water and Power. They said Iesco had already paid to the CPPA-G the price of electricity it had procured.

At this, former member energy of the Planning Commission Shahid Sattar told the regulator that all distribution companies had transferred an accumulated amount of Rs52bn to the CPPA-G on the instructions of the Ministry of Water and Power to ensure that circular debt stayed around Rs300bn as committed to the IMF.

The Nepra chairman asked the ministries of water and power and finance to explain their position, but the two ministries had not sent their representatives to the hearing despite prior notice.

Sadozai expressed his displeasure as the power companies were on the active privatisation list. As administrative head, the Ministry of Water and Power has a key role in financial and administrative strength of the distribution companies while the finance ministry has control over subsidy payments and circular debt and dealings with the IMF. Both ministries have members on the board of directors of the distribution companies.

The Nepra chairman ordered that notices be issued to the two ministries to explain their absence from the hearing and why profits of the Discos had been transferred to the CPPA-G even though electricity price had already been paid. The regulator also ordered that relevant orders of the power ministry be also placed on the Nepra record.

He deplored that the Discos did not have meters and transformers to meet consumer service standards but their distribution margin had been deposited in the accounts of CPPA-G or made payments to the independent power companies.

The chairman said the Discos were responsible for payment of actual cost of electricity they purchase for onward distribution to consumers. He also expressed his concern that despite being a profitable company, electricity cables were hanging in a poor condition in Rawalpindi.

The regulator reserved its determination on Iesco’s request for 50 paisa to Rs2 per unit increase in consumer tariff over the next five years. The regulator was informed that the company would spend around Rs70bn for loss reduction by 0.8pc over the next five years.

The regulator also expressed its displeasure that out of 12 board meetings of Iesco, the member from the power ministry attended only three meetings which showed the ministry and its representatives had little interest in the affairs of the distribution companies.

K-ELECTRIC: Separately, Nepra also approved 54 paisa per unit increase in electricity tariff for consumers of K-Electric on account of monthly fuel price adjustment for the month of October. The increased rates would be applicable in the billing month of January.

This would yield Rs850 million to the Karachi based utility. Nepra expressed its displeasure over higher power generation cost despite a fall in furnace oil prices. The KE representatives, however, explained that the utility had purchase electricity from National Transmission and Dispatch Company at Rs1.93 per unit higher tariff.

Published in Dawn, December 18th, 2015