The management and efficiency of the electricity sector suffer from a lack of transparency and availability of clearly defined laws and rules.
Electricity is placed in Part II of the Federal Legislative List. The formulation of any policy and regulatory oversight over this sector vests with the Council of Common Interests (CCI) under Article 154 of the Constitution wherein all provinces and the federal government are represented in equal numbers.
The federal government cannot formulate or regulate any policy or supervise or control the utilities. It has to be the CCI. Currently the federal government continues to make major policy decisions with respect to the power sector which is violation of the Constitution.
Recently, the federal government tried to transfer regulatory authorities under the purview of the federal ministries which has been challenged in the courts of law as it was in breach of the express terms of the Constitution.
As per Article 157 (1) of the Constitution, the federal government has the executive authority to construct power generation plants and lay interprovincial transmission lines, whereas, as per Article 157 (2), the government of a province may construct power houses and lay transmission lines for use within the province and determine tariff for distribution of electricity within the province.
Thus the government of a province is vested with an executive authority to undertake generation, transmission, distribution and regulation functions within its domain.
As a general principle however, the provinces lost the executive authority in relation to matters of electricity after the 18th Amendment except under Article 157 (2) of the Constitution, that too without the power to legislate to put into effect their executive authority.
Provinces can set up their electricity institutions within their territorial jurisdiction for generation, transmission, distribution and regulation, either through the existing legislation or through creation of legal entities under the Companies Ordinance 1984.
Provinces for now are content with setting up provincial departments of energy and companies under their executive powers but lack the power to bring into effect substantive laws which has gone largely unnoticed.
Surprising as it is the archaic Electricity Act 1910 is still in force though the electricity market has since undergone marked transformation. There is practically no law available to the federal government for the exercise of powers in relation to generation, transmission, distribution and regulation, keeping in view market trends and global practices.
The Nepra Act is restricted to regulatory functions whereas the Wapda Act 1958 was relevant when it was an integrated utility. Wapda’s powers and functions have eroded with the induction of private power projects and devolution of transmission and distribution functions to the public sector, national grid company and generation and distribution companies.
The national grid and distribution companies are set up under the Companies Ordinance 1984. Owing to the lack of regulatory oversight specific to government owned companies, these companies have been picking and choosing laws to suit their interests.
The state run utility companies fail to appreciate, by design or negligence that they are public utility companies duly licensed by the regulator and cannot be treated at par with any other private companies.
Private generation companies have been introduced under different power polices of the federal government starting from 1994, 1995, 1997, 2002, 2006, 2013 and 2015. Similarly, the provinces have formulated their own polices.
Both the federal government and provincial power polices ought to have been approved by the CCI which is often not the case. Resultantly, the policies are ambiguous, discriminatory and sometime at cross-purposes with each other.
There is no law that enables providing concessions, incentives and benefits to the private sector as a result of which most of these concessions are based on executive decisions implemented through contractual arrangements. This creates a risk of procedural impropriety, unfairness and irrationality.
The federal government has formulated laws for creation of entities like Wapda under the Wapda Act 1958, the Private Power and Infrastructure Board under PPIB Act 2012 and Alternative Energy Development Board under AEDB Act 2010.
The PPIB and AEDB are performing their functions under various policies of the federal government which are constitutionally the prerogative of the CCI.
The Constitution maintains that it is the CCI shall regulate and supervise electricity related institutions, which is not happening, and therefore the federal government has intervened.
The most effective mode of supervision and regulation would have been in the shape of provincial participation in the board of directors and governors of the electricity entities.
There is a school of thought that the procurement of power from the private sector does not fall within the definition of the public procurement as the equity and debt is financed by the private sector.
This view is patently wrong as the sale and purchase of power from the private companies is for and on behalf of public sector distribution companies and the federal government fully secures obligations through concession agreements and guarantees. The equity and debt incurred by the private sponsors is repaid from the public accounts. Hence, these are public procurements without any exception.
The Supreme Court of Pakistan in various judgments has clearly laid down that the procurement in the utility and infrastructure projects has to be through competitive bidding for giving best value of money for the consumers. However this is followed more in breach than observance.
The one window created by the federal and provincial governments lacks the authority to procure power for and on behalf of other entities from private power companies under their statutory enactments and as per the principle of privity of contract under the Contract Act 1872.
Yet they are in business of purchasing power from the private power companies. Furthermore, they being not the licencees of the regulator, prudency of such purchases cannot be tested.
To eliminate the existing legal conundrum in the power sector, there is a need for enacting a ‘New Electricity Act’ that shall consolidate, formulate and enable all the laws at the federal and provincial levels in the generation, transmission, distribution and regulation segments of the power sector with particular focus on the transparency in the award of the power projects.
Unless there is an appreciation and realisation of the legal vacuum and a need for ensuring transparency, legal issues will continue to interrupt and hinder the cost effective and economical growth of the power sector.
— The writer is an attorney of law in the corporate and energy sector.
Published in Dawn, The Business and Finance Weekly, May 15th, 2017