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Nepra supports provinces’ stance on generation

December 16, 2012

Prime Minister Raja Pervez Ashraf reportedly told the chief ministers that provinces could produce, transmit and distribute power and levy taxes but there were technical or operational hindrances which needed to be removed.— File Photo

ISLAMABAD: Noting with concern that electricity establishment led by the ministry of water and power has been maintaining the status quo for over two decades instead of steering the sector to reform, the power regulator has sided with the provinces’ view that they cannot contribute to electricity generation without the centre’s support.

Even with their larger roles, the provinces would not be able to produce the large quantum of power in the near future, due to various reasons without critical support of the federal entities, said the National Electric Power Regulatory Authority (Nepra) in a report submitted to the Council of Common Interests.

This was in line with a recent complaint by the Punjab chief minister to the CCI that despite empowered by the 18th Amendment, an enabling environment was not being created to help the provinces set up power plants.

Although the Constitution provides for generating electricity by the provinces, yet the cap of 50MW was got removed through a decision of the CCI, said Shahbaz Sharif, adding the generation potential from bagasse by sugar mills and the obstacles of not allowing upfront tariff by Nepra had washed out the provincial effort.

He had told the CCI it was promised that provincial powers for raising loans would be enhanced, but no headway towards that end could be made. This, he added, handicapped the provinces as investors while negotiating with provincial governments demanded sovereign guarantees which could only be given by the centre.

He had also complained that even if the provinces with no captive capacities generated power, they could not benefit from several hundreds of megawatts they produced for want of a decision on upfront tariff and wheeling charges up to the national grid.

Prime Minister Raja Pervez Ashraf reportedly told the chief ministers that provinces could produce, transmit and distribute power and levy taxes but there were  technical or operational hindrances which needed to be removed.

Regarding sovereign guarantees, he reminded the provincial leaders that federal government was facing financial constraints while provinces had surplus resources and it was looking towards them for financial support.

According to Defence Minister Syed Naveed Qamar, provincial governments are free to involve private sector for generation but the federal government would not be obliged to purchase provincial generation and as such a decision of upfront tariff by the federal government will be a deviation from CCI decision of allowing provinces to generate electricity.

Nepra expressed concern that the replacement of Wapda with Pakistan Electric Power Company as a central controlling entity did a great harm to the sector as generation companies could not carry out maintenance and expansion programme, compromising rehabilitation works which in turn resulted in more outages.

Instead of taking the newly created entities towards privatisation, Pepco not only tried to maintain the status quo but also resisted attempts by the distribution and generation companies to work with independence. Therefore, even twenty years after the approval of power sector reform process (in 1992), any steps for creating an independent culture are forcefully opposed at the labour union and officers’ level, the Nepra report said.

The role of the ministry also seems to maintain status quo, the regulator said. Although Pepco had been disbanded, yet the role of distribution and generation companies continued, it pointed out.

Such a situation was so serious that the government had to abandon its efforts to appoint chief executive officers of Discos.

Strikes and lockouts by labour and officers prevented new CEOs from entering the offices of Discos.

Nepra said the reform process should be re-started right away because status quo and centrality in the system had increased the gap between the power cost and consumer tariff from Rs1.80 per unit in the fiscal year 2010-11 to Rs3.17 per unit in 2011-12 despite over 100 per cent increase in consumer tariff.