The announcement of changing the way the power sector regulator works as well its reporting hierarchy has made headlines recently. The two are different issues demanding separate analysis because of the different implications they will have for the regulator as well as stakeholders.
Firstly, the administrative control of the National Electric and Power Regulatory Authority (NEPRA) has been transferred from the cabinet division to the Ministry of Water & Power (MoWP) which this column has highlighted earlier. In isolation this is still not the biggest of transgressions although a potential conflict of interest is discernable. However, the government also plans to change the NEPRA Act 1997 which has heightened fears that a plan is in the offing to curtail the power of the regulators.
Along with changing the reporting structure the government is also proposing that the ministry orders and directives will be binding on the regulator. This sounds ominous to say the least, as the regulator will lose its independence with an element of duress most likely being introduced as well. Nawaz was quick to point out recently that the reason the changes are being introduced is because the regulator had started focusing more on the government institutions instead of the private sector. Well, that is what will happen when the dominant player in the energy sector of the country is the government.
And mind you even the government crosses some lines which it shouldnt. So the checks and balances should be there to ensure transparency and proper due diligence of projects. The PML-Ns mandate tilts heavily towards a load shedding free Pakistan for which it might be hasty in decision making. All the more reason for an unbiased regulator then it seems.
But some of the proposals such as the introduction of market operator and electricity trading are intended to eventually drive the countrys electricity sector towards market based operations and should be viewed as such. Eventually the most efficient form is where both demand and supply are controlled by market forces. Granted, we are still a long way off but the changes will be the starting point for the transition.
Another positive step will be the removal of the generation licensing requirement as this will encourage more small generation plants of less than 5 MW to be set up. Currently, the bureaucratic red-tape involved acts as a disincentive for small scale generation to be implemented on a wide scale.
Overall, the changes are a mixed bag but offer serious implications for the governance of the power sector. Therefore, this column believes that the government should not replicate the mistake of introducing it as an ordinance as it did with the Companies Ordinance 2016 which was rejected by the Senate for the same reasons. The proposed changes should be brought in Parliament where detailed deliberations should take place.
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