Finance Ministry has reportedly initiated the action of pressurising a headless and "unbridled" National Electric Power Regulatory Authority (Nepra) into doing something it is unwilling to do under the guise of carrying out a diagnostic analysis and an audit of its regulatory framework, well informed sources in Nepra told Business Recorder.
Finance Minister Senator Ishaq Dar deliberately requested the addition of a new structural benchmark under the $6.64 billion Extended Fund Facility by the International Monetary Fund during the second quarterly review that took place in Dubai from 1 to 10 February 2014. This, sources in Nepra told this correspondent on condition of anonymity, was an attempt to interfere in the affairs of the regulator.
The IMF, in its staff report, indicated that in order to address the administrative constraints of Nepra, authorities will conduct a diagnostic study of the regulatory framework of the power sector and prepare an interim report by end of April (new structural benchmark). The IMF maintains that the report will identify the means to effectively and efficiently address critical regulatory issues that inhibit performance and restrain full transparency.
The sources further revealed that at present Nepra is at the top of the list of those public sector organisations which have earned the ire of the incumbent government particularly after the regulatory body refused to support the government plan to convert a few Independent Power Producers (IPPs) to coal, saying the entire plan is contrary to law. In addition, Nepra reduced the allowable percentage of losses to Lahore Electric Supply Company (Lesco) by 2.2 per cent which reportedly angered the Water and Power Ministry and Lesco.
The Letter of Intent (LoI) submitted by the government to the IMF board, a prerequisite for the release of the $555.6 million tranche, acknowledged that Nepra has refused to pass on the cost of Syndicated Finance Certificates (SFCs) to consumers, which, sources claim are about Rs 300 billion. "The above mentioned instances no doubt contributed to the government's decision to support a diagnostic analysis and include it as a condition of the IMF to lay the onus on a third party," said an analyst on condition of anonymity.
Sources claim that Nepra's performance came under fierce criticism in the last meeting of the Council of Common Interests (CCI) in February 2014 when Nepra's Annual Report 2011-12 and State of the Economy Report 2012 were tabled for consideration. Prime Minister Nawaz Sharif presided over the meeting.
The CCI's decision was as follows: "The Council of Common Interests considered a summary submitted by the Cabinet Division on Nepra's annual report 2011-12 and the State of Industry Report 2012 and expressed its dissatisfaction over the performance of Nepra and decided that a diagnostic analysis and an audit of the regulatory framework of Nepra shall be conducted to address the administrative and technical constraints".
Sources in Finance Ministry told Business Recorder that the Economic Reforms Unit (ERU) has been directed to conduct a diagnostic analysis and an audit of the regulatory framework. Ministry of Water and Power- a long time foe of the regulator - is extending technical support to the ERU. The sources said, ERU called a meeting on March 10, 1014 to discuss modalities for a diagnostic analysis and an audit of regulatory framework; however, Nepra did not attend the meeting. Acting Chairman Nepra, Khawaja Naeem - a former army officer - is said to be a close relative of Minister for Water and Power and Defence, Khawaja Asif. Khawaja Naeem was appointed Member Nepra on the recommendations of Chief Minister Punjab, Mian Shahbaz Sharif during his previous term.
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