Energy security

At the famous Madame Tussaud's wax museum in London, sculptures representing renowned individuals from history, politics and popular culture stand in silent vigil, eerily lifelike but transfixed in inaction. This silent house of waxworks is strongly reminiscent of the new building of the national power regulator NEPRA, located in the heart of the capital yet like Madame Tussaud's serving little purpose except to entertain the beholder. In truth, this edifice stands as further testament to the waste of public money. Indeed, its only importance seems to derive from its tall proportions, a perfect example of modern technology standing as a false beacon of national prosperity. The interior environment offers 'new ways of working' and the offices have a lavish decor with contemporary furniture and plush furnishings.
In the Eighties, the global power market landscape changed and the purpose of regulation became protecting consumers. In 1997, at a time when 25% extra- electricity was available to export, share of cheap hydroelectricity was more than 50%, Pakistan had the chance to follow UK's example when Nepra, emerged with an 18-page Act mandated to issue licenses for power generation, distribution and transmission. At the same time, it had to ensure provision of consistent electricity at affordable rates and create a level playing field for power companies.
During the last decade, globally the regulators have made dramatic changes in regulations. The transformations, including technological advances and increasing renewable energy share, increasing efficiency for cost reductions, and climate change concerns are incorporated to ensure sustainable economic development by supply electricity at affordable rates. One of the key roles of regulators is energy audit, to ensure minimum use of fuel to generate single unit of electricity.
Nepra Act was also amended three times, when three amendments related to the qualification of the chairperson were made to the original legislation. The impetus for these amendments gathered momentum when a bureaucrat with substantial influence and clout exerted himself in his last days of retirement to realise his desire to take the reins of Nepra in 2008. This was at a time when the power sector was already being crippled. Within a few years, the gap between supply and demand widened to accommodate provision for only one-third of the total demand leaving the economy in tatters. After his departure, the Act was again changed to accommodate another crony, who looked after the interests of the ruling regime for years. Such needless changes through amendments provide ample evidence of the rampant nepotism that has plagued Nepra through the decades.
A closer look at the core functions of NEPRA, namely issuing licenses, enforcing standards for quality, determining tariffs for the generation, transmission and distributing electric power serves as an index to Nepra's performance. Issuing licences through pre-formatted pro formas exposes their capabilities. Transparent tariff termination depends on a breakdown of EPC (engineering procurement construction) cost, wherein due diligence is essential. Regional markets show that tariffs in all forms of energy granted with an abnormally-inflated rate are reflective of 'the power' of proponents.
In fact, the ultimate victim of the stagnant nature of the Nepra Act is Pakistan's power sector itself. Energy efficiency is one of the cherished mantras of the modern world, but it seems that it is one, which has escaped the attention of Nepra. If Nepra had concentrated on improving the heat-rate (measure of efficiency) of its thermal power generation plants, it would have been able to avoid the payment of Rs 1,900 billion subsidies. This amount, if effectively used for hydropower development, would relieve Pakistan of its grave energy crisis. Low efficiency, and high carbon emissions through coal power generation mark NEPRA as prominently against the preservation of the environment. This should be alarming for all actors aiming to curb climate change.
Another catastrophic blunder of Nepra is the negligible enforcement of Section 37 of Act in which Nepra was responsible for the review of public sector projects. However, Nepra has failed in its mandate by ignoring hydropower projects of Power Policy 2002. There were 22 projects, having a capacity of 8,100 MW scheduled for completion in 2012. Yet, over this period of 13 years, only 7% progress has been made on these. If these had been completed on target date, the Rs 1900 billion subsidy accrued could have been saved.
Moreover, if Nepra had shown any interest in the Neelum-Jhelum Project, Pakistan would have won the Kishanganga case in the International Court of Arbitration. Conversely, members and chairperson of Nepra visited under construction thermal power plants by IPPs on a regular basis to monitor progress for early completion. Nepra's passion for expensive thermal power generation betrays its lack of integrity, professionalism, and loyalty towards the very nation it is mandated to serve.
The Nepra Act had also developed performance standards for safe and reliable supply of electric power and embedded the strictest penalties in case of non-compliance. However, voltage fluctuation has remained a major issue in Pakistan causing short-circuiting and leading to the deaths of 289 workers in a garment factory and more recently to the timber market incidents in Karachi and Lahore Anarkali. Yet, the culprits remain unpunished by Nepra.
It would appear that most of the time Nepra is involved with hearings on fuel adjustment charges or tariff determination. Both tasks can better be performed by an energy tariff calculator, which is available online, and can even help to calculate the annual fuel consumption and CO2 emissions. Yet these tasks have to be accomplished by Nepra. In my experience, the hearings are moot because the final outcomes are largely dictated by the Ministry. As the main objective of Nepra is protection of consumer interests, this represents a big disconnect between the mandate and the practice. As a case in point, in the last fiscal year, the ratio of number of complaints to total electricity consumers was 0.0147 percent showing great mistrust of Nepra on the part of the public.
Nepra is fully aware of the grave energy crisis that our country is facing but it seems that the organisation's mind is struck on importing electricity from India, which they think is a panacea for the energy crisis. In my considered opinion, such strategies will only serve to further shackle Pakistan into dependence on other countries.
In conclusion, it is safe to say that Nepra, supposedly a regulatory body, is nothing but a repository for the statues of cronies and retired bureaucrats. However, there is one vital difference between the statues of NEPRA and the statues of Madame Tussaud's. The waxworks at the museum at least generate significant annual revenue. On the other hand, Nepra is parasite, spending money on hearings held in luxurious five-star hotels, so much so that Nepra has helped, inadvertently, to effectively prop up the hotel industry in our ailing economy.
In epilogue, it must be understood that steadfast commitment to generating employment opportunities in the energy sector will help curb terrorism. If the citizens of this great country are productively employed, they are more likely to desist from engaging in terrorism. This can only be done when the political regime addresses energy issues, which have paralysed industries across the country creating more and more unemployment and disaffection. This milestone cannot be achieved unless the right person is selected for the right job, cutting out deadwood irrespective of kinship and family relations with the higher ups. This is the simplest formula to revamp national power regulator. Nepra, is a case study of institutional failure. To implement sustainable energy policies for economic growth is a cause of concern for the entire international community.
(The writer is adviser at SDPI)