Maintaining cost accounting records: SECP to make it mandatory for power generation firms

The Securities and Exchange Commission of Pakistan (SECP) will make it mandatory for power generation companies to maintain cost accounting records to calculate cost of generation and sales of each of the generation facility licensed by National Electric Power Regulatory Authority (NEPRA) during a financial year. According to the draft of Electric Power Generation Industry (Cost Accounting Records) Order, 2015 issued by the SECP here on Wednesday, the order shall apply to every company engaged wholly or partially in generation of electric power energy in Pakistan under the licenses granted by the NEPRA.
Under the proposed order, power generation companies would be required to maintain adequate records showing the quantity and cost of various utilities consumed and utilized by the company related to production. Details shall be available to determine the actual consumption by the power house. The cost of power consumed by the company shall be shown separately in cost statements.
Power distribution shall be considered a separate line of activity in power sector. Adequate record shall be maintained for the expenditure incurred on distribution lines, gauging installations, repair and maintenance and extension of distribution network. The record shall be maintained for all those expenses which are incurred on activities that can be reasonably and fairly be attributed to distribution services. Adequate record shall be maintained to evaluate the cost of energy losses as expenses and it would be clearly indicated whether these are normal or abnormal losses. In case of abnormal losses these shall be separately disclosed. Where energy losses exceed the normal limits, the reasons shall also be disclosed in the cost records, SECP said.
Every company to which this Order applies shall, in respect of each financial year commencing on or after the commencement of this Order, keep cost accounting records, containing, inter-alia, the particulars specified in Schedule I, II and III to the Order. The cost accounting records shall be kept in such a way as to make it possible to calculate from the particulars entered therein the cost of generation and cost of sales of each of the generation facility licensed by NEPRA during a financial year. Where a company is engaged in any other business, the particulars relating to the utilisation of materials, labour and other items of cost in so far as they are applicable to such other product shall not be included in the cost of product referred.
It shall be the duty of every person referred to in sub-section (7) of section 230 of the Companies Ordinance, 1984 to comply with the relevant provisions in the same manner as they are liable to maintain financial accounts required under section 230 of the said Ordinance. If a company contravenes the provisions of Order, every director, including chief executive and chief accountant, of the company who has knowingly by his act or omission been the cause of such default shall be punishable under sub-section (7) of section 230 of the Companies Ordinance, 1984.
Following raw/direct materials are considered as prime sources of energy in their respective Electric Power Generation process: furnace oil; diesel oil; gas; coal; water; wind; steam and others (to be specified). The draft order said that adequate records shall be maintained for above material where applicable for receipt, issue and balances both in quantities and values. The basis of valuation shall be consistent with the requirement of Accounting and Financial Reporting Standards as applicable in Pakistan and shall be disclosed clearly in the cost records maintained or if so desired by the company in a separate manual of procedures, if any maintained by the company or in foot-notes or separate explanatory notes to the cost statements for the relevant period.