The energy sector

It has been reported that the Cabinet Division has been granted the power to set electricity tariff to the Minister for Water and Power, Khawaja Asif. The reasons are twofold: (i) the line losses as well as actual bill collection allowed by the regulator, National Electric Power Regulatory Authority (Nepra), in setting tariff is considerably higher than what is in fact the case - a situation that accounts for rising receivables of power sub-sectors generating the debilitating circular debt; and (ii) the government in any event sets the final tariff, that is subsequent to Nepra submitting the proposed tariff for review, as then deliberates on the amount of subsidy it would extend.
These are valid concerns voiced repeatedly by the Ministry of Water and Power; however, there is a downside to this move as Nepra has opposed the government's proposed tariff determinations for a number of extremely valid reasons that aimed to protect the interest of the consumers. For example, Nepra refused to entertain the Ministry's recommendation to add security-related costs to tariff for power projects awarded to Chinese companies last year by pointing out that the existing tariff already includes a security cost.
In addition, the Central Power Purchase Agency (CPPA) requested Nepra to approve a Rs 1.62 tariff reduction in power tariff for January but instead Nepra approved a Rs 3.23 per unit reduction on legitimate grounds and pointed out that: (i) inefficiently-run plants (state-run generation companies) were adding to the costs of generation by violating merit and that higher tariff would reflect rewarding inefficiency; (ii) CPPA's poor and delayed accounting practices claiming a Rs 9.8 billion adjustment of 11-year-old bills without any certification or evidence prompting the Nepra Chairman to maintain that "we will take the legal opinion whether such delayed claims can be entertained or not;" and (iii) Nepra maintained that the cost per unit from the controversial Nandipur power plant was well above the determined tariff and as a result, over Rs 2.5 billion worth of rightful charges could not be allowed in the tariff resulting in an additional debt servicing cost that would ultimately need to be passed on to the consumers which was extremely unfair. No doubt, there would be an overwhelming support from the public to all three of the decisions taken by Nepra based on an impeccable rationale.
It is precisely for these reasons that multilaterals, including the World Bank, have repeatedly expressed serious concerns at attempts to undermine the regulator's autonomy. In a recent letter, the World Bank urged the government to allow Nepra to maintain its autonomy - a letter written subsequent to the government's attempt to bring five regulators, including Nepra, under the administrative control of the line ministry, as opposed to the Cabinet Division - a move checkmated through the courts.
To conclude, Nepra, together with the other four regulators, performs a critical service for the public and it does so by reining in unjustified demands for higher tariffs by not only inefficiently-run Gencos and CPPA, but also higher tariff demands by members of the administration who have taken the decision to implement a flawed project such as Nandipur. Be that as it may, it may also be appropriate for Nepra to be more realistic in assessing the line/distribution losses as well as the Discos' bill collection rate.