The World Bank (WB) favours the establishment of an appellate forum to review tariff determinations finalised by the National Electric Power Regulatory Authority (Nepra), which the regulator had opposed vigorously in the past, official sources told Business Recorder. According to sources, the bank is of the view that the current process has the potential of impasse, as it happened last year.
It says that any changes in issues, such as appeal processes, need to be considered in relation to the implications for investors and the more general credibility. The bank is ready to provide support in these issues if the government wishes, bank's energy sector mission said in meetings with government officials during May 16-31.
A Cabinet committee on regulatory bodies, headed by Prime Minister Shaukat Aziz, has also considered the proposal on recommendations from Minister for Water and Power Liaquat Ali Jatoi who wants to give hegemonic role to the utility at all cost.
The Water and Power Ministry, which is backing Wapda and the Private Power Infrastructure Board (PPBI) in black and white, has also convinced the WB team that without the establishment of an independent appellate body, Nepra could not be controlled.
On May 23, the committee discussed the controversy and asked Prime Minister's Advisor on Energy to submit recommendations within a month so that the issue may be resolved.
The World Bank team observed that there were a number of important developments and, apart from new tariff filings by the distribution companies (Discos), the National Transmission and Dispatch Company (NTDC) was about to file a multi-year tariff petition.
The Discos have also raised the issue of retail and wholesale tariffs, saying that lack of company-specific retail tariffs (or distribution margins) makes it difficult to plan and conduct budgeting, financial management and investment financing.
They say that it also makes it difficult to introduce adequate incentives, at the company and staff levels, for rewarding good performance and penalising non-performers. On top of that, it appeared that different discos were being charged different wholesale tariffs (power purchase price) which adds another major element of uncertainty and risks beyond discos' control.
"In the absence of clear and predictable tariffs setting rules, the discos will be severely limited in their ability to improve their operation and investment performance," the bank observed.