National Electric Power Regulatory Authority (NEPRA)
BACKGROUND
Historically, electricity sector policymaking, regulation, and service provision were all under the State’s control. However, they lacked the managerial capacity and financial resources necessary to keep up with the growing demand for their services.
The government in 1992 prepared a strategic plan for restructuring the electricity sector. It unbundles vertically integrated utility, WAPDA, into separate generation, transmission, and distribution companies for better management. The government invited private capital in the generation sector to augment state-owned generation resources. The establishment of an autonomous regulatory agency to introduce transparent and judicious economic regulation in the power sector of Pakistan was also part of this plan.
The National Electric Power Regulatory Authority (NEPRA) was established under Section 3 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (NEPRA Act No. XL 1997) to regulate the provision of electric power services in Pakistan. In 2018, the NEPRA Act was amended to create a legal basis for developing a competitive electricity market.
Initially, NEPRA was established as an autonomous body with no administrative control from the government. However, for interaction with Federal and Provincial Governments, it was an attached department to the Ministry of Water and Power. Later, it was linked with the government through the Ministry of Law and Justice. Since June 2000 NEPRA has been under the Cabinet Division (Malik, 2007).
NEPRA Act
As in the NEPRA Act 1997, the aim behind the formation of NEPRA was to have an independent regulatory body to improve the efficiency and availability of electric power services while protecting the interests of consumers, investors, and the operators equally, and to promote competition and deregulate power sector activities where competition exists.
| Box 1. Major regulatory obligations under NEPRA Act No. XL 1997
· Grant of licenses, approval of power acquisition programs. · Determination of tariff, terms and conditions and rates. · Prescription and enforcement of quality-of-service standards, approval of operating codes and investment standards; and · Industry structure/privatisation including the transition towards a competitive market where feasible; and · Consumer rights and obligations_ complaint redressal. |
Under the act, NEPRA’s policy guidelines for power sector reforms revolve around: cost-effective tariff structure to ensure investments in the short run; expansion of generation, transmission, and distribution capacities in the long run to meet the growing energy demand; and to ensure a reliable provision of electricity to consumers (Malik, 2007).
However, the Regulation of Generation, Transmission and Distribution of Electric Power (Amendment) Act, 2018 has increased its responsibilities to include not only the regulation of generation, transmission and distribution of electric power and matters connected therewith and incidental thereto, but also to ensure high standards of transparent, certain and effective regulation of the electric power markets of Pakistan; specification of the legal framework within which a competitive electric power market can develop and sustain; and to manage conflict of interest between the state and the development of the electric power markets. Key amendments are reported in Appendix A.
Besides, ensuring the elimination of energy poverty and facilitating the development of environment-friendly renewable electricity markets are among the major responsibilities of NEPRA.
| Box 2. NEPRA Mandate under Amended Act [Act No. XII of 2018]
In addition to grant licenses and tariff determination, NEPRA is given authority to, · Specification of procedures & standards for registration of persons providing electric power services. · Advisory to the Federal Government in the formulation of electricity plan, policy, and public sector projects. · Specification and enforcement of performance standards for generation companies and persons licensed or registered under the Act. · Specification of procedures & standards for investment programs by generation companies and persons licensed or registered under the Act. · Specification of accounting standards and establish a uniform system of account by generation companies and persons licensed or registered under the Act. · Ensuring efficient tariff structures and market design for sufficient liquidity in the markets. · Specifying fees. · Review of its own decisions. · Settle dispute between licenses in accordance with the specified procedure. · Issue guidelines and operating procedure to promote market development, including trading in accordance with national electricity plan and policy. · Review of organisational affairs of generation companies and persons licensed or registered under the Act for efficient supply of services. · Encourage uniform industry standards and code of conduct for generation companies and persons licensed or registered under the Act for efficient supply of services; and · Submit report on the activities of generation companies and persons licensed or registered under the Act to the Federal Government. |
In short, under the amended act, NEPRA’s policy guidelines revolve around creating a legal basis for moving to a competitive market structure.
