LAHORE: The government has set up a committee for auditing the power sector, eliminating circular debt and developing a future road map, in a bid to identify and examine causes of high cost of electricity in Pakistan.
According to a notification issued by the Ministry of Energy (Power Division), the committee will also discuss the establishment of private power generation units under different power policies, propose steps to prevent wrongdoing and ensure energy security in the country.
The committee will not only identify and examine the causes of circular debt, but it will also propose ways to overcome the problem, give suggestions to prevent future build-up of the debt and ensure power supply at least possible tariffs.
As per the notification, the committee will consist of eight members which include the Power Division additional secretary, an officer not less than Power Division deputy secretary, nominees of the Securities and Exchange Commission of Pakistan (SECP), National Electric Power Regulatory Authority (Nepra), Central Power Purchasing Agency, National Power Control Centre, Federal Investigation Agency and Inter-Services Intelligence. The committee will be chaired by former SECP chairman Muhammad Ali.
This probe, though coming close on the heels of other such investigations into the independent power producers (IPPs) by the National Accountability Bureau (NAB), Nepra, the Inquiry Commission on Debt, has, however, been cautiously welcomed by the IPP sector as it is expected to tackle issues pertaining to the power sector in a professional manner.
The committee’s terms of reference cover four broad areas, which include review matters pertaining to the cost of setting up private power generation units under various policies including all aspects of project costing and identifying any unethical or illegal practices, administrative procedural weaknesses and any regulatory gaps that may have appeared, and recommending the way forward.
The committee will also review matters pertaining to payments made to the IPPs, payables to the IPPs, lower-than-required collection of consumer bills by distribution companies, electricity tariff determination policies and procedures, and identify unethical or illegal practices, if any.
Similarly, the committee will also review the policies and models of the power sector globally and recommend the way forward for changes in the country’s power policies, administrative setups across the entire value chain, power generation and billing to end-consumers, regulatory and market reforms with a view to avoiding circular debt in the future and reduction in the cost of power supply to consumers.
It will also review compliance of the IPPs with their respective power purchase agreements (PPAs) and any illegal relaxation given to the IPPs in terms of tariff determination, financial close, construction period, capacity payment and merit order, review the fuel efficiency allowed under the tariff policy and actual cost accounting of the IPPs and capital structure allowed under the tariff policy.
The committee will be responsible for submitting two interim reports – first within six weeks of its establishment and the second within 10 weeks. It will be coming up with a final consolidated report within 12 weeks for review by the prime minister.
Published in The Express Tribune, August 18th, 2019.