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Nepra moves against K-Electric

Nepra, being much in hibernation ever since the privatisation of KESC some 10 years back, has been rudely shaken this summer to wake up amidst street protests and a fresh bout of government’s awakening to take a fresh look at K-Electric (K-E) deliverables, this time apparently a bit more seriously.

Up to now, Nepra’s role has largely been limited to tariff adjustments for K-Electric supply of electricity to 2.2 million customers in Karachi extending from Gharo in Sindh to Bela in Balochistan. Consequent to recent excessive load shedding in the said area, the government directed Nepra to carry out a comprehensive audit of the key performance indicators of K-Electric’s performance and financials.

It has been reported that Nepra in its findings has established the default on part of K-Electric in violating the agreement and the licence conditions it signed with the government – a default which may invoke a show-cause notice to be followed by regulatory proceedings against the utility. A possibility of a fine of Rs 100 million or appointing an administrator for the take-over of the company cannot be ruled out as stated. One of the reasons of default made public is that despite taking a loan of Rs 13 billion from the government at the time of privatisation to deliver certain things, the K-E did not implement the agreement, whereas load shedding in Karachi during Ramazan extended from 12 to 96 hours at a stretch contrary to K-E’s claim of 8 to 10 hours.

Nepra’s moving into action, solely on government instructions, brings into question the role of a regulator in Pakistan as a body established to fairly and independently protect the interests of the government, the private or public sector investor and the people. Nepra would have looked good if it would have been proactive in systematically monitoring the operations of K-E under the mandate awarded to it in accordance with the constitution of Pakistan. But, this did not happen. Nepra moved under the instructions and dictates of the government which has compromised its status as an independent body.

Not much different is the conduct of oil and gas sector regulator – Ogra. Consequent to the recent fuel availability crises, with petrol pumps out of fuel for a week or so, Ogra was held primarily responsible by the government for not being proactive in systematically monitoring the mandatory oil storage inventory levels of oil marketing companies. At the Ogra end not much of its findings, beyond counter-blame, was made public; nor was a road map formulated to arrest such happenings in future. It soon was business as usual and perhaps will remain so till a new debacle confronts the nation with much of the same scene repeated again.

With this background one is sceptical about Nepra’s findings on K-E and whether the conclusions, if any, be made transparent and implemented in the interest of all parties. Most likely, as per the past trend, it will be business as usual once the public hype is over. The culture of deals has creped well into all segments of state governance, as in politics, with the result that not much good is happening around us.

On the other hand, K-E, however, much in defiance of Nepra, has widely published in print media its achievements since the current management took control in 2009. K-E claims to have invested PKR 106.9 billion in the period 2009 to 2015, much of it as Foreign Direct Investment (FDI), of which PKR 77 billion in adding 1038 MW of power to the grid, Rs 18 billion in upgrading the distribution network, Rs 9.6 billion in transmission grids and Rs 2 billion in management systems upgrades like SAP-ERP system for the integrated monitoring and management of KE’s financial and operational disciplines. The system also identifies a good customer from a bad one and accordingly regulates the duration of loadshedding or no loadshedding. K-E pledged to invest additional Rs 200 billion over the next 3-5 years by further adding a capacity of 700 MW coal fired power plant and converting the 400 MW furnace oil based plants into coal fired ones and 180 MW diesel plants to combined cycle to make the plants more efficient and cost effective. It plans to achieve 1000 MVA power transmission enhancement. K-E claims to have provided uninterrupted power to all the industrial zones in the last 5 years and stated to have exempted 60% of Karachi from loadshedding.

The public, while it suffers, is confused whom to believe. This would not have been the case if the perception and conduct of our regulators had been above questioning nor could have K-E dared to independently present to the public its side of the story while the Nepra audit is on – a breach which appears to have been ignored by the regulator or perhaps condoned.

Nepra and other regulators have a constitutional mandate to look after the public interest. In the K-E case, public expects to be informed on issues like as to what really went wrong in KESC privatisation and put to rest the ongoing bouts of government assertion, from time to time, that it was a bad privatisation. The public demands a fair verdict on K-E claims and Nepra findings and above all the actions that have been taken to put the house in order and its sustainability. Simply playing to the media and the gallery is a dent on the credentials of our public institutions. This needs to change and change fast.

Farhat Ali, "Nepra moves against K-Electric," Business recorder. 2015-07-22.
Keywords: Economics , Economic issues , Economic crisis , Economic problems , Government-Pakistan , K-Electric , Power plant , Sindh , Balochistan , Pakistan , MVA , PKR , KESC