FUNCTIONING OF NEPRA AS AN EFFECTIVE POWER REGULATOR OF PAKISTAN By Muhammad Rizwan Saeed MA Islamic Studies, University of the Punjab, 2000 MBA, Al-Khair University AJK, 2002 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCES In Business Administration To FACULTY OF ADVANCED INTEGRATED STUDIES AND RESEARCH (MS BA) NATIONAL UNIVERSITY OF MODERN LANGUAGES, ISLAMABAD December 2009
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FUNCTIONING OF NEPRA AS AN EFFECTIVE POWER REGULATOR OF PAKISTAN
By
Muhammad Rizwan Saeed
MA Islamic Studies, University of the Punjab, 2000 MBA, Al-Khair University AJK, 2002
A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF
MASTER OF SCIENCES
In Business Administration
To
FACULTY OF ADVANCED INTEGRATED STUDIES AND RESEARCH
(MS BA)
NATIONAL UNIVERSITY OF MODERN LANGUAGES, ISLAMABAD
December 2009
ii
NATIONAL UNIVERSITY OF MODERN LANGUAGES FACULTY OF ADVANCED INTEGRATED STUDIES & RESEARCH
THESIS/DISSERTATION AND DEFENSE APPROVAL FORM
The undersigned certify that they have read the following thesis, examined the defence, are satisfied with the overall exam performance, and recommend the thesis to the Faculty of Advanced Integrated Studies & Research for acceptance: Thesis/ Dissertation Title: Efficiency of NEPRA as an Effective Power Regulator of Pakistan Submitted By: Muhammad Rizwan Saeed Registration #: 001-MSBA/2007 (Jan) Name of Student
Master of Sciences Degree Name in Full (e.g Master of Philosophy, Doctor of Philosophy)
Business Administration Name of Discipline Prof. Dr. Shahab Alam ______________________________ Name of Research Supervisor Signature of Research Supervisor Prof. Dr. Shazra Munnawer ______________________________ Name of Dean (FAISR) Signature of Dean (FAISR) Prof. Dr. Aziz Ahmad Khan ______________________________ Name of Rector Signature of Rector
_______________________ Date
iii
CANDIDATE DECLARATION FORM I _______Muhammad Rizwan Saeed _______________________ Daughter/ Son of ___Qazi Muhammad Saeed (Late) ___________ Registration # _____001-MSBA/2007 (Jan)__________________ Discipline ________Business Administration_________________ Candidate of ____Master of Sciences___________________ at the National University of
Modern Languages do hereby declare that the thesis (Title) __Functioning of NEPRA as an
Effective Power Regulator of Pakistan __________________________________________
submitted by me in partial fulfillment of MS degree, is my original work, and has not been submitted or published earlier. I also solemnly declare that it shall not, in future, be submitted by me for obtaining any other degree from this or any other university or institution. I also understand that if evidence of plagiarism is found in my thesis/dissertation at any stage, even after the award of a degree, the work may be cancelled and the degree revoked. ____________________________ ______________ Signature of Candidate Date ___Muhammad Rizwan Saeed____ Name of Candidate
iv
ABSTRACT Thesis Title: Functioning of NEPRA as an Effective Power Regulator of Pakistan
The effectiveness of a regulatory agency is outcome of the quality of its management,
whereas a strong infrastructure i.e., fulfillment of institutional requirements and autonomy of
functions are the basic requirements of an autonomous regulatory system, besides the
environmental factors that can also influence the effectiveness of a regulatory body.
NEPRA, the National Electric Power Regulatory Authority was established in 1997 to
ensure transparent and judicious regulation in the power sector, after restructuring of power
sector. Earlier the government was the operator as well as the regulator for both power
services providing companies i.e., WAPDA and KESC. The power sector restructuring and
other reforms in the energy sector were the efforts to avert the risk of any future energy crisis,
but they could not be proved to be fruitful.
This research work is based on evaluation of the efficiency of NEPRA as an effective
electric power regulator in Pakistan, considering the above stated four main factors. The
scientific research method, consisting of hypotheses testing and the formulation of regression
model was used in the research work. It has been concluded that NEPRA is working in a nice
manner. There are three stakeholders of NEPRA, i.e., government, electric power companies
and the electricity consumers. Out of which government and most of the electric power
companies are satisfied with the performance of NEPRA, but the electricity consumers are
less satisfied. Availability of trained manpower and implementation of regulations have been
pointed out as the areas of special attention to improve the performance of NEPRA. Some
steps are also suggested in this regard.
This study is an attempt to improve the effectiveness of NEPRA by exploring the
influence of different factors upon it. The research work has contributed towards increasing
the ability of NEPRA to overcome the present power crisis of Pakistan and to address the
grievances of electricity consumers.
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TABLE OF CONTENTS
Chapter Page
THESIS/DISSERTATION AND DEFENSE APPROVAL FORM ...…… ii
CANDIDATE DECLARATION FORM .…………………………………. iii
ABSTRACT ………………………………………………………………… iv
TABLE OF CONTENTS ...………………………………………………… v
LIST OF TABLES .….……………………………………………………… ix
LIST OF FIGURES ………………………………………………………… x
LIST OF APPENDICES …………………………………………………… xi
LIST OF ABBREVIATIONS ……………………………………………… xii
ACKNOWLEDGEMENTS ...……………………………………………… xiii
1. INTRODUCTION ..………………………………………………………… 1
1.1 Background of the Study ..……………………………………………… 1
1.2 Context of the study …………………………………………………… 1
1.3 Rationale of the study .………………………………………………… 3
1.4 Problem statement ..…………………………………………………… 5
1.5 Significance of the study ……………………………………………… 6
A Structure of Pakistan Electric Power Company (PEPCO) ………………… 155
B Details of Independent Power Produces (IPPs) …………………..………… 156
C Status of Generation Projects Under Process .……………………………… 157
D Category-wise Number of Consumers (Year 2008) .……………..………… 158
E Questionnaire to be filled by officials/ representatives of NEPRA ………… 159
F Questionnaire to be filled by Electricity Producers/ Transmitters/
Distributors …………………………..…………………………………….. 161
G Questionnaire to be filled by members/ representatives of Chambers
of Commerce and Industry ………………………………………………… 163
xii
LIST OF ABBREVIATIONS
AEDB Alternative Energy Development Board AJK Azad Jammu & Kashmir ATA Automatic Tariff Adjustment CHASHNUPP Chashma Nuclear Power Plant CNG Compressed Natural Gas CO2 Carbon Dioxide CPPA Central Power Purchase Agency DISCOs Distribution Companies EPRE Electric Power Regulatory Effectiveness FESCO Faisalabad Electric Supply Company FPCCI Federation of Chambers of Commerce & Industry GENCOs Generation Companies GEPCO Gujranwala Electric Power Company GWh Giga Watt Hour HESCO Hyderabad Electric Supply Company HSFO High Speed Furnace Oil IESCO Islamabad Electric Supply Company ICB International Competitive Bidding IPPs Independent Power Producers KANUPP Karachi Nuclear Power Plant KESC Karachi Electric Supply Corporation LESCO Lahore Electric Supply Company MEPCO Multan Electric Power Company MW Mega Watt NEPRA National Electric Power Regulatory Authority NTDC National Transmission & Dispatch Company PEPCO Pakistan Electric Power Company PESCO Peshawar Electric Supply Company PPAs Power Purchasing Agreements PPIB Private Power and Infrastructure Board QESCO Quetta Electric Supply Company SPPs Small Power Producers TESCO Tribal Electric Supply Company TOE Tons of Oil Equivalent WAPDA Water and Power Development Authority
xiii
ACKNOWLEDGEMENTS I am very thankful to Almighty Allah for His guidance and help throughout this
research study.
I acknowledge the generous assistance, guidance and time given by my respected
teacher and supervisor, Dr. Shahab Alam, throughout the study.
I am deeply grateful to Dr. Shazra Munnawer, Dean of the “Faculty of Advanced
Integrity Studies & Research” and other faculty members, especially Dr. Rashid Ahmed
Khan and Dr. Faqir Muhammad who provided guidance.
My heartiest appreciation goes to my parents, without their blessings this research
would not be possible. I am also grateful to my wife and children, who remained the source
of love, affection, care and encouragement throughout this laborious task.
My gratitude also goes to the officials of NEPRA, WAPDA and IPPs as well as the
members of FPCCI and the local Chambers of Commerce & Industry throughout the country,
who took part in the survey and filled the questionnaires.
I am also thankful to my friends Dr. Sajid Hussain Awan and Mr. Ghulam Rasool for
their kind help and intellectual guidance.
1
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
National Electric Power Regulatory Authority (NEPRA) was established by the
Government of Pakistan under NEPRA Act No. XL of 1997. It was set up with the purpose to
provide the regulation of generation, transmission and distribution of electric power. Basically
the effectiveness of a regulatory agency is the consequence of the quality of its management.
This research work is based on the idea to evaluate the efficiency of NEPRA as an effective
power regulator in Pakistan. The purpose of this study is to suggest the improvement in the
quality of management at NEPRA, which will result in enhancing its ability to overcome the
present power crisis of Pakistan and to address the grievances of electricity consumers.
1.2 CONTEXT OF THE STUDY
WAPDA was created in 1958 for coordinating and providing same direction to the
schemes of Water and Power development. The same task was formerly being done the
respective Provincial Electricity and Irrigation Departments.
KESC, the Karachi Electric Supply Company Limited has been working since 1913.
KESC was responsible for electric power generation, transmission and distribution to
residential, commercial, industrial and agricultural consumers within its licensed areas (6000
square kilometers) i.e., entire Karachi and its outskirts in Sindh and Baluchistan. KESC was
privatized in 2005 with the transfer of 73% shares to the private sector, whereas 27% shares
rest with Government of Pakistan. (Malik, 2007)
As stated earlier, the electric supply in Pakistan was the responsibility of two vertically
coordinated entities WAPDA and KESC after 1958. Government was acting as operator and
2
regulator for both entities. Their performance remained satisfactory until early 1980s, later on
the situation started deteriorating. After huge losses in WAPDA and KESC the need was felt to
restructure them. It was also recognized that the efficient power generation and transmission
capacity expansion could only be attained through the involvement of the private sector.
(Malik, 2007)
In 1992, government planned to privatize the power sector and prepared a strategic plan
for the same. It was decided in 1993-94 to go for thermal power generation through the
independent power producers (IPPs). NEPRA, the National Electric Power Regulatory
Authority was established in 1997 as an independent regulatory agency, in order to introduce
transparent and wise cost-effective regulation in the power sector. Formation of regulatory
authorities was also the demand of multilateral lenders and they provided funds for the creation
and restructuring of public sector utilities including NEPRA (Kazmi, 2000).
In 1998 WAPDA’s Power Wing was vertically integrated into separate generation,
transmission, and distribution companies, according to NEPRA Act-1997 and WAPDA Act-
1998. WAPDA has now been re-organized into four thermal power generation companies
(GENCOs), nine power distribution companies (DISCOs) and one National Transmission and
Dispatch Company (NTDC). The hydroelectric power development and operation functions
remained with WAPDA. (Malik, 2007)
In October 2007, WAPDA was bifurcated into two separate bodies i.e., WAPDA and
Pakistan Electric Power Company (PEPCO), out of which WAPDA is made responsible for the
development of water sector and Hydel Power projects whereas PEPCO (formerly WAPDA
Power Wing) is vested with the responsibility of thermal power generation, transmission,
distribution and billing. There is an independent Chairman and MD (PEPCO) replacing
Chairman WAPDA and Member (Power), who were previously holding these additional
charges.
PEPCO has been fully empowered for the supervision of the affairs of nine Distribution
Companies (DISCOs), four Generation Companies (GENCOs) and a National Transmission &
Dispatch Company (NTDC). These companies are working under independent Board of
Directors (Chairman and some Directors are from Private Sectors).
3
Central Power Purchasing Agency (CPPA) has been established under the coverage of
NTDC for payments from DISCOs to IPPs, GENCOs and NTDC. Ultimately, it will function
independently under Federal Govt. and all forthcoming Independent Power Producers (IPPs)
will be under CPPA.
The power sector restructuring and other reforms in the energy sector were the efforts
to avert the risk of any future energy crisis. In spite of all these preventive measures and
remedial actions, the energy crisis has been emerged in the form of acute deficiency of electric
power in Pakistan. Presently both domestic and commercial users of electricity are facing its
acute shortage these days, which has badly hampered the routine activities. Pakistani industry
is a major victim of power outage along with the troubled citizens. The question arises in a
competitive global economy how a country's industry can compete by loosing 25% of
productivity on daily basis, especially when we are the neighbours to China and India, two of
the world fastest growing economies (Aliji, 2008).
NEPRA, the official regulatory body for the power sector, does not have the autonomy
it needs to impose a rational price structure. With hydro-electric projects held-up due to a lack
of political will and consensus, and thermal projects unable to start due to bureaucratic
hesitation and lack of private-sector interest, a bigger crisis becomes visible on the horizon. As
the KESC privatisation has just demonstrated, the private sector does not have a ready answer
for all our problems. There must be a sound plan based on political consensus that involves all
the stake-holders (Qamar, 2008).
The reorganization of power sector and reformation of power regulatory structure of
Pakistan are the steps towards country’s self-adequacy in meeting its electricity needs. But
there is still space for improvement. This research study is an effort to fill the gaps in the
present power regulatory structure of Pakistan.
1.3 RATIONALE OF THE STUDY
On request of WAPDA, Automatic Tariff Adjustment (ATA) mechanism for fuel cost
variations was formulated by the end of 1999 (Rizvi, 2000). Since March 2001, ATA was
4
adopted, and was being applied every three months, i.e., adjusting the tariffs of the distribution
companies according to the variations in fuel prices (Malik, 2007).
Recently Government of Pakistan (GoP) has decided to authorise the National Electric
Power Regulatory Authority (NEPRA) to readjust electricity prices monthly, in accordance
with fluctuating oil prices, in a move to end the subsidy for electricity consumers (Bhutta,
2008). With this mandate, all the slabs in the tariff have been abolished and unified rate is set
for the consumers. The decision has badly affected the small domestic consumers and the
domestic and commercial electricity bills have become doubled. The situation has become as
worse that the consumers denied to pay the bills until the justified settlement of tariff (Aliji,
2008), provided the 7 to 16 hours load-shedding per day is already in practice (Khan, 2008).
Up till now not only the government could do as much efforts to solve the problem of
electricity shortage, but the tendency of rapid rise in electricity prices seems to be continued.
Certainly tough decisions will have to be taken, and implemented with commitment. In fact it
is the competence and foresight of leadership to have top think at least 25 years for a nation's
existence in the competitive world (Bacon & Besant-Jones, 2002). Unluckily it could not be
possible during the past 60 year history of Pakistan.
In May, 2008 the federal cabinet approved invitation for fast track electric power
generation schemes by means of International Competitive Bidding (ICB). In fact government
plans to inject an additional 1500 MW thermal power in WAPDA and KESC systems on a fast
track basis and has hit snags as tariff offered by most of the companies is on the higher side.
During negotiation with the qualified companies, only a few companies agreed to reduce the
tariff; the others remained reluctant (Ghumman, 2008).
With the persistent and considerable increase in crude oil price, furnace oil has also
become expensive. Furnace oil is a major fuel used in power generation in Pakistan, as about
25 per cent of the thermal power generation capacity of WAPDA and almost entire power
generation of KESC depends on furnace oil. As an interim measure, WAPDA was allowed to
raise 13 paisa per unit but KESC was denied for the same. (Kazmi, 2000)
KESC has increased per unit charge in October, 2008 accepting NEPRA’s offer,
whereas the commercial and domestic consumers suffered major electricity problems facing
5
power cut and load-shedding as a routine activity. The consequences of this crisis resulted in
the shape of the riots in Karachi by where the suffering citizens finally lost their temper and
came to the streets to protest the unending power cuts. Actually Pakistan’s chronic power
shortage is now assuming critical proportions, but the worse thing than the unending electricity
breakdowns is lack of any planning to rectify the situation. Apart from discomfort of
consumers, there is a direct monetary cost of growing gap between demand and supply of
electric power (Qamar, 2008).
The exorbitant load shedding with the addition of high electricity tariffs have multiplied
the miseries of common people. The present pitiable condition of common man has urged the
researcher to do research on this topic.
1.4 PROBLEM STATEMENT
Pakistan is facing acute shortage of electric power these days. Domestic users of large
cities are observing a minimum of 7 hours load-shedding, whereas this duration dilates to 16
hours per day in rural areas. In addition to this, the tariffs are on increasing trend and now
NEPRA has given consent by the government to revise the tariffs every month, earlier it was
given the permission for such changes after every three months, according to ATA formula
(Rizvi, 2000). This situation has not appeared overnight. The prevalent crisis is an outcome of
unwise energy policies of past thirty years.
The present situation has now raised questions for the performance of NEPRA which is
the regulatory authority for power generation, transmission and distribution throughout the
country, and is responsible to protect the interests of consumers as well as the interests of
power generation/transmission/distribution companies. But it seems that NEPRA could neither
adequately protect the interests of consumers nor that of electric power companies, which is a
deviation from its primary responsibilities. What is the solution of this problem? To answer
this question, there is requirement of a research to study the effectiveness of NEPRA. This
research has highlighted the strengths and weaknesses of this regulatory authority and may be a
step to make it as much effective to get rid of the current power crisis.
6
1.5 SIGNIFICANCE OF THE STUDY
The earlier researches have targeted only one or two aspects to check the effectiveness
of NEPRA. This research work has been based on the Article 7 of NEPRA Act-1997 to
evaluate the effectiveness of NEPRA, with special reference to management attributes of the
consumers’ satisfaction.
7
CHAPTER 2
REVIEW OF LITERATURE 2.1 QUALITY OF REGULATION
A power regulatory authority with good management is mandatory for improvement of
overall performance of Power Sector of Pakistan, as the quality of regulation determines the
rules for investment finance and private participation. A regulatory authority requires a well-
designed industry and market structure for provision of quality regulatory services. The electric
power industry of Pakistan itself requires an efficient governance framework. (Malik, 2007)
2.2 REGULATORY EFFECTIVENESS
Harbison (2001) presented a generic definition of regulatory effectiveness: “Provided
the required authority and resources as prerequisites, the regulatory body is effective when it:
• ensures that an acceptable level of safety is being maintained by the regulated
operating organizations,
• develops and maintains an adequate level of competence,
• takes appropriate actions to prevent degradation of safety and to promote safety
improvements,
• performs its regulatory functions in a timely and cost-effective manner as well as in
a manner that ensures the confidence of the operating organizations, the general
public, and the government, and
• strives for continuous improvements in its performance.”
Regulatory effectiveness means “to do the right work” whereas Regulatory efficiency
means “to do the work right” (Harbison, 2001). It means that the effectiveness is to be
analyzed first, based on well defined mission objectives of the regulatory body. After that the
8
work can be done for improvement of efficiency which can be followed-up by means of setting
achievable goals.
A regulatory system has two basic dimensions i.e., regulatory governance and
regulatory substance. Regulatory governance includes the institutional & legal design of the
system through which is required for decision making whereas the regulatory substance means
the contents of regulation, that is, the regulatory functions including price setting, quality-of-
service, and entry-exit rules etc. (Malik, 2007). Therefore, the regulatory effectiveness mainly
depends upon the quality of governance.
Cook, Kirkpatrick, Minogue and Parker (2004) identified five attributes of good
regulation namely transparency, accountability, targeting, proportionality, and
consistency. This refers to their argument that state regulation is not likely to get authority
until society accepts it for its decisions and behaviours.
Cordova-Novion and Hanlon (2003) observed some of the issues related to the
institutional framework for economic regulation, particularly regulatory accountability in terms
of its balancing effect on independence; and institutional coherence in the shape of the
regulatory framework. Stern and Cubbin (2005) also emphasised on the importance of an
independent regulatory institution, with a clearly defined legal framework for the continuous
output growth and efficiency in the utility services.
Levy and Spiller (1994), Smith (1997), Stern and Holder (1999), Stern (2000) and
Jacobs (2004) identified several governance characteristics for effective utility regulation
which include regulatory autonomy, clarity of functions, accountability, transparency,
predictability and participation.
2.2.1 Modeling Regulatory Effectiveness
Many countries of the world are currently developing effectiveness models. Similarly a
model is helpful for assessment and measurement of regulatory efficiency and effectiveness.
According to Harbison (2001) a model, in this regard, should be based primarily on managing
9
the safety of installations those would be used for electric power generation and distribution.
The quality of the regulatory body can be described through Figure-2.1 which contains
conventional management wisdom and modern business practices carried out at public sector
organizations (Harbison, 2001).
Figure 2.1 Quality System Model for a Regulatory Authority
Source: ‘Improving nuclear Regulatory effectiveness’, Nuclear Energy Agency, Organization
for Economic Co-operation and Development, France.
Mission
Core Activities
Prerequisites
Assessment
What is the task?
How to fulfill it?
Are we fulfilling it?
• The mission, as given by the government. • Core values, as developed by the regulatory authority.
• Core activities (processes or tools) of the regulatory authority (i.e. rule making, inspection, assessment, information, enforcement) = effectiveness.
• Necessary prerequisites and support (support processes, resources, competencies, etc.).
• Assessment of outcomes in relation to the mission and the need to assess the mechanism (i.e. audit, self-assessments, external assessments, indicators) = efficiency.
10
2.2.2 Need for Continuous Improvement
The need for continuous improvement in performance needs to be stressed particularly,
among all the dynamics of an organization. The concept of “learning organization” provides
the basis for continuous improvement in an organization which includes the steps: setting the
strategic direction (identifying issues and setting objectives to solve the issues), determining
resources and work activities (solution designing and implementation), measuring and
monitoring performance (observation and supervision), assessing performance (evaluation
of the effectiveness), and the feedback (tracking success); repeating the process as an endless
loop. Figure-2.2 shows the continuous improvement process.
Figure 2.2 Steps Towards Continuous Improvement
Source: ‘Improving nuclear Regulatory effectiveness’, Nuclear Energy Agency, Organization
for Economic Co-operation and Development, France.
11
2.3 REGULATORY EXPERIENCE IN DEVELOPING COUNTRIES
Economic reforms have not been not very encouragingly experienced in the developing
countries of Latin America, South-East Europe, Sub-Saharan Africa, South Asia and South-
East Asia. Recent studies on the economics of regulation highlighted the issues related to
independent utility regulators.
Most of the studies on effectiveness of regulations have emphasized the importance of
Source: Energy Sector Management Assistance Programme data. [ESMAP (1999)], Global Energy Sector Reform in Developing Countries: A Scorecard; The World Bank, Washington D.C.
Out of 115 countries, some countries took all the six steps for power-sector reforms
whereas some of them had not taken a single step. Corporatization and commercialization was
the most common step (more than 44%) while privatization of assets was the least common step
(about 20%) taken in this regard. (Bacon and Besant-Jones, 2002)
2.8.3 History of Power Sector Reform
Some of the countries have taken up power-sector reforms through major privatization
of the sector to promote competition while others have made partial progress through inviting
private sector for power generation (i.e., IPP route). Many countries have others have not done
significant progress.
The obligation of power purchase through IPP agreements may lead to serious
financial risks, as took place in many Asian countries during 1998 financial crisis, when the
currencies were devalued but retail power tariffs could not be increased (Gray and Schuster,
1998). The higher risks cause greater barriers in the way of power-sector reforms.
Bacon and Besant-Jones (2002) assessed the following five types of exposure that are
experienced due to power-purchase agreements with IPPs, although some Asian countries
(Indonesia, Malaysia, Philippines, and Thailand) were much less exposed to risks beyond their
control.
34
• exchange rate exposure through origin of fuel supply as imported fuels often have
high prices;
• exchange rate exposure through currency of wholesale tariffs; high tariffs in case of
wholesale tariffs in a hard currency like US dollars;
• exchange rate exposure through foreign debt for project financing, especially in
case of project financing over 50% of total project cost;
• market risk exposure through proportion of country’s electric power requirements
fulfilled by IPPs, risk becomes high in case the proportion is more than 50%; and
• exposure to off-taker payment problems through margin of retail tariffs over
wholesale prices, the risk is high when this margin is less than 3 cents (US) per
kilowatt-hour to cover the expenses of transmission, distribution, customer services
along with power system losses, line losses and theft.
The results showed a large difference in risk exposure among aforementioned four
countries. Philippines had the greatest overall exposure due to higher risk-rating for all the five
indicators, which is creating huge problems. Pakistan has the problems like that of Philippines,
with a single-buyer approach (by means of Central Power Purchase Authority to contract with
IPPs for power-purchase). In Pakistan, the problem arose with the arrears in payments by
government agencies to the IPPs due to low collection of payments from power consumers. To
keep the utility's risk exposure within manageable proportions, only a few such power purchase
agreements (PPAs) should be signed before the power market is reformed.
2.8.4 Lessons from Sector Reforms
Experience of designing and implementing power-sector reforms has resulted in several
lessons (Besant-Jones, 1996). Major restructuring of an integrated power supply chain of
functions is feasible. Power generation, transmission and distribution functions can be
separated from one another.
Private financing of power investments is feasible in a perfect business environment,
and commercial lenders are willing to provide medium-term financing (10–15 years) for
35
investments in well-functioning reformed power sectors that are abiding by the regulatory
principles. On the other hand, the countries with little record of good regulation and fair
dealing for businesses, commercial lenders lend only on short maturities (under 3 years). The
governments have to carry an excessively high proportion of investment risks through
performance and payment guarantees, in the presence of multilateral financial participation, in
order to attract large private investments to the power sector.
Governments must sustain an attractive business environment and sound sector
regulation to attract the required amount of investment in power capacity on competitive terms
(Bacon & Besant-Jones, 2002).
2.9 PAKISTAN’S POWER SECTOR REFORMS AND REGULATORY
STRUCTURE
2.9.1 Reforms in the Power Sector
It was in 1986, GOP promoted private sector on built-own-operate basis but the
response was not encouraging, probably due to the political instability.
In 1992, the responsibility of transmission and distribution of electric power vested
with the public sector. The government of Pakistan decided to bring reforms in the electric
power sector through its restructuring. It was understood that power generation and
transmission capacity expansion and efficiency could not be achieved without the
involvement of private sector. The revised power policy was formulated in 1994 and
consequently government invited private sector to invest in the power generation projects.
36
2.9.2 IPPs in Pakistan
Initially 18 IPPS started their operations in Pakistan with the heavy foreign
investment installing the thermal power plants of about 6000 MW capacity. They were
consented to sell their electricity to WAPDA as well as KESC according to their power
purchasing agreements (PPAs). The main thing appealing to the IPPs was the government
incentives in the shape of bountiful tariffs. HUBCO was the first IPP that started its
functioning in 1993 with the power generation capacity of about 1292 MW (WAPDA
Website, 2009).
From 1998 onwards, Pakistan had surplus capacity of power generation WAPDA and
KESC were compelled to buy expensive IPPs electricity though their own plants were
under-utilized. Financial problems, instead of improving, deteriorated even further. IPPs
got involved in disputes and court cases with the government over the tariffs set in their
PPAs with WAPDA. IPPs insisted reduction in fuel prices, in reply of the Government’s
demand for provision of electricity on reduced tariffs. The government then resolved
the IPP issue with the involvement of international donors and within the framework of
contractual agreements (Malik, 2007). Government then in 1994 announced a
comprehensive policy package which had many drawbacks (Shah, 2002). The structural
adjustment programme under the supervision of World Bank and IMF afterward enhanced
this policy shift.
Here are some of the steps that had been taken during the power regulatory reform
process:
• Establishment of Private Power and Infrastructure Board (PPIB) in 1994, to
facilitate private investors.
• Establishment of National Electric Power Regulatory Authority (NEPRA), an
autonomous regulatory agency, to introduce transparent and well-judged
economic regulation in the power sector of Pakistan. NEPRA was created under
37
the NEPRA Act 1997 to ensure fair competition and to protect the interests of
electric power consumer, producer and seller.
• Unbundling of WAPDA’s vertically integrated Power Wing into separate
generation, transmission, and distribution companies in 1998 (as per NEPRA Act-
1997 and the WAPDA Act-1998). WAPDA has now been reorganised into four
thermal generation companies called GENCOs, nine distribution companies called
DISCOs, and one National Transmission and Dispatch Company (NTDC). The
hydroelectric power development and operation functions remained with WAPDA.
• Pakistan Electric Power Company Private Limited (PEPCO) was established as
a separate agency within WAPDA. PEPCO was made responsible for the
restructuring and preparation for privatisation for the generation and distribution
companies in due course through the Privatisation Commission. Private sector
participation is being encouraged to promote competition in the generation and
distribution parts of the industry, while NTDC would remain under state control
and be responsible for national dispatch, transmission, and system planning as a
‘single buyer’.
• Responsibility for the energy sector policy remains with the government.
2.9.3 Reforms to Meet the Country’s Electric Power Requirements
The power demand was projected to grow at 7.9 % (Ghumman, 2006) during the period
of 2005-10 and would increase from 15500 MW to about 21500 MW during this period. To
meet the future electric power requirements during 2005-10 government was promoted
investment in hydel and renewable energy projects to enhance power generation capacity with
other institutional reforms in power sectors. Government was supporting the fast track power
projects and NEPRA has been assisting the potential IPPs through quick processing of the
license applications accurately and appropriately. NEPRA also established the upfront tariff for
various technologies including Wind farms licensing and tariffs for independent power
producers (Ghumman, 2006).
38
To meet total energy requirements, it would be mandatory to explore the possibility of
regional collaboration in this regard. The plans to import of electric power from Iran and
Central Asian states are under consideration.
In year 2006-07, NEPRA issued licenses to several IPPs of 1630 MWs using Thermal,
Wind or Hydel technologies. The Grid Code has established a framework making ease for
operation, maintenance, development and planning of economic and reliable national grid.
NEPRA started monitoring of performance standards of power generation, distribution and
transmission companies. NEPRA also issued several regulations having long-term implication
during 2006-07 considering the demands of accountability, transparency and professionalism.
2.9.4 Power Regulatory Framework
The objective behind the creation of NEPRA (formed under NEPRA Act No. XL of
1997) was to have an independent regulatory body for improvement of efficiency and
availability of electric power services while equally protecting the interests of consumers,
investors and operators, and to promote competition and deregulate power sector activities
for healthy competition.
Initially NEPRA was established as an independent body without any administrative
control from the government. However, for the sake of interaction with Federal and
Provincial Governments it was initially attached to the Ministry of Water and Power. Later
it was linked with the government through the Ministry of Law and Justice. However, in
June 2000 NEPRA was directly attached with the Cabinet Division. Presently, NEPRA is
working in an extremely centralized manner. All the decisions regarding tariffs and
standards required to be approved by federal government. NEPRA consists of a Chairman
and four members (one from each province), all of them are appointed by the government.
NEPRA was initially funded through federal government grant amounting to Rs
100.5 Million. Additionally NEPRA meets its expenses from licensing fees on constant basis
and filling fees for tariff applications etc.
39
Like other regulatory systems, the most important regulatory functions of NEPRA are
grouped in the following five main categories [details may be seen in item 2.9.5]:
• Determination of tariff rates and terms and conditions ;
• Grant of licenses, approval of power acquisition programmes;
• Setting and enforcement of quality-of-service standards, approval of
operating codes and investment standards;
• Industry structure/ privatisation including the transition towards a competitive
market where feasible; and
• Consumer rights and obligations, complaint redress.
NEPRA’s broad policy guidelines for power sector reforms revolve around the
following:
• Tariff structure to ensure sufficient resources to cover costs and investment in
the short term;
• Encourage generation, transmission and distribution capacities on a non-
discriminatory basis to meet the existing needs and growing demand in the long
run; and
• Quality of service to the consumers as well as ensuring network efficiency
including reliability and voltage disturbances.
• Planning criteria for safety, reliability and cost effectiveness of generation,
transmission and distribution facilities.
40
2.9.5 Powers and Functions of Regulatory Authority
The powers and functions of NEPRA are described in the Article 7 of NEPRA Act (Act
No. XL of 1997). According to which:
(1) The Authority shall be exclusively responsible for regulating the provision of electric
power services.
(2) In particular and without prejudice to the generality of the foregoing power, only the
Authority, but subject to the provisions of sub-section (4), shall —
(a) grant licenses for generation, transmission and distribution of electric power;
(b) prescribe procedures and standards for investment programmes by generation,
transmission and distribution companies;
(c) prescribe and enforce performance standards for generation, transmission and
distribution companies;
(d) establish a uniform system of accounts by generation, transmission and
distribution companies;
(e) prescribe fees including fees for grant of licenses and renewal thereof;
(f) prescribe fines for contravention of the provisions of this Act; and
(g) perform any other function which is incidental or consequential to any of the
aforesaid functions.
(3) Notwithstanding the provisions of sub-section (2) and without prejudice to the
generality of the power conferred by sub-section (1) the Authority shall—
(a) determine tariff, rates, charges and other terms and conditions for supply of
electric power services by the generation, transmission and distribution companies and
recommend to the Federal Government for notification;
(b) review organizational affairs of generation, transmission and distribution
companies to avoid any adverse effect on the operation of electric power services and
for continues and efficient supply of such services;
41
(c) encourage uniform industry standards and code of conduct for generation,
transmission and distribution companies;
(d) tender advice to public sector projects;
(e) submit reports to the Federal Government in respect of activities of generation,
transmission and distribution companies; and
(f) perform any other function which is incidental or consequential to any of the
aforesaid function.
(4) Notwithstanding anything contained in this Act, the Government of a Province may
construct power houses and grid stations and lay transmission lines for use within the Province
and determine the tariff for distribution of electricity within the Province.
(5) Before approving the tariff for the supply of electric power by generation companies
using hydro-electric plants, the Authority shall consider the recommendations of the
Government of the Province in which such generation facility is located.
(6) In performing its functions under this Act, the Authority shall, if practicable, protect the
interests of consumers and companies providing electric power services in line with guidelines
laid down by the federal government, not contradictory to the provisions of this Act.
2.9.6 Licenses (Entry and Exit Requirement)
The license provides a plan for the various intermediary phases for the ultimate goal
of an open electric power market structure. No company is allowed to do business of
generation, transmission and distribution without getting a license from NEPRA. License is
an instrument for checking the development of capacity more than required; evaluating the
professional ability of an operator for execution of project; and financial feasibility of the
project. The process involves a public hearing. The progress on issuance of licenses is
given in Table 2.12.
42
Table 2.12 Progress in the Issuance of Licenses
Type of Company Number Capacity
Small Power Producers (SPPs) 25 400 MW
Isolated Generation Companies (IGCs) 6 52 MW
Independent Power Producers (IPPs) 18 4774 MW *
Distribution Licenses ** 9 –
KANUPP and CHANUPP (nuclear) All
KESC and WAPDA Generation Companies All
Transmission License (NTDC) 1
* HUBCO being at the top with the capacity of 1292 MW. ** All successor distribution companies namely, HESCO, QESCO, MEPCO, FESCO,
LESCO, GEPCO, JESCO, PESCO and KESC.
Source: “Effectiveness of Regulatory Structure in the Power Sector of Pakistan (2007)” by Dr. Afia Malik.
43
CHAPTER 3
METHODOLOGY
3.1 OBJECTIVES OF THE STUDY
This research work is based on the idea to contribute towards the solution of the power
crisis of Pakistan through evaluating the effectiveness of NEPRA. The purpose of this study is
to highlight the strengths and weaknesses of NEPRA in order to make it as much effective that
it will be able to overcome the power crisis of Pakistan. Following objectives will be
achieved:-
(i) To find out the level of stake-holders’ satisfaction about the functioning of
NEPRA.
(ii) To find out the level of consumers’ satisfaction with the efficiency of NEPRA.
(iii) To evaluate the effectiveness of NEPRA with reference to satisfaction of
consumers and other stake-holders.
(iv) To find out the hurdles in the way of efficient and effective functioning of
NEPRA.
(v) To analyze the management functions of NEPRA, and finding out the ways and
means for their betterment.
(vi) To make suggestions for increasing the effectiveness of NEPRA, so that it will
be able to solve the power crisis of Pakistan.
3.2 RESEARCH QUESTIONS
This research has been focused on answering three basic questions associated with
power crises of Pakistan.
44
(i) To what extent NEPRA is carrying out its responsibilities?
(ii) What are the hurdles in the way of efficient and effective functioning of
NEPRA?
(iii) How the electricity deficit can be overcome in a short period?
3.3 THEORETICAL FRAMEWORK (EPRE MODEL)
As a model represents a system, as identified by Cooper and Emory (1995), accordingly
the researcher developed EPRE Model based on the four independent variables which affect
two dependent variables. The independent variables include Autonomy of Functions,
Institutional Requirements, Management Expertise and External Factors. The dependent
variables include “Satisfaction of Electric Power Producers, Transmitters & Distributors” and
“Satisfaction of Electric Power Consumers”. Both dependent variables provide collateral for
“Effectiveness of Electric Power Regulatory Authority”. The detail of independent variables is
given below:-
(i) Autonomy of Functions: Regulatory Autonomy, Financial Resources,
Independence for Legislation.
(ii) Fulfillment of Institutional Requirements: Legal Design, Sufficient
Manpower, Clarity of Roles, Transparency, Accountability.
Out of the 33 participants from Electric Power Consumers, 18 participants i.e., 54.5%
agreed with the statement “Power consumers are satisfied with the performance of NEPRA”,
whereas, 13 participants i.e., 39.4% neither agreed nor disagreed with the statement and only 2
participants i.e., 6.1% disagreed with the statement. These results indicate that most of the
participants i.e., 54.5% participants are satisfied with the overall performance of NEPRA,
although a considerable number of participants have shown indifference who are not much
satisfied.
143
5.4 RESULTS OF DATA ANALYSIS To ensure the reliability of data, the statistical test “Cronbach’s Alpha” was applied on
all the questionnaires, among which the first questionnaire was filled by “NEPRA Officials”.
The results of reliability statistics show that the value of Cronbach’s alpha was more than 0.7
for all 30 items. The same test was also applied separately on the items those compose the four
independent variables i.e., factors for effectiveness of NEPRA (within the same questionnaire),
all the four values were greater than 0.7 (Table 4.1). This proves that the data, collected so for,
is reliable and normal.
Reliability test was then applied on the other two questionnaires (dependent variables),
i.e., filled by “Electric Power Companies” (22 items) and “Electricity Consumers” (11 items).
The values of Cronbach’s Alpha calculated in both cases were greater than 0.7 as depicted in
Tables 4.2 & 4.3 respectively. Thus the data collected by means of these two questionnaires
was also found reliable and normal.
For all the factors i.e., “Autonomy of Functions”, “Institutional Requirements”,
“Management Expertise” and “Avoidance of Environmental Factors”, the response of NEPRA
Officials and that of Electric Power Companies were found positively correlated at p < 0.05, as
shown in Tables 4.5, 4.6, 4.7 & 4.8 respectively. However, the correlations were not strong.
For “Management Expertise”, the response of NEPRA Officials and that of Electricity
Consumers were found positively correlated at p < 0.05, as shown in Table 4.9. On the other
hand, for “Avoidance of Environmental Factors” the response of NEPRA Officials and that of
the Electricity Consumers were found negatively correlated at p < 0.05 (Table 4.10).
Pearson’s Correlation Coefficients were calculated for independent variables and
dependent variables separately. All the four independent variables were found positively inter-
correlated which satisfied their multi-collinearity. There were 6 combinations of two different
independent variables each, out of which 4 were found positively correlated at p < 0.01 and 2
were found positively correlated at p < 0.05, as depicted in Table 4.11.
144
Pearson’s Correlation was then applied to find the inter-correlation between two
dependent variables i.e., EN_P and EN_C, which were used separately in EPRE Models. Both
dependent variables were found positively correlated at p < 0.01, as shown in Table 4.12.
“Multiple Regression” was used to confirm the EPRE model and the model was proved
to be fit in both cases of “Power Companies” and “Electricity Consumers” as relationship of
between the set of four independent variables was found to be significantly strong. The four
independent variables were: Autonomy of Functions (AUT_FN), Fulfillment of Institutional
Requirements (FIR), Management Expertise (ME) and Avoidance of Environmental Factors
(AEF), whereas the dependent variables were: Efficiency of NEPRA with respect to Power
Companies (EN_P) and Efficiency of NEPRA with respect to Electricity Consumers (EN_C).
In case of Power Companies, Fulfillment of Institutional Requirements (FIR) was found to be
the most significant variable having the strong relationship with the dependent variable,
whereas in case of Electricity Consumers, Management Expertise (ME) was found to be the
most significant variable.
There were eight (8) hypotheses, out of which four (4) were accepted and four (4) were
rejected. t-test was applied for hypotheses testing for which the rejection region consisted of
⏐t⏐≤ 2. Resultantly the three variables i.e., “Fulfillment of Institutional Requirements”,
“Management expertise at NEPRA” and “Avoidance of Environmental Forces” were found to
be good predictors for “Effectiveness of NEPRA with respect to Power Companies”, whereas
“Management expertise at NEPRA” was found to be the good predictor for “Effectiveness of
NEPRA with respect to Electricity Consumers”.
145
CHAPTER 6
CONCLUSION AND RECOMMENDATIONS 6.1 OUTCOMES OF THE STUDY
The response of Electric Power Companies and that of Electricity Consumers were
correlated to the response of NEPRA Officials on the same topic, it was found that the
correlations were weak in the case of Electricity consumers. The situation indicates that
Electric Power Companies are satisfied with the functioning of NEPRA but the Electricity
Consumers are less satisfied. Although Electricity Consumers are not satisfied with the
functioning of NEPRA, still they have high expectations for betterment in near future.
Prior to data analysis, the reliability test Cronbach’s Alpha was applied on the data
collected by means of all three questionnaires. In each case the value of alpha was greater than
0.7 verifying the reliability and validity of data.
Pearson’s Correlation Coefficients were calculated for independent variables and
dependent variables separately. All the four independent variables were found positively inter-
correlated which satisfied their multi-collinearity (Table 4.11). Said Test was also applied to
find the inter-correlation between two dependent variables. Both dependent variables, used in
EPRE Models, were found positively correlated (Table 4.12). Likewise the results of
correlations showed the significant relationship was found among the data collected from
different sources i.e., NEPRA officials, electric power companies and electricity consumers.
The standard procedure of Multiple Regression confirmed the EPRE model as fit in
both cases of power companies and electricity consumers, showing significantly strong
relationship between a set of four (4) independent variables i.e., Autonomy of Functions
(AUT_FN), Fulfillment of Institutional Requirements (FIR), Management Expertise (ME) and
Avoidance of Environmental Factors (AEF). However, Fulfillment of Institutional
Requirements (FIR) was found to be the most significant variable having the strong
146
relationship with the dependent variable i.e., Efficiency of NEPRA with respect to Power
Companies (EN_P). In case of Electricity Consumers, Management Expertise (ME) was found
to be the most significant variable having strong relationship with the dependent variable i.e.,
Efficiency of NEPRA (EN_C).
According to the results of hypotheses testing, “Fulfillment of Institutional
Requirements”, “Management expertise at NEPRA” and “Avoidance of Environmental
Forces” were three independent variables those can excellently predict the dependent variable
i.e., “Effectiveness of NEPRA” in case of Power Companies. On the other hand “Management
expertise at NEPRA” was found to be the good predictor for dependent variable i.e.,
“Effectiveness of NEPRA” in case of Electricity Consumers.
6.2 REGULATORY EFFECTIVENESS Effectiveness of Electric Power Regulation has two dimensions i.e., regulatory
governance and regulatory substance (Malik, 2007). Regulatory governance consists of
institutional and legal framework which includes sufficient trained manpower, clarity of roles,
transparency in the functions and a system of accountability. All these require autonomy of
functions. Regulatory substance refers to the contents of regulation including setting of
standards, setting of tariffs, quality of services, etc. Both regulatory governance and regulatory
substance surely require autonomy of functions and management expertise; and both are
affected by the environmental factors like influences by the federal government, provincial
governments and other stake holders i.e., electric power service providing companies, electric
power consumers and other political forces in the country.
This research work was focused on above said four main factors which positively
influence the effectiveness of electric power regulation in Pakistan i.e., Autonomy of
Functions, Fulfillment of Institutional Requirements, Management Expertise, and Avoidance
of Environmental Factors. Previous researches on the subject revealed eighteen (18) different
factors that can affect the efficiency of an electric power regulator, however all these factors
are not equally effective simultaneously in Pakistan’s scenario. Hence, the relevant factors
were combined for bringing more simplicity in the research work and subsequently more
clarity and better understanding of the results.
147
NEPRA has the autonomy in most of its functions. Autonomy of Functions includes
Regulatory Autonomy, Availability of Financial Resources, and Independence in Legislation
& Enforcement of Rules/ Regulations, among which Enforcement of Rules/ Regulations often
require involvement of government agencies and institutions. Hence the enforcement of
regulations seems to be a weak area. The importance of all these aspects of regulatory
autonomy has already been highlighted in earlier researches. According to these researches,
autonomy of functions is an important factor that can affect the efficiency of a regulatory
body.
It has been revealed that NEPRA is fulfilling majority of the almost all the institutional
requirements at satisfactory level. The institutional requirements include Legal Design or
Institutional Framework, Sufficient and Trained Manpower, Clarity of Roles, Transparency,
and Accountability. It has been concluded that NEPRA has a strong institutional framework,
which is a basic requirement of a regulatory authority. NEPRA officials have been assigned
different roles and tasks and most of them are aware of their concerned issues only. In this
way, all of them are not aware of all the decisions taken by the top management. There is felt a
scarcity of manpower, especially trained and experienced manpower, due to which the power
companies have to face difficulty while getting their problems solved.
NEPRA higher management and other employees have adequate management
expertise, which are necessary to deal with stake holders and making in-time and right
decisions. Management expertise are based upon fulfilling these aspects: Proportionality
(Qualification according to job requirements), Proficiency, Reliability (Predictability,
Credibility & Consistency), Targeting (Objectivity), and Participation of Customers.
Avoidance of Environmental Factors can positively influence the efficiency of a
regulatory authority, as most of the environmental factors hamper its effectiveness. The
environmental factors that would be avoided include Federal Government Influence, Provincial
Influence, Influence by Customers, and Influence by Power Companies. It is concluded that
NEPRA has to face many of the influences, mostly from federal government (including
indirect pressures from other political forces in the country) and secondly from provincial
governments/ bodies, although the provincial governments often cooperate for power projects
through provisioning of land and other resources. Other influences can be from electric power
companies and electricity consumers, in attempts to secure their interests.
148
It has been concluded that there are three stake holders for an electric power regulatory
authority, i.e., the government, the power companies and the consumers. NEPRA is already
working under the umbrella of federal government. Chairman and members are appointed by
the federal government and they are responsible to it. Hence, NEPRA cannot deviate from the
goals fixed by the government. Consequently government remains satisfied with the
performance of NEPRA.
As per the research findings, NEPRA is presently working at a nice manner, but its
policies and practices are more beneficial for electric power companies than electricity
consumers.
It has also been concluded that the federal government acts as a supporting utility, and
the higher management of NEPRA, comprising of its Chairman and members, as well as its
officials are mostly drawn from government services that have not fresh thinking and the
thinking of getting freedom from government influence. There is felt a deficiency of adequate
and accurate information at some places. This conclusion is similar with the conclusions of
previous researches as referred by Malik (2007). Because of these reasons the delays are
observed in the implementation of NEPRA policies and most of the changes needed for its
effectiveness.
According to the opinion of Electric Power Companies, NEPRA has more autonomy,
but it has weak institutional framework with less management expertise, and electric power
companies can not get undue favours from NEPRA by pressurising it, instead government
sometimes exerts unnecessary pressures upon NEPRA for implementation of its decisions in
order to satisfy the political forces in the country the international financing agencies like IMF
and World Bank.
According to the opinion of Electricity Consumers, NEPRA has less management
expertise, and consumers some times exert pressure upon government for getting relief,
government further exerts this pressure to NEPRA and electric power companies, and also
gives some rebate in the billing. The negative correlation between the data collected from
NEPRA and that of consumers regarding Environmental Factors depicts the use of
environmental factors in the favour of electricity consumers up to some extent. However the
149
efficiency of NEPRA is hampered due to the undue pressures directly by the government and
indirectly by political forces in the country as well as the international financing agencies.
6.3 RECOMMENDATIONS
The results were analyzed in the light of literature reviewed in this regard and the
following steps were recommended:-
1. The nominations of Chairman and Members of NEPRA should be on merit and
Government should consider the qualifications, experience and management expertise
while filling the top management positions at NEPRA.
2. Government should avoid exerting undue pressures upon NEPRA and let it work
independently for satisfaction of all stakeholders.
3. NEPRA should retain and maintain its autonomy by ensuring availability of necessary
financial resources and by making right legislation & enforcement of regulations.
4. NEPRA should take steps for strengthening its institutional framework, with the special
attention to availability of trained manpower.
5. NEPRA should take necessary steps to enhance its management expertise, especially by
placing right persons at right places, maintaining its credibility and ensuring the
participation of customers in decision making on relevant matters.
6. There should be separate process of licensing and regulatory procedures for Small
Power Producers (SPPs), as it is difficult to handle so much SPPs individually from a
central place, while handling the matters of other big power companies. There may be a
separate Wing of NEPRA that will deal with SPPs or their matters should be dealt at
regional offices of NEPRA.
7. Self sufficient power producing industries, which are not engaged in transmission of
electric power on national grid, should have separate regulatory criteria and should be
granted license accordingly.
150
8. Safety at Power Plants, Distribution Facilities and Transmission Lines is a subject of
primary attention for an electric power regulatory authority. This includes the Safety of
Human, Material, Equipment and Installations; among which the human safety is of
utmost importance. In this regard special attention is required in the power transmission
area; where there are insufficient personal protective equipment, proper safe tools and
other facilities to protect the persons working with live high transmission lines or with
live high-voltage equipment. The human safety has been unattended for a long time
probably due to scarcity of funds with power companies including WAPDA and the
companies working under the shelter of PEPCO.
9. NEPRA has to play its role in adjustment of payments among different electric power
service providing companies and other government institutions.
10. Government should not privatize the profitable power generation units and power
projects. Instead those power generation units are required to be privatized which are
either not profitable or they are not being run in full capacity.
151
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Appendix - A
Structure of Pakistan Electric Power Company (PEPCO)
PEPCO is responsible for the management of all the affairs of 14 corporatized entities including four Thermal Power Generation Companies (GENCOs), a National Transmission Dispatch Company (NTDC) and nine Distribution Companies (DISCOs). Following is given the details of Thermal Power Generation Companies (GENCOs) Description Name Structural Formation/ Area of Jurisdiction Generation Companies (GENCOs) 1 Southern Generation Power
Company Limited, Jamshoro, Distt Dadu, Sindh.
GENCO-1 TPS Jamshoro & GTPS Kotri
2 Central Power Generation Company Limited, Guddu, Distt Jacobabad, Sindh.
GENCO-2 TPS Guddu & TPS Quetta
3 Northern Power Generation Company Limited, District Muzaffargarh, Punjab.
MEPCO Rahim Yar Khan, Multan, Khanewal, Sahiwal, Pakpattan, Vehari, Muzaffargarh, Dera Ghazi Khan, Leiah, Rajan Pur, Bahawalpur, Lodhran, Bahawalnagar.
6 Peshawar Electric Power Company
PESCO Whole Province of NWFP.
7 Hyderabad Electric Supply Company
HESCO Whole Province of Sindh except Karachi where KESC is responsible for distribution of power.
8 Quetta Electric Supply Company
QESCO Whole Province of Balochistan.
9 Tribal Electric Supply Company
TESCO FATA and Tribal area of NWFP.
Source: WAPDA Website (2009)
156
Appendix - B
Details of Independent Power Produces (IPPs)
Detail of the IPPs Projects commissioned and under commercial operations is as under:
Sr.# Name of Project Technology
Commercial Operation
Date
Gross Capacity
(MW)
Net Capacity
(MW)
Energy Received July, 2006 to June, 2007
(GWh)
1 KAPCO GTs, Combined cycle, Steam Turbine on LSFO/Gas/ Diesel
1 Attock Gen Limited 156 PPA Signed 01.09.07 10.01.09 2 Gulf Power Project 179 19.04.2007 31.10.08 3 Eastern Power Project 150 19.04.07 31.10.08 4 Tayio Hills Power Project 120 29.03.07 31.10.08
5 Orient Thermal Power Project 225
PPA signed 01.11.05 (F C Achieved on
16.12.06) 29.03.09
6 Atlas Power (Shirazi Investment) 225 PPA signed 06.09.07 31.03.09 7 Associated Technology 100 31.03.09 8 Amzon Energy 117 31.10.09 9 Tapal Energy Expansion 161 31.10.09
10 Kohinoor Energy Expansion 143 31.10.09 11 Japan Power Expansion 101 31.10.09 12 Nishat (Chunian) Ltd 200 06.07.07 30.06.10 13 Nishat Power Ltd 200 06.07.07 31.12.09 14 Hubco Narowal Plant 225 31.03.10
15 Mari Power Project, Daharki, 175 PPA signed 29.08.07
(F.C. Achieved on 08.09.07)
April 09
16 Green Power Project 205 June 09
17 Sapphire Electric Company Ltd Muridke 235
PPA signed 30.09.06 (F.C. Achieved on
20.06.07) 20.10.09
18 Engro Power Project 150 11.08.07 Dec 09 19 Halmore Power Project At Bhikki 225 PPA signed 16.12.06 Nov 09 20 Saif Power Project At Sahiwal 200 PPA signed 17.10.06 Jan 10 21 Star Power Project, At Jarwar 133 27.10.05 Feb 10 22 Fauji Korangi Power Project 150 Project shifted to KESC May 10 23 Inter Gen Power Project 150 June 10 24 Western Electric Power Project 150 Project shifted to KESC Dec 10
Source: WAPDA Website (2009)
158
Appendix - D
Category-wise Number of Consumers (Year 2008*) Categories LESCO GEPCO FESCO IESCO MEPCO PESCO HESCO QESCO TESCO WAPDA
A. Personal Information Name (Optional): ________________________ Designation (Optional): _________________ Area of Working: _______________________________________________________________ Functioning of National Electric Power Regulatory Authority (NEPRA) Put ‘Y’ or ‘ ’ sign in one of the five columns before each of the following questions. 1 means “Strongly Disagree”; 2 means “Agree”; 3 means “Neither Agree nor Disagree” (Neutral); 4 means “Agree” and 5 means “Strongly Disagree”. B. Questions to be filled by officials/ representatives of NEPRA
1 2 3 4 5 Sr. No. Questions Strongly
Disagree DisagreeNeither
Agree nor Disagree
Agree Strongly Agree
N1 Effective standards and procedures are adopted at NEPRA.
N2 NEPRA officials have sufficient authority to discharge their responsibilities satisfactorily.
N3 Federal government does not take such decisions those affect the autonomy of NEPRA.
N4 NEPRA is independently setting the performance standards for electric power companies.
N5 NEPRA is independent in prescribing fee structure for electric power companies.
N6 The financial resources are sufficient for proper functioning of NEPRA.
N7 Sufficient manpower is available at NEPRA for its smooth functioning.
N8
There is a strong system of accountability within NEPRA.
N9 Roles and tasks for each employee are clearly defined.
N10 Companies working under PEPCO are not given more freedom than IPPs while determining the tariffs.
N11 Foreign companies and local IPPs are equally treated for grant/ renewal of licenses and setting of tariffs.
N12 A well-defined legal design is available.
160
1 2 3 4 5 Sr. No. Questions Strongly
Disagree DisagreeNeither
Agree nor Disagree
Agree Strongly Agree
N13 NEPRA employees are motivated towards their job responsibilities.
N14 NEPRA officials are qualified and trained according to job responsibilities.
N15 Present chairman & members of NEPRA are qualified and expert at required level.
N16 Previous chairmen & members of NEPRA had been qualified and expert.
N17 Companies are provided by uniform accounting system.
N18 NEPRA is successful in protecting the interests of electric power consumers.
N19 NEPRA is successful in protecting the interests of electric power companies.
N20 WAPDA & PEPCO can not exert any pressure to NEPRA for favourable decisions.
N21 Sufficient co-operation is given by provincial governments for smooth running of power projects.
N22 Availability of provincial resources (land and funds) for power projects.
N23 Assistance given by provincial governments for laying transmission lines.
N24 Provincial governments do not intervene in the process of tariff determination.
N25 Level of security services provided by provincial governments for power projects.
N26 Level of cooperation given by the consumers. N27 Electric power producers, transmitters and
distributors cooperate with NEPRA for implementation of its policies and decisions.
N28 Electric power service providers appropriately pay their dues to NEPRA.
N29 NEPRA is not compelled by the federal and provincial governments for unjustified decisions.
N30 The functions of NEPRA are not affected by political forces within the country.
C. If you would like to add any other useful information, please write down:-
161
Appendix – F
Questionnaire for Management Research
A. Personal Information
Name (Optional): __________________________Designation (Optional: ___________________
Area of Working: ________________________________________________________________ Functioning of National Electric Power Regulatory Authority (NEPRA)
Put ‘Y’ or ‘ ’ sign in one of the five columns before each of the following questions. 1 means “Strongly Disagree”; 2 means “Agree”; 3 means “Neither Agree nor Disagree” (Neutral); 4 means “Agree” and 5 means “Strongly Disagree”. B. Questions to be filled by representatives of Electricity Producers / Transmitters /
Distributors 1 2 3 4 5
Sr. No. Questions Strongly
Disagree DisagreeNeither
Agree nor Disagree
Agree Strongly Agree
P1 The fee structure and performance standards are made by NEPRA keeping in view the interests of power companies.
P2 There is no involvement of government agencies for preparation and implementation of the fee structure and performance standards.
P3 License issuance/ renewal procedures, for electric power companies, are easy and do not involve lengthy approvals by the government agencies in addition to NEPRA authorities.
P4 NEPRA officials deal with power companies without any stress.
P5 Power companies in time pay their dues to NEPRA. P6 Interim tariffs are set according to the requirement
of the company.
P7 Regular tariffs are set according to the requirement of the company.
P8 Terms conditions imposed by NEPRA for power services are acceptable.
P9 NEPRA adopts appropriate ways to evaluate the performance of companies.
P10 NEPRA policies are encouraging for retaining and enhancing our service level.
P11 NEPRA standards towards getting private investment in power sector are justified.
P12 NEPRA gives required cooperation to power companies for their smooth functioning.
162
1 2 3 4 5 Sr. No. Questions Strongly
Disagree DisagreeNeither
Agree nor Disagree
Agree Strongly Agree
P13 Reforms suggested by NEPRA are beneficial for electric power companies.
P14 NEPRA officials are aware of their responsibilities, as they are qualified and trained.
P15 NEPRA top management and officials have required expertise in regulatory matters, as they solve the related problems efficiently.
P16 Tariffs are set according the satisfaction of electric power companies.
P17 Power companies are getting satisfactory share for increases in electricity tariffs.
P18 NEPRA helps in payment adjustments and resolution of conflicts among power producer, transmitters, distributors and the consumers.
P19 NEPRA does not affect the organizational affairs of electric power companies due to the decisions under the influence of government and political forces.
P20 Power companies are satisfied with the reports of NEPRA submitted to Govt.
P21 NEPRA is successful in getting required co-operation from the provincial governments for smooth running of power projects.
P22 Power companies are satisfied with the performance of NEPRA.
C. If you would like to add any other useful information, please write down:-
Area of Working: __________________________________________________________
Functioning of National Electric Power Regulatory Authority (NEPRA)
Put ‘Y’ or ‘ ’ sign in one of the five columns before each of the following questions. 1 means “Strongly Disagree”; 2 means “Agree”; 3 means “Neither Agree nor Disagree” (Neutral); 4 means “Agree” and 5 means “Strongly Disagree”. B. Questions to be filled by members/ representatives of Chambers of Commerce and
Industry 1 2 3 4 5
Sr. No. Questions Strongly
Disagree DisagreeNeither
Agree nor Disagree
Agree Strongly Agree
C1 There is a satisfactorily level of availability and quality of electricity supply for consumers.
C2 Smooth electricity supply is observed without fluctuation.
C3 Losses are not borne by the industry due to uneven supply of electricity.
C4 Losses are not borne by the industry due to electricity outage.
C5 Electricity tariffs are acceptable according to the economic position of consumers.
C6 Electricity charges acceptable to consumers according to the level of supply.
C7 The trend of increase in electricity tariffs is justified. C8 The other charges imposed on consumers are
acceptable for them.
C9 Consumers expect from NEPRA for improvement of electricity supply condition.
C10 NEPRA gives weight to the suggestions of consumers for changing in tariffs.
C11 Power consumers are satisfied with the performance of NEPRA.
C. If you would like to add any other useful information, please write down:-