Key Players and Legal Structure of the Pakistani Power Sector

Incentives for foreign and local investment in the Power Sector of Pakistan

  • Exemption from Corporate Income Tax, Turnover Tax and Withholding Tax, no Sales Tax, only 5% concessionary Import Duty on plant & equipment not manufactured locally
  • GOP Guarantees obligations of power purchaser and provinces
  • GOP provides protection against Political Force Majeure, change in law and Change in duties & taxes
  • Power Purchaser to bear hydrological risk for hydropower projects
  • Payment of compensation in case of termination due to GOP Event of Default
  • Tariff adjustments for variation in currency exchange rates and fuel prices
  • Tariff indexation for inflation (US CPI & Pak WPI)
  • Government ensures conversion of Pak Rupee & remittance of foreign exchange for project-related payments

Barriers to entry and foreign investment in the Pakistan Power Sector

  • Pakistan is facing difficulties in attracting new investments in power sector due to Circular Debt.
  • Fuel choice for new power generation projects
  • Gas supply to existing IPPs uncertain on long-term basis (beyond June 2011)
  • Oil Logistics and Transportation Issues
  • Furnace oil prices soaring high, entering into the realm of unaffordability for the overall economy of Pakistan
  • Huge infrastructure requirements to support coal and hydro projects.
  • IPPs facing problems due to frequent tripping’s in the transmission system
  • Security (Law & Order) issues
  • Difficulties in arranging local & foreign financing for new private power projects

Legal Framework

Pursuant to Article 70(4) of the Constitution of Pakistan 1973 read with Fourth Schedule attached thereto, Electricity was on the Concurrent Legislative list of the Constitution, therefore, both the federal and the provincial governments had the power to legislate and thereby regulate the electricity sector. However, no provincial law on the subject can be made which was in conflict with the federal law. Overall national policy and legislation is controlled and determined by the federal government whereas the powers of the provincial governments remain restricted to their respective provincial territories under the Electricity Act, 1910 which was the first legislation through which provisions to regulate this sector were provided. Electricity Rules 1937, which stem out of the Electricity Act, 1910, were adopted by Pakistan. Under the Eighteen Amendment effective from 19 April 2010 the Concurrent Legislative List has been abolished and the subjects in the List have been assigned exclusively to the federal government or the provincial government so as to give more autonomy and independence to provinces.

Article 153 of the Constitution contains another important provision regarding electricity, as it provides for the composition of the Council of Common Interests (Council) and its responsibilities. The Council is to be appointed by the President. The members of the Council are the Chief Ministers of the provinces and an equal number of members from the federal government nominated by the Prime Minister from time to time. The Prime Minister, if he is a member of the Council, is the Chairman of the Council, but if at any time he is not a member, the President may nominate a federal minister who is a member of the Council to be its Chair- man. The Council is responsible to Parliament.

Article 154 of the Constitution stipulates the functions and rules of procedure of the Council. The key functions of the Council with respect to the electricity and water include exercise of supervision and control over related institutions. The decisions of the Council are expressed in term of majority opinion; it seeks directions from the Parliament and any complaints from the provincial government against the decision of the Council are referred to Parliament in a joint sitting; its decision is final.

Article 157 relates to electricity and empowers the federal government to construct or cause to be constructed hydroelectric or thermal power installations or grid stations for the generation of electricity and to lay or cause to be laid inter-provincial transmission lines in any province. The government of a province may to the extent that electricity is supplied to that province from the national grid, require supply to be made in bulk for transmission and distribution within the province. Any provincial government may levy tax on consumption of electricity within the province; construct powerhouses and grid stations and lay transmission lines for use within the province; and finally determine the tariff for distribution of electricity within the province.

The Eighteenth Amendment in the Constitution (via amendment Article 157(3) of the 1973 Constitution – electricity specific dispute resolution has been added under Eighteenth Amendment) also provides for the resolution of any dispute between the federal government and a provincial government in respect of any above-mentioned matter (construction of hydro or thermal power or grid stations for generation of electricity or inter-provincial transmission lines) by Council of Common Interests, a constitutional body.

The fiscal incentives and priority has been ensured to the people of that province where the electric power is being generated utilizing the natural potential of that province. Such a protection is provided under Article 161(2) of the Constitution reads as under:

The net profits earned by the Federal Government, or any undertaking established or administered by the Federal Government from the bulk generation of power at a hydroelectric station shall be paid to the Province in which the hydroelectric station is situated.

To remove the ambiguity in respect of the ‘net profits’ an explanation has been provided in the 1973 Constitution of Pakistan that net profit shall be computed by deducting from the revenues accruing from the bulk supply of power from bus-bars of a hydroelectric station at a rate to be determined by the Council of Common Interests. The operating expenses of the station shall include any sums payable as taxes, duties, interest or return on investment, depreciation, element of obsolescence and over-heads and provision for reserves.

The Ministry of Water and Power is responsible for formulating Pakistan’s power policies. In 1992, the Pakistan power sector was restructured due to the shortages of electricity in the country. A new energy law adopted in 1994 known as Policy Framework and Package of Incentives for Private Sector Power Generation Projects in Pakistan which aims to attract private investment in the power sector and which culminated into the introduction of first ever IPPs. A new state-owned independent institution was established in 1994 – the PPIB which is primarily dedicated to serving as a one window facilitator to investors in Pakistan’s private power sec- tor. The NEPRA was created under the NEPRA Act in 1997. NEPRA’s main purpose is to ensure fair competition and consumer protection along with to regulate and determine a number of other strategic matters like licensing and tariff. Vertical unbundling process of WAPDA was completed in 2002 to initiate the process of privatization of public sector electric generation and distribution companies. A new power law was enacted in 2002 known as Policy for Power Generation Projects – Year 2002, which was similar to power policy 1994, but its scope was broader as the new power law applies both to private investment projects and to public-private partnerships and public sector power plant projects which was lacking in 1994 power policy. The power policy 2002 is still in force.

Electricity wholesale market was created on a model of ‘single buyer plus’ which was established in July 2002 under which the NTDC functions as the sole purchaser of all electricity generated by all producers together. The plans are to further liberalize it so that major consumers can purchase electricity from producers of their own choice by way of mutual sale-purchase agreements.

 

In addition to the constitutional provisions, the enactments dealing with the electricity in Pakistan are as follows:

  • The Electricity Act, 1910 (as amended by he Electricity Act (Punjab Amendment) Ordinance, 1971; Electricity (Amendment) Ordinance, 1979;
  • The Electricity Rules, 1937;
  • The Water and Power Development Authority Act, 1958;
  • The Central Laws and Statutes Reform Ordinance, 1960;
  • The Water and Power Development Authority (Chairmen and Members) Service Rules, 1972;
  • The Pakistan Water and Power Development Authority (Chairman & Members) Service Rules, 1972;
  • Employees of Pakistan Water and Power Development Authority (Allocation to Provinces) Orders, 1979;
  • Water and Power Development Authority Employees (Conduct) Rules, 1978;
  • Water and Power Development Authority Employees (E&D) Rules, 1975;
  • Pakistan Water and Power Development Authority Employees (Retirement) Rules, 1979;
  • Pakistan Water and Power Development Authority Leave Rules for Water and Power Development Authority Employees Rules, 1982;
  • Pakistan Water and Power Development Authority Common Cadre Administrative Posts Service Rules, 1980;
  • Pakistan Water and Power Development Authority Traveling Allowance Rules, 1982;
  • Pakistan Water and Power Development Authority Law Officers Service Rules, 1983;
  • Sarhad Hydel Development Organization Act, 1993;
  • the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (NEPRA Act);
  • National Electric Power Regulatory Authority Tariff, Standards and Procedure Rules, 1998;
  • National Electric Power Regulatory Authority Application and Modification Procedure- Regulation, 1999;
  • National Electric Power Regulatory Authority Licensing (Distribution) Rules, 1999;
  • National Electric Power Regulatory Authority Licensing (Generation) Rules, 2000;
  • National Electric Power Regulatory Authority Fee Rules, 2002;
  • National Electric Power Regulatory Authority (Fee pertaining to Tariff Standard and Procedure) Regulations, 2002;
  • National Electric Power Regulatory Authority Fine Rules, 2002;
  • National Electric Power Regulatory Authority Consumer Eligibility Criteria, 2003;
  • SRO 953(I) 2004;
  • Performance Standards (Distribution) Rules, 2005;
  • Performance Standards Transmission Rules, 2005;
  • NEPRA Interim Power Procurement (Procedure and Standards) Regulations, 2005.

Case references on electricity generation, production, distribution and marketing:

  • WAPDA v. M. Fayyaz Butt [1999 MLD 2731 (B)] (Billing);
  • WAPDA v. Kashmir Steel Furnace [1999 CLC 492 (C)] (Electricity Dues Payment Default);
  • Akbar v. WAPDA [1999 CLC 1198] (Electricity Dues Payment Default);
  • Nabi Bakhsh Khan Khosa v. Province of Balochistan [1999 MLD 2077 (A)] (Electricity Dues Payment Default);
  • WAPDA v. Steel Rolling Mills [1999 SCMR 494 (A)] (Electricity Billing);
  • Flying Kraft Paper Mills (Pvt) v. WAPDA [1999 SCMR 472 (B)] (Electricity Billing);
  • Colony Textile Mills Ltd v. WAPDA Kra [1998 Civil Cases] (Electricity Act, 1910);
  • Niaz Ali v. Secretary, Government of Punjab, Industries and Mineral Devel- opment Department, Lahore [1998 SCMR 506] (Mining Lease);
  • WAPDA v. Government of Sindh [PLD 1998 Kr. 209] (Water and Power Development Authority Act 1958; Property Tax Matter);
  • Anwar Salaam v. Member National Industrial Relations Commission, Lahore Bench [1998 PLC] (Jurisdictional Employment Matter);
  • Tariq Waheed v. State [KLR 1997 Criminal Cases 338] (Electricity Theft);
  • Gadoon Textile Mills v. WAPDA [1997 SCMR 641 (I)] (Licensing);
  • Rehman Flour Mills v. WAPDA [1997 CLC 1794] (Electricity Billing);
  • WAPDA v. M. Iqbal [1997 MLD 1920] (Compensatory Matter);
  • Yosaf v. WAPDA [1997 PLC (C.S) 424 (A)] (Electricity Tempering);
  • Shamim-ud-Din v. Federation of Pakistan [1995 CLC 299] (Electricity Act 1910);
  • J.K. Government v. Nafees Bakers [PLD 1995 (S.C) AJK) 47 (G)];
  • WAPDA v. Hidayatulah [1995 CLC 739 (A)] (Discontinuance of Power Supply);
  • WAPDA v. M. Riaz [PLD 1995 Lah. 56 (A)] (Statutory Matter);
  • Aslam v. State [KLR 1995 Criminal Cases 148] (Theft of Electricity);
  • WAPDA v. Malik Ice Factory [1995 CLC 1310] (A Reservation of Power Matter);
  • KESC v. Muhammad Ahmad [1994 MLD 1221 B] (Supplementary Bill Matter);
  • IIyas Marine and Associates Ltd v. KESC [1994 CLC 596] (Billing Matter);
  • Main M. Riaz v. WAPDA [1994 Law Notes 977] (Billing Matter);
  • WAPDA v. Barkat Ali [NLR 1994 660 (A)] (Metering Equipment Matter);
  • Fazal Hussain v. WAPDA [1994 Lah. PLD 138] (Statutory Matter);
  • Asif Marble Industries v. WAPDA [1994 CLC 2419] (Stay Order);
  • Shafi v. Commissioner Rawalpindi [1994 SCMR 283] (Non Objection Certificate);
  • Bismillah Cotton Factory v. WAPDA [1993 MLD 1478] (Electricity Act 1910; Temporary Injection Matter);
  • WAPDA v. Pakistan Atomic Energy Commission Employees Cooperative Housing Society Ltd, Islamabad [PLD 1993 Lah. 237 (A)] (Water and Power Development Authority Act, 1958 (Income Tax Exemption);
  • Makkah Ice Factory v. WAPDA [1991 PLD SC 813] (Billing Matter);
  • Riazullah Qureshi v. KESC [1990 PLD 309 (2)] (Electricity Act, 1910; Pay- ment Matter);
  • Abdul Ghani v. KESC [1990 PLD 284 (2)] (Jurisdictional Matter);
  • OK International Industries v. Chairman WAPDA [1990 ALD 517 (2)] (Juris- dictional Matters);
  • Tagiuen Silk Mills Ltd v. KESC Ltd [1990 MLD 488 (8)] (Electricity Billing Matter);
  • Ramzan Ice and Cold Storage Factory v. KESC Ltd [1990 MLD 488 (8)] (Injunction Matter);
  • Nazar Muhammad v. WAPDA [1990 SCMR 980] (Statutory Matter);
  • Raisa Bibi v. WAPDA [PLD 1990 Peshawar 105] (Electricity Bill Payment Matters);
  • Hyderabad Engineering Industries Ltd v. A.P. State Electricity Board [1989 PSC 941] (Electricity Act, 1910; Statutory Matters);
  • National Ice Factory v. KESC Company [1989 ALD 300 (2)] (Electricity Billing Matters);
  • WAPDA v. Liaquat Hussain (Compensatory Matters);
  • Ghiasuddin v. Executive Engineer, WAPDA [1989 CLC 200] (Statutory Matters);
  • Shamas Textile Mills Limited, Chinio v. WAPDA [1989 Law Notes 1133] (Inspection and Authority Matters);
  • Ghangir v. WAPDA [1989 MLD 36] (Payment Matters);
  • Central Cotton Mills v. Government of Pakistan [1989 MLD 3868] (Payment Matters).

 

The Electricity Act, 1910

The Electricity Act 1910 is an inherited piece of legislation adopted by Pakistan on its creation in 1947 that mainly relates to supply and use of electrical energy. Some of its sections 7, 32, 33, 34 and 37 deal with generation of electrical energy. This Act does not purport to be a code as it is not an exhaustive Act. The Act has four parts and an annexed schedule. Part I contains title and its territorial jurisdiction, which is whole of Pakistan as well as definitions used in the Electricity Act, 1910. Part II encompasses detailed provisions pertaining to the grant and revocation of the licenses along with key terms and conditions of the licenses and other stipulations pertaining to the execution of works, supply of electricity, metering and non-discriminated supply of energy. The word energy used in the Act is defined as ‘electrical energy when generated, transmitted, supplied or used for any purpose except the transmission of a message’. There is a schedule attached to the Act, which contains provisions, which are deemed to be incorporated with and to form part of every license granted under Part II. Part III deals with the supply, transmission and use of electrical energy by non-licensees, who are obliged to obtain the previous sanction of the provincial government pursuant to section 28 of the Act. Part IV contains protective clauses related to the protection of railways, canals, docks telegraphic, telephonic and electric signaling lines and so forth. This part also contains a provision to deal with the accidents and prohibition of connection with the earth. This Part also provides for the constitution of an Advisory Board consisting of a chairman and at least two members; and the appointment of Electric Inspectors. A provision for establishment of a Federal Electricity Board was subsequently inserted in the Act; this Board inter alia, has the powers to make rules to carry out the purposes and objects of the Act, as provided for under section 37 thereof. Sections 39–50 deals with the criminal offences, penalties and procedures related thereto.

The provincial government of Punjab adopted the Electricity Act, 1910 with certain amendments by the Electricity Act (Punjab Amendment) Ordinance, 1971.

The Electricity Rules, 1937

In exercise of the powers conferred under section 37 of the Electricity Act, 1910, the Electricity Rules, 1937 were promulgated to regulate the generation, transmission, supply and use of energy and to carry out the purposes and objects of the Electricity Act, 1910.

These rules provide detailed mechanisms, procedures, provisions and technical specifications in furtherance of the objectives of Electricity Act, 1910. Chapter 1, in addition to the title, contains definitions of the terms used in the Rules. The safety aspect of the operations is specifically addressed in these Rules. The concept of Inspector has been borrowed and incorporated similar to that of mining inspector under the Mines Act, 1923 whose primary function and power is to settle the disputes arising out of the provisions of the license or the Act and enforce safety in operations. His decision is appealable to the provincial government or the federal government as the case may be.

These rules are technical in nature and cannot be comprehended without specialized knowledge of electrical engineering. These rules are binding on all per- sons, companies and undertakings that are the licensees or work under an agreement with the government for supply or use of electricity. It is the responsibility of the licensee to install and maintain the apparatus and supply lines at consumer premises as per standards set in the Rules to avoid any injury or danger. The rules are also binding on a non-licensee or any other person who has installed and maintained such a facilities for his personal use but the general public have the access on his land or premises.

Water and Power Development Authority Act, 1958

The Pakistan WAPDA Act, 1958 (WAPDA Act 1958) was made effective on 24 April 1958. This Act essentially provided for creation of the WAPDA as stipulated under section 3 thereof, which is a corporate entity exclusively under the control of federal government. WAPDA has the jurisdiction over all Pakistan to generate, supply and distribute electricity except for the districts of Karachi, where KESC operates. Under WAPDA Amendment Act, 1994 and after its bifurcation, WAPDA’s function has been reduced to look after the development of water resources and generation of hydroelectric power only.

 

WAPDA Act 1958 provides for WAPDA powers and responsibilities as follows:

  • Preparation of a comprehensive plans for the development and utilization of the water and power resources of Pakistan on a unified and multi-purpose basis and obtaining of approval of the federal government;
  • Irrigation, water supply and drainage and recreational use of water resources;
  • The generation, transmission and distribution of power, and the construction, maintenance and operation of power houses and grids; but this function has been now been taken away from WAPDA under power sector reform programme and it the responsibility of PEPCO and other companies working under it;
  • Food control;
  • The prevention of water logging and reclamation of waterlogged and saline land;
  • Inland navigation;
  • The prevention of any ill effects on public health resulting from the operations of the authority;
  • Privatize or otherwise restructure any operation of the authority except the Hydel generating power stations.

 

Section 8(5) was added by the WAPDA (Amendment) Act, 1994 to enable the restructuring of the WAPDA. In order to pave the way for restructuring, unbundling, privatization1 and so forth., the WAPDA has been given the mandate to:

  • Undertake any joint venture or work in association with the provincial government, and agency, corporation, company, authority or any person and may subscribe to the equities and acquire such other rights and obligations as may be necessary for such joint venture or association;
  • Promote, form or sponsor any company or companies having the objects of installation of thermal any Hydel projects and development and utilization of any resources of energy for generation, transmission and distribution of power and for survey, investigation, exploitation and utilization of resources of energy for generation, transmission and distribution of power;
  • Subscribe for, take or otherwise acquire, hold and dispose of shares, bonds debentures, commercial papers or other securities of any company promoted, formed or sponsored under clause (b) and receive dividends or other payments therefrom and transfer to it any of its land or any other property, movable or immovable, tangible or
  • Intangible, against cash, shares, bonds, debentures, commercial papers or other securities as is desirable or necessary to enable it to privatize or otherwise restructure any operation of the authority;
  • Enter into any of the following arrangements which may be consistent with its objects, namely: provision of services and personnel, goods, appliances, plants, machinery and other material and purchasing of electrical capacity and energy from any company specified in clause (b);
  • Enter into any contract or agreement with any company or companies specified in clause (b); and
  • Notwithstanding any terms of any contract entered into by the Authority for the supply of electricity to any person, transfer such contract to any company or other entity promoted, formed or sponsored pursuant to a scheme framed under clause (vii) of sub-section (2).

 

Explanation:

For the purpose of this section the expression ‘privatize’ means the transfer or disinvestment of any of its assets, property, rights or liabilities, interest, power business, grid operation of work, or maintenance thereof, or generation or its distribution, by the authority, with the prior approval of the federal government for valuable consideration to any person, company or body on ownership.

Section 9 of the WAPDA Act 1958 stipulates the mechanism to handle schemes framed by an agency in any province other than the WAPDA. The section empowers the WAPDA to take up any project proposed by any province if beyond a certain value (as may be prescribed by the federal government) as it may deem appropriate.

Section 11 of the WAPDA Act 1958 empowers WAPDA to acquire control over underground water resources, operations of power houses and grids in any region in a province, make recommendation for prescribed standards for operation and maintenance of irrigation works. Section 12 clarifies that WAPDA is deemed to be a licensee under the Electricity Act 1910. It also exempts WAPDA from certain duties and obligations of a licensee as stipulated in sections 3 to 11, sub-sections (2) and (3) of section 21 and sections 22, 23 and 27 or in clauses I to XII of the Schedule to the Electricity Act 1910.

 The Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997

As noted above, the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (NEPRA Act) is the current legislation for regulation of Generation, Transmission and Distribution of Electric Power in Pakistan.

A single but efficient power regulatory authority that is, NEPRA came into being under section 3 of NEPRA Act. The NEPRA is an independent body which regulates electric power sector with exclusive powers to grant licenses for generation, trans- mission and distribution of electric power; determine tariffs, take measures to ensure efficient supply of services, and protect the interests of all the stakeholders, mainly consumers and companies providing electric power services. The NEPRA has the mandate to enact enabling regulations to carry out its functions and promote foreign direct investment and create competitive market environment. The NEPRA Act also envisages the creation of a National Grid and Dispatch Company – NTDC, which have exclusive rights to provide electric transmission service in the entire territory of Pakistan except for the territory served by the KESC. Section 19 enables the authority to grant a special purpose transmission license to a company other than National Grid Company in accordance with the stipulations prescribed therein. Sec- tion 20 provides for grant of an electric distribution license and the description of major conditions to be associated therewith. Under section 25, the Authority is empowered to grant generation, transmission and distribution licenses in the terri- tory served by KESC and to other companies, as it may deem appropriate. Section 31 provides guidelines and prescribes the procedure for determination of the tariff. Under sections 46 and 47, the authority is empowered to make rules with the approval of federal government, and regulations, as it may deem appropriate for the carrying out of its functions under this Act.

National Electric Power Regulatory Authority Licensing (Generation) Rules, 2000

These rules have been framed by the NEPRA with the approval of the federal government pursuant to the NEPRA Act 1997, and came into force on 17 April 2000. They specify the terms and conditions for the grant of a power generation license as detailed at Rule 3 thereof. The license fee is stipulated in the NEPRA (Fee) Rules 2000. The duration of a generation license is commensurate with the maximum expected useful life of the units comprised in the generation facility demonstrated to the satisfaction of the Authority. The generation company can only charge the tariff for the electric power and/or the Authority pursuant to the provisions in Rule 6 specifying the ancillary services. The Authority can revoke the generation license if it contravenes the provisions of the generation license and the rules provided, for under Rule 8 hereof. Rule 9 places an obligation on the licensee to be prudent in expenditure and to obtain project financing on prudent and commercially reasonable terms. The licensee is obliged to make available the net capacity of its generation facilities for economic dispatch by the national grid company consistent with the grid code and any applicable distribution code subject to the terms of Rule 10. Provisions regarding the regulation of ancillary services are given in Rule 12. Discriminatory treatment between the purchasers of electricity is prohibited under Rule 13. Regulatory provisions concerning the financial and organizational affairs of the licensees are given in Rules 14 and 15. Licensees are obliged to prepare and file with the authority the operating procedures manual pursuant to the provisions given under Rule 16. Rule 20 obliges the licensees to provide information regarding the activity of the licensee to the authority. Rule 21 empowers the authority to impose fines and penalties in addition to its powers to revoke a generation license or appoint an administrator over the generation business pursuant to Rule 8. Authority is mandated by Rule 22 to resolve disputes.

National Electric Power Regulatory Authority (Tariff Standards and Procedure) Rules, 1998

As the title indicates, these Rules are meant for the regulation of tariff and matters concerning thereto. Rules 3–8 specifies the procedure for filing of tariff petitions and the procedure until placement of the petition for hearing by the authority. Rule 9 specifies the procedure for hearing of the tariff application by the authority. During the course of a hearing, the presiding officer may make rulings or may require further examination of the record, or take time to review the rulings if announced during the hearing, as per the procedure more specifically provided for under Rule 12. There is a provision for a tentative opinion of the authority and a record thereof to provide stakeholders with an opportunity to appraise the prospects of their case in the proceedings and consider settlement or withdrawal of their case or to modify the evidence proposed to be presented (Rule 14). Procedure regarding submission of the evidences is given in Rule 15. The decision of the authority, time frame and procedure thereto is stipulated in Rule 16. The authority has the right to require the licensees to modify or revise the basis for the tariff determination or the information requirement as per Rule 17. The tariffs once approved by the authority are to be filed with the authority and the authority, if the tariff is not already approved, may require the licensee to file a petition for the purpose of approval of the tariffs of such licensee (Rule 18). Rule 19 provides the guidelines concerning format of the tariff. Rule 21 provides for the dissemination of the information concerning tariff for the information of customers. Rules 22–26 contain certain general provisions such as seal of the authority, effect of irregularity in proceedings, inspection by public, confidentiality, extension of time, and so forth. Rule 27 provides for the authority’s power to impose penalties in case of contravention of these rules.

National Electric Power Regulatory Authority Licensing (Application and Modification Procedure) Regulations, 1999

These regulations were enforced on 1 March 1999 by SRO No. 142(1)/99 and describe the procedure for filing of license application and modification thereto. Rule 3 stipulates the requirement and information, which is to be filed along with the license application. Rule 4 enables the submission of application by companies that are not registered under the Companies Ordinance 1984.

Eligibility criteria are spelt out in Rule 5. Acceptance of application by the Registrar and its handling and grant procedure is given under Rules 6, 7 and 8. Rule 10 provides in detail the right of the authority to modify any or more of the terms of the licenses at any time during the term of the license. Under Rule 12, the authority reserves the right to amend these regulations. Schedule I specifies the format of the application. Schedule II specifies the license fee for different types of licenses, which is linked with the size of the project. Schedule III illustrates the technical, financial and other information required to be submitted along with the application; the list is, however, not exhaustive.

Sarhad Hydel Development Organization Ordinance, 1993

SHYDO Ordinance was promulgated and made effective on 16 January 1993 under the authority of the Governor, Khyber-Pakhtunkhwa conferred upon him by Article 128 of the Constitution of the Islamic Republic of Pakistan. Section 3 of the Ordinance provides for the establishment of SHYDO with its head office at provincial capital Peshawar and with operating jurisdiction within the province of Khyber-Pakhtunkhwa. Sections 4–9 deal with the organizational and administrative matters of SHYDO. The powers and duties of the organization and framing of schemes by SHYDO are identical to those of WAPDA and the WAPDA is defined as authority under the SHYDO Ordinance, which is a subordinate law and operates only if it is not in conflict with the other laws in force. SHYDO is responsible to the provincial government of the Khyber-Pakhtunkhwa.

REFORMS IN THE ELECTRICITY SECTOR

Previously, the whole power sector was a State monopoly as the only public-sector utilities; WAPDA and KESC were authorized for the generation, trans- mission and distribution of power in the country. In furtherance of the similar pursuits being followed by other countries in the global village, Pakistan initiated restructuring and reform process in the electricity sector in 1986 when the government encouraged the setting up of private sector power projects on BOO basis as a matter of policy, but the response was not very encouraging. A concrete step in this direction was taken in 1994 when an ambitious power policy was announced and the Act of country’s giant and monopoly utility (WAPDA) was amended to pave the way for its restructuring, unbundling, and for ultimate corporatization and privatization of the sector. Another key step towards reform in the electricity sector was the creation of NEPRA in 1997, which is fully functional. Notable progress has been made in restructuring and reforms of WAPDA. WAPDA has been unbundled into eight distribution companies (DISCOs), four thermal generation companies (GEN- COs), one Hydel generation company and a NTDC. These entities have been registered with the Securities and Exchange Commission of Pakistan under the Companies Ordinance 1984 and are currently managed by PEPCO, but ultimately the DISCOs and GENCOs are planned to be privatized. KESC has recently been privatized, and efforts are being made to privatize, GENCO-1 (Jamshoro), FESCO, and PESCO.

In parallel, various power policies were announced in the years 1994, 1995, 1998 and then in 2002. As a result of the conducive power policies, over four- teen thermal power generation plants installed by the IPPs are already operational whereas a few more are in pipeline. All hydropower projects remain with the

The PPIB were created in 1994 to facilitate private sector participation in power generation in Pakistan. PPIB provides ‘one-window’ facilities to private sec- tor investors in matters concerning establishment of power projects and related infrastructure. Since its establishment, the PPIB has played a key role in facilitating the IPPs in resolving various issues in an efficient manner and providing guarantees on behalf of the government.

The major restructuring of the giant WAPDA had been done during 1998–2002 on the following lines:

  • A unified power wing of WAPDA comprising generation, transmission and distribution has been restructured into fourteen public limited companies under the corporate law;
  • Restructuring power sector assets to form autonomous commercially independent entities through the adoption of prudent business practices, enhanced efficiency levels, cost reduction and profit orientation;
  • Promotion of competition to eventually offer affordable electricity to customers; through the corporatization/commercialization process, promoting commercial viability and enhancing the business value of the assets of each corporate entity;
  • Enhancing privatization initiatives;
  • Operationalized the PEPCO as a private limited management company owned by the government to steer, manage and oversee the corporatization/ commercialization reforms programme.

Impressive progress has been made in the implementation of the restructuring and reform programmes of WAPDA. The fourteen distribution companies have been corporatized along with one national transmission and power dispatch company (NTDC), four thermal GENCOS and nine distribution companies (DISCOs).

 

In addition to the above, following has been achieved:

  • Induction of directors from the private sector and PEPCO in the Board of Directors of the corporate entities to utilize their experience for formulation of effective corporate policies;
  • Execution of Business Transfer Agreements (BTA), an Operation and Development Agreement (ODA), Electricity Supply Agreements (ESA), Bulk Supply Agreements (BSA) and Fuel Supply Agreements (FSA) between WAPDA and corporate entities for autonomous commercial operation;
  • Transfer of WAPDA staff to their respective corporate entities;
  • Federal tax exemptions for the corporate entities for capital value tax, income tax and wealth tax;
  • Winning consent of most of the creditors;
  • Preparation, review, approval and adoption of opening balance sheets for the corporate entities as of 30 June 1998;
  • Privatization schedule for FESCO finalized and sent to the Privatization Commission of Pakistan;
  • Investment plans for distribution power system rehabilitation prepared and finalized by the distribution companies;
  • Financial restructuring of WAPDA approved by the government;
  • Filed applications by all DISCOs for obtaining a license from NEPRA; a public hearing by NEPRA for the processing of applications of the Lahore Electric Power Supply Company (LESCO) and Gujranwala Electric Power Company (GEPCO);
  • Submission of a proposal to the government for price consideration to be paid or settled by the government with WAPDA so that the share of the corporate entities owned by WAPDA can be transferred to the name of the government. There are two nuclear power projects owned by PAEC. These are the KANUPP, and the Chashma Nuclear Power Plant CHASHNUPP. A third nuclear power plant is planned at the CHASHNUPP site, which will also be owned by PAEC. Nuclear plant safety matters are overseen by the PNRA, which was established on 22 January 2001, whereas the licensing of generation plant and determination of tariff is within the jurisdiction of NEPRA. The PNRA is empowered to devise, adopt, make and enforce regulations and orders for nuclear safety and radiation protection to all types of nuclear installations and nuclear substances.

Though restructuring and reforms in the electricity sector in Pakistan have achieved notable progress, there is still a long way to go until consumers can have choice of supplier, sufficient supplies, competitive price and quality service.

PPIB role and creation

  • Created in August 1994 to promote private investments in power sector
  • Acts as One-Window facilitator on behalf of GOP, its Ministries/ Departments
  • Executes Implementation Agreements and provides GOP Guarantees on behalf of President of Pakistan duly authorized by Prime Minister of Pakistan
  • Facilitates IPPs in executing PPA, WUA with relevant GOP agencies
  • Monitoring of IPPs progress
  • Provides support to Ministry of Water & Power, Provinces / AJ&K technical, financial and legal matters
  • Coordination/Liaisons with local and multilateral development/ Financial Institutions
  • PPIB received statutory status on 6th March 2012 through an Act of the Parliament

Achievements of PPIB:

  • Successfully managed to induct 27 independent private power projects (IPPs) totaling about 6928 MW
  • Attracted an investment of around US$ 8 billion.
  • Attracted leading international / local investors and lenders to the Pakistan Power Sector
  • Contributed in development of domestic capital markets.
  • Supported economic growth and enhanced power supply

 

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