ISLAMBABD : National Electric Power Regulatory Authority (NEPRA), a quasi- judicial Authority of troubling power sector, is reportedly on the foot steps of the country’s supreme court with respect to differences. But in NEPRA, these differences are visible in various decisions of the Authority, while Supreme Court judges are openly releasing their letters to the media.
Insiders claim that one of the reasons of dispute within the Authority is that interests of some entities are being protected out of the way to extend them financial benefit at the cost of consumers.
The latest difference was witnessed in a decision of DISCO’s Fuel Charges Adjustment (FCA) determination for the month of August 2024, especially on the tariff of over Rs 12 per unit given to the baggasse IPPs, in which Member (Tariff and Finance), Mathar Niaz Rana, an ex-bureaucrat has stated in his additional note that during the public hearing on the FCA for August 2024, held on September 26, 2024, consumers representative raised concerns over CPPA-G’s proposed adjustments, especially the bagasse-fired tariff which led to an increase in the FCA. It was pointed out that a public hearing, mandated by law, was not conducted to get consumer views on this issue and his oversight the decisions legally flawed and invalid from the outset.
According to Member Tariff his esteemed colleagues must be aware that following the FCA public hearing, there has been widespread consumer criticism regarding the bagasse-based tariff, which has been deemed excessively high and decided without adequate consumers’ participation. This has contributed to unexpectedly high tariffs, even surpassing local coal prices—an issue requiring urgent attention. CPPA-G highlighted this impact during public hearings on the FCA, showing a significant increase in the bagasse tariff from June to August 2024 compared to local coal. In June, the bagasse tariff stood at Rs. 5.982 per kWh, remained unchanged in July 2024, but sharply rose to Rs. 12.48 per kWh in August 2024. Meanwhile, the local coal tariff saw a more gradual increase from Rs. 11.03 per kWh in June 2024 to Rs. 11.33 in July 2024, and Rs. 12.27 in August 2024. By August 2024, the bagasse tariff had not only risen significantly but had also surpassed the local coal tariff. The sudden spike in the bagasse tariff has raised candid consumers’ concerns, especially as consumers have also objected that they were not part of the decision-making process for this tariff.
He further stated that earlier the Ministry of Energy had also objected to Bagasse based tariff through a reconsideration request and I had respectfully disagreed with the learned Authority’s decision to dismiss the Ministry of Energy’s (MoE) reconsideration request on legal grounds, without granting the Ministry an opportunity to present the merits of its case. The MoE’s request was made in the public interest, aiming to review the excessively high bagasse-based tariff. In my view, this reconsideration request can still be revived as a continuation of earlier original proceedings. The original bagasse tariff was set in 2013, and its review process began in 2018. In my humble opinion the Ministry’s request could have been considered under the legal framework existing prior to the 2018 amendments to the NEPRA Act, rather than being dismissed under the 2022 amendments. This approach would align with the precedent set by the Authority in many cases including handling K-Electric’s renewable energy RFPs, which were processed under the repealed NCBTR regulations since they had been submitted before the regulations were rescinded. Adopting this legal consistency would have been more appropriate in the case of the MoE’s request.
Moreover, the Ministry of Energy’s (MoE) request, made in the interest of consumers, still merits serious reconsideration, even if it necessitates a flexible interpretation of the applicable legal provisions. The Authority has previously demonstrated such flexibility in applying legal requirements in many instances, as in the case of Thar Energy Limited in its decision of August 2023, where comparable latitude was afforded to Independent Power Producer (IPP). Given this precedent, there is still a compelling basis for extending the same consideration to the MoEs request also to review the excessive bagasse-based tariff in the consumer’s interest.
” My learned colleagues will agree that consumers are essential stakeholders and necessary parties in tariff proceedings under the Civil Procedure Code (CPC). Any decision regarding tariff rates without a public hearing contravenes the Tribunal’s orders and breaches mandatory provisions of the NEPRA Act, Tariff Rules, CPC provisions and superior court judgments. There is legal point of view that this procedural deficiency undermines the financial and legal integrity of the decision and makes it legally unenforceable on consumers in the light of many judgments of the superior courts. The matter, if remains unaddressed, may hinder further investment in bagasse-based generation while also increasing consumer end tariff, ” he added.
After explaining the background of his contention, Member Tariff has recommended that the negative FCA of Rs. 1.2628 be notified, excluding bagasse-based generation claims under the revised tariff. I respectfully recommend that the Authority, vested with extensive powers, take corrective action regarding its decision and promptly initiate suo moto curative proceedings under the applicable legal provisions of the NEPRA Act, NEPRA (Tariff Standards and Procedure) Rules and other relevant regulations. As highlighted, a public hearing is essential to transparently and thoroughly assess the bagasse-based tariff, explore pricing alteratives, and address related controversies. Including these claims in the FCA, would undermine the proposed suo moto review process.
Responding to brother Member (Tariff and Finance) , Chairman, and three members, in their unprecedented additional note have argued that paragraph 11 of the FCA Decision, which comprehensively addresses the commentator’s concerns. We believe the assumption that a public hearing is a mandatory legal requirement is incorrect. The procedures outlined in the CPC do not apply to tariff determination proceedings, which are governed by the National Electric Power Regulatory Authority (Tariff Standards and Procedure) Rules, 1998 (the “Tariff Rules’), established under the Regulation of Generation, Transmission & Distribution of Electric Power Act, 1997 (the “Act”). It is a fundamental principle that special laws take precedence over general laws, and the CPC is referenced in the Act solely for the enforcement of orders under section 40, pertaining to tribunal decisions set up under section II. Thus, the assertion that public hearings are mandatory under the Act lacks any basis.
They are of the view that while the Authority encourages public hearings, it is important to note that, according to the Tariff Rules, it is within the Authority’s discretion to decide whether to hold a public hearing. Rule 4(6) allows the Authority to solicit public comments if deemed appropriate, and Rule 9 grants the Authority the discretion to determine the necessity of a hearing upon admitting a petition. This indicates that conducting public hearings is not a mandatory requirement.
Moreover, while both NEPRA and the courts emphasize the importance of hearings in tariff determinations, it is essential to distinguish between initial comprehensive tariff determinations and the review of fuel pricing adjustments under already established tariffs. The Decision was a review of the fuel price mechanism based on an established upfront tariff from August 28, 2013, which underwent all necessary processes, including hearings for affected parties.
The Chairman and three members also claim that the Authority strictly adhered to established procedures while issuing the Decision, providing multiple opportunities for hearings and issuing a unanimous, well-reasoned order, to which Member (Tariff) was a signatory and did not raise any objections at that time.
” Member (Tariff) has asserted that the bagasse-based fuel cost component experienced a significant increase in August 2024, rising to Rs. 12.48/kWh from Rs. 5.98/kWh in July 2024, and that this revised component has surpassed the fuel cost of local coal. The comparisons made are misleading and lacks critical context. It is essential to note that the fuel cost of bagasse-based generation projects had been under adjudication since 2019 across various legal forums, including the Islamabad High Court, the NEPRA Appellate Tribunal, and NEPRA itself. Pending above adjudication, the provisional fuel cost component of Rs. 5.98/kWh, which pertains to the year 2015, was being paid since October 2018. Therefore, making the comparison of the provisional component of 2015 with the revised component of 2024 is out of place,” said Chairman and three members.
Likewise, comparing this change with the monthly increase occurred in the fuel cost component of local coal power plants is not correct. Secondly, while a comparison has been drawn with the fuel cost component of local coal power plants, several crucial factors have been overlooked. Firstly, the fuel cost component for local coal is adjusted on a monthly basis, whereas the fuel cost for bagasse-based generation is allowed to be reviewed on annual basis. Additionally, the fuel cost component for local coal is subject to exchange rate fluctuations, while the bagasse component is allowed to be indexed annually to a fixed percentage of 5%, which is significantly lower than the country’s inflation rate as well as to the rate of currency devaluation. Furthermore, the analysis neglects the differences in efficiencies between coal and bagasse power plants, which can impact overall fuel cost. Nevertheless, when evaluated over the yearly timeframe of FY 2023-24, it is evident that the revised fuel cost component for bagasse projects (Rs. 12.48/kWh) is, in fact, lower than that of average fuel cost component of local coal power plants (Rs. 13.76/kWh).
Furthermore, Member (Tariff) suggests that the Ministry of Energy’s (“MOE”) reconsideration request should not have been dismissed on legal grounds, viewing it as a continuation of prior proceedings. However, this request was filed in 2024 after the 2021 Amendment, which limits such requests to public sector licensees involved in distribution and supply business of electric power. Legal remedies are statutory rights that operate prospectively, making the assertion of continuity incorrect.
Additionally, the reference to RFPs initiated before the repeal of the National Electric Power Regulatory Authority Competitive Bidding Tariff (Approval Procedure) Regulations, 2017 (“NCBTR”), is not correct. The RFPs had been submitted and the process thereon had been initiated while NCBTR were in force. Regulation 37(2) of the 2022 Procurement Regulations provides a savings clause for processes initiated prior to its issuance.
The Authority also provided the MOE ample opportunity to address the maintainability of the reconsideration request. The request of the representatives of the MOE to seek legal opinion regarding maintainability of reconsideration request from Ministry of Law and Justice was also allowed. The Authority made its decision based on the law, available record while keeping in view the opinion of Ministry of Law and Justice.
” We maintain that the absence of a public hearing does not vitiate the proceedings. The Authority’s decision-making process included thorough cost analysis, future projections, and adequate opportunities for stakeholder input. We believe the Decision is legally sound and procedurally correct. Revisiting decisions that have attained finality could lead to regulatory uncertainty. It is also noteworthy that, following the opinion from the Ministry of Law and Justice, neither the MOE nor any other party challenged NEPRA’s Decision before the NEPRA Appellate Board or in any high court, despite available remedies. Furthermore, during the FCA decision process, neither CPPA-G nor the MOE objected to the claims of bagasse-based power projects. Had any objections been present, they would have sought legal remedies through the appropriate forums. In view thereof, the Decision has become effective in terms of rule 18(2) of the Tariff Rules upon notification in the official Gazette and has also attained finality since no appeal or review was ever filed against the Decision. CPPA-G while implementing the Decision has also processed the invoices of certain power plants and made payments as well. Therefore, not allowing legitimate cost in the FCA Decision will be imprudent and also contrary to the law,” replied the Chairman and three members to their brother member.
They have also claimed that ” since the decision has not been challenged by any party before any forum available under the law, the suo motto curative review based on submissions of the stakeholder should not be initiated in a mechanical manner and the Authority must examine whether any substantial miscarriage of justice has occurred. If that is not the case, a more appropriate course is to address stakeholder feedback through a reasoned explanation of the decision, thereby preserving the integrity of the regulatory process and ensuring transparency and predictability.”.
Ends
