Nepra's state of industry report 2021.

• Position: National Electric Power Regulatory Authority

National Electric Power Regulatory Authority (NEPRA) has recently issued its flagship annual State of Industry Report 2021 (SIR21). The purpose of such reports by a regulator generally is to provide an overview of the regulated business, summarize major developments during a previous period, state its own position on key issues, and offer insight into its approach to regulating this business in the future. NEPRA has done a good job as SIR21 is much improved and comprehensive than this report's previous editions. The SIR21 also identifies some key issues and challenges facing the power industry in Pakistan and offers recommendations for dealing with them. On some issues, we find NEPRA's stances questionable, and in the ensuing paragraphs, discuss why the Authority must reconsider its position and prescription to handling these challenges.

First and foremost, reading the SIR21, one cannot help feeling that on most issues, NEPRA has taken an entirely hands-off approach. "Arm's length" or "light-handed" regulation is arguably more desirable than a "command and control" or "micro-management" approach to dealing with the regulated industry, but not to the extent of making it just an annual ritual of lamenting, "We ordered them to improve but they did not comply". If the regulated entities were not implementing the suggested reforms, NEPRA should have engaged these entities actively to understand their genuine difficulties and helped them in overcoming these. It would be nice, if in the future, NEPRA could provide a summary of the efforts it made to engage these entities actively to assist them in resolving some critical issues they faced.

In the SIR21, NEPRA characterizes hydroelectric and bagasse-based power generation plants as "intermittent" and at multiple places asserts that their addition into the grid necessitates keeping of an equal amount of backup from conventional plants. We take exception to both of these assertions. Power from solar and wind power plants is characterized intermittent because it can drop from nominal rating to almost zero in a matter of moments if a thick cloud blocks the sun over solar panels or wind stops blowing across wind turbines. The available water resource for hydroelectric plants and biomass for bagasse-based plants may be limited in magnitude but these limitations are of a different nature and planners can predict to a large extent the pattern of their availability through analytic efforts. Even run-of-the-river type hydro...