The ultimate test

The government is soon to form a new National Electricity Regulatory Commission (NERC) to regulate the national systems of electricity generation, transmission and distribution. A Royal ordinance to that effect is to be issued. As an umbrella organisation, it will be authorised to supervise the power companies, including developing a code of conduct for them, fix tariffs, prevent monopoly, diversify the electricity markets, and create and enforce mechanisms for power development and simplification of rules and regulations, as well as provide other guidelines. The earlier decade-old tariff fixation mechanism through a separate committee has now been scrapped. NERC will have to start work on reviewing power tariffs within six months.

It is a good idea to eliminate duplication of work and confusion about functions, bring under one agency fragmented responsibilities to facilitate simplification of processes, and

improve power sector management. In fact, there has been a tendency of late to talk of an umbrella organisation in other sectors, too. Nepal, which depends heavily on foreign bilateral and multilateral aid to implement almost any programme and project, has often made such changes as part of the guidelines supplied or desired by the donors, especially the multilateral ones. The idea of the present regulatory commission is no exception. In the past, too, in the name of boosting efficiency and effectiveness, policy has been changed from time to time and agencies have been created and merged. However, it is debatable whether all these exercises have yielded satisfactory results to justify the costs.

The test of the new commission, however, lies not in high-flown philosphy or theories. Despite being one of the richest in hydro-power potential in the world, Nepal, has, ironically, the highest electricity tariff in South Asia. Corruption, leakage and the lack of accountability mainly account for this poor state of affairs. The state-owned Nepal Electricity Authority (NEA) generated a revenue of over Rs.12 billion last year, Rs. one billion more than the previous year. But it is reported to be finding it difficult to break even. By the end of the last fiscal year, NEA had yet to recover Rs.320 million from government offices and Rs.860 million from municipalities, apart from the not-so-insignificant private unpaid bills. One example of how the costs of NEC go up is that it pays bloated prices to purchase power from private companies even as it charges the consumers punishing rates. The usefulness of the new body will be proven only if it can make power distribution reliable and efficient and bring down the power tariff, or at least keep them unchanged. Although the experience does not offer much of a hope, let’s wait and see.