LAHORE, Feb 14: As Pakistan Electric Power Company begins the last year of its existence — its mandate runs out on Dec 31, 2002, — experts see a rocky road ahead. The Pepco, must now match the concepts developed by it work with practice, making important people yield their powers to new entities.

The prime minister’s executive order of October 1998, which created the Pepco, charged it with splitting the Water and Power Development Authority into private companies corporatized under the Companies Law. It has created 12 companies. Most of them, however, exist on papers only as the operational independence granted to them has yet to be linked to responsibilities.

“An old mind-set still prevails in the Wapda and the companies. The newly-created entities still expect the Wapda to take all important decisions. The Authority is happy to oblige,” a power sector expert says.

Each of the companies has a board of directors. The boards include representatives from the Pepco, the Wapda and the private sector. So far the boards don’t have any financial powers. The Wapda still operates under a unified financial regime. All income first comes to its finance member who then makes allocations to the companies. The distribution is in accordance with Wapda’s priorities. The Wapda and the Pepco still have to evolve a mechanism for distribution of income and responsibility for expenditures. This will involve abdication of administrative and financial powers by those who have enjoyed a monopoly for years. It may not be easy and could consume better part of Pepco’s energies over the next 10 months, the expert warned.

There are some genuine problems, a Wapda employee said in its defence. If distribution of income is decentralized and every distribution company is financially independent, at least five out of eight would lose their viability. Presently, Wapda is making money from companies like the Lesco and Fesco and pumping it into the likes of the Hesco and Pesco. Until these companies are made to stand on their feet, they cannot be handed over to the private sector.

Framing the rules of business for the board of directors is another tough task. Most of the time, agenda set for the board of directors meetings clashes with the goals and the rules set by the Pepco and the Wapda.

Creating an organizational structure for these companies and implementing it may prove quite tricky, a Pepco employee says. The Wapda, he said, had so far approved the organizational structure for only the National Transmission and Distribution Company. It had yet to accept the proposals relating to the GENCOs and the DICSOs.

Directors for human resource management, finance, internal audit and technical services have the most vital role in the companies’ operations. Frequent changes at the companies would disrupt continuity and tax the nerves of those managing them.

A Ministry of Water and Power official said working at these companies would not improve unless sufficient financial and administrative powers were devolved to them. In theory, some of the powers have already been delegated to them. But linking them to day-to-day working of these companies is going to be the biggest challenge facing both the Pepco and the Wapda, he added. Once the directors are in place and the rules of business have been finalized, there would be the need for developing a monitoring and surveillance system.

So far the Wapda has been dealing with the independent power producers rather than transferring the matter to the NTDC. In future, however, the NTDC will be purchasing power from the IPPs. The commercial arrangements have, however, not been clearly laid down. In the restructured power sector the NTDC and the National Power Control Centre will play a pivotal role in dispatch, settlement of invoices, ensuring spinning reserves and making the required amount of electric power available to buyers. It is, therefore, essential to finalize arrangements for these entities.

Developing a uniform tariff structure country may be the trickiest job, an IPP employee said. Uniform tariff is the declared policy of the government of the Pakistan. In practice, however, tariff can only be adjusted according to the paying capacity of the consumers.

On top of it, the Wapda has chosen to confront the National Electric Power Regulatory Authority. This hardly augurs well for the future of the power sector.