by Umer Gilani & Muhammad Alee
Pakistan’s “rooftop solar community” is up in arms and the reason behind it is a one-word amendment recently proposed by NEPRA in its own regulations – to be precise, NEPRA (Alternative & Renewable Energy) Distributed Generation and Net-Metering Regulations, 2015. The proposed amendment will change the price at which utility companies are supposed to buy power produced by rooftop solar power producers. While these excess units were previously supposed to be purchased according to the “average power purchase price”, they will now be purchased at the “average energy purchase price”, which is much lower. In numerical terms, the rate being offered to rooftop solar producers has been slashed from Rs. 19 to Rs. 9, i.e. the rate has been halved in one go. What seems, initially, like an innocuous one-word change in the rules is actually a drastic re-working of the financial feasibility of the entire rooftop solar power network in Pakistan.
Like many other concerned citizens, my colleagues and I attended the public hearing conducted by NEPRA to understand the regulator’s motive behind this move. From what we could gather, the motive is something akin to “wealth redistribution”. Chairman NEPRA argued that since the overall price of electricity in the country has sharply risen in the country, the 20,000 households and industries which had timely invested in rooftop solar are now benefiting considerably from their investment. Therefore, NEPRA feels it is only fair that these investors should now be fleeced a little and the gains should this be re-distributed to those 36 million consumers who have not been able to invest in solar panels.
This logic fails on at least three grounds.
Firstly, the math is quite ridiculous. According to some estimates rooftop solar generators are selling less than 20Megawatts to the national grid. This is only a tiny fraction of the country’s power basket. Whether these units are underpriced or over-priced doesn’t make a big difference. It is the tariff being given to the mega-generation companies, the Independent Power Producers (IPPs), which really makes all the difference. It is astonishing that a regulator which has being approving disastrous deals with IPPs over the years has become fixated with squeezing the handful of citizen-investors who took the risk of setting up solar plants in their homes. It is a terrible waste of regulatory time and effort.
Secondly, the regulator seems to have forgotten the entire point behind distributed generation and the net-metering system. The entire point behind this system was to avoid the distribution losses and line losses. Unlike mega-power generation plants which are often located hundreds of miles away from the main consumption sites, and which therefore necessitate the dissipation of power during transmission, these little power powers are located right in the middle of the sites where energy is being consumed. To equate the tariff being granted to rooftop with that tariff being given to IPP is to miss the point entirely.
Finally, and most significantly, whoever proposed this amendment seems to have turned a blind eye to the legalities of the situation. It is one of the most elementary principles of administrative law in this country that vested rights cannot be taken away from citizens through legislation. This cannot be done through law and it most definitely cannot be done through a tweaking of rules, which are in the nature of delegated legislation. The bigwigs of NEPRA seemed fazed when we mentioned that the proposed amendment amounts to swindling those little investors who had signed up for solar power and obtained licenses under the then-prevailing rules. They now have a legitimate expectation that at least during the currency of the 7-year licenses the state authorities will not be able slash the price of their produce through a tweaking of the rules.
The law in this regard is quite clear. It allows very limited powers to the executive in its function as a delegated legislator, restricting such legislation to prospective effect only (PLD 1964 SC 293; PLD 1963 SC 633; 1986 SCMR 1917). The Supreme Court has held that the executive authority cannot exercise its rule-making power (whether such power is to make, amend, vary or rescind) to take away vested rights of the citizens, and any change which is destructive to rights so vested is without lawful authority and of no legal effect (PLD 1970 SC 439). This protection is also extended to revisions or amendments to vested rights by way of notifications (PLD 1969 SC 430; 1986 SCMR 1917) and the Supreme Court has held that contractual obligations cannot be destroyed by retrospectively applying executive orders (1986 SCMR 1917).
The truth is that the issue which the rooftop solar community is facing is not entirely peculiar to them. It is a part of the larger “rule of law” issue in the country. These are a few atomized, disorganized, relatively “small” investors. They made the mistake of investing solar power and obtaining licenses for distributed generation upon the belief that the state authorities will honor their commitment. Little did they realize that in Pakistan, state authorities are accustomed to taking U-turns. The government and NEPRA can’t really go back on their word insofar as the IPPs are concerned because the IPPs will take them into international arbitration, an area where Pakistani state authorities have had bitter experience. So, they are not focusing the entire exploitative energies on swindling this ragtag bunch of small investors. It is safe to say that the State has yet again failed to protect the investment of the citizens.
The good thing is that unlike in the past, these small citizen-investors are in no mood to be taken for a ride. The tide of discontentment is rising and this was quite visible in the public hearing. If NEPRA doesn’t change course and if the powers-that-be don’t head the cries of the small citizen-investors, this tide of rage might soon find its way to the courts. Who knows what happens next!
Courtesy of The News.
