The government has restricted the hydropower developers from taking more than 17 per cent profit but the small power developers no longer need to pay additional fines to the NEA, if the power generation drops due to change in hydrology, according to new bylaws.
According to the bylaw ‘Conditions for People with Licence for Power Purchases and Sales-2019’ issued today by Nepal Electricity Regulatory Commission (NERC), hydropower developers are barred from taking more than 17 per cent return on equity but it has also exempted the hydropower projects – of less than 10 MW – of additional fines in case of generation drop.
“If the profit made by any hydropower project is higher than 17 per cent, it will be managed by reducing the rate agreed upon in the power purchase agreement (PPA),” confirmed chairman of the commission Dilli Bahadur Singh.
The commission will assess the tentative investment, source of money and its interest rate, clearance of loans and interests, ratio of equity and loan, recurrent expenditure, operational expenditure, maintenance costs, revenue and taxes and other service charges, additional capital that will be required, among others, to calculate the return and income before issuing approval to the developers to sign PPA with Nepal Electricity Authority (NEA), the bylaw reads, adding that the developer will need to submit technical and financial aspects of their power project and tentative rates for the final approval of PPA from the regulatory commission. “Before submitting the documents, they will have to hold discussions with NEA for the tentative rates.”
After the commission approves the final power purchase rate, the developer and NEA will sign the final agreement, it adds. “The commission will finalise the PPA rates within 90 days by assessing the projects’ technical and financial aspects but the financial assessment is not required for projects with installed capacity of up to 100 megawatts (MW).”
More than 40 hydropower projects have been waiting to sign the PPA were waiting for the bylaw as the PPA with NEA has been stalled since the last six months due to delay in issuing the bylaws. “The hydel projects will now be able to sign the PPA with NEA,” Singh said, adding that the power developers will, however, have to get a go-ahead from the commission – according to the bylaws – beforehand. “Earlier, the NEA could independently negotiate and determine the power purchase rates with developers.”
Though, not fixed, the NEA had been signing PPA with power developers earlier at around 17 per cent of return on equity. Singh, however, said that the new PPAs will be based on old tariff till the commission comes up with a new tariff rate.
Likewise, small hydropower plants with an installed capacity of less than 10 MW will not be penalised for falling short of production forecasts, the Electricity Regulatory Commission said. “The developers no longer need to pay additional fines to the NEA, if the power generation drops due to change in hydrology,” the bylaws read, adding that they were penalised up to 80 per cent of the deficit electricity, earlier. “Hence, the developers had been expressing strong reservations against the earlier rule and demanding that it be scrapped.”
Last month, the operators of 20 hydel projects with a combined capacity of 69.8 MW urged the government to acquire their projects citing heavy financial stress, besides calling for the removal of the availability declaration system for plants below 10 MW. “The projects are witnessing a 55 per cent fall in the power projections stated in the PPA, and their income has declined in line with the fall in output,” according to the troubled developers.
According to the bylaws, the provisions requiring developers to produce electricity up to a maximum of 70 per cent of the total annual energy output in the dry season will not be implemented for 10-MW schemes. Likewise, the NEA must pay compensation for undelivered energy to small hydel schemes by calculating the amount using a uniform formula for transmission lines, the bylaws reads.
Independent power producers welcomed the move by the Electricity Regulatory Commission.
According to the bylaw ‘Conditions for People with Licence for Power Purchases and Sales-2019’ issued today by Nepal Electricity Regulatory Commission (NERC), hydropower developers are barred from taking more than 17 per cent return on equity but it has also exempted the hydropower projects – of less than 10 MW – of additional fines in case of generation drop.
“If the profit made by any hydropower project is higher than 17 per cent, it will be managed by reducing the rate agreed upon in the power purchase agreement (PPA),” confirmed chairman of the commission Dilli Bahadur Singh.
The commission will assess the tentative investment, source of money and its interest rate, clearance of loans and interests, ratio of equity and loan, recurrent expenditure, operational expenditure, maintenance costs, revenue and taxes and other service charges, additional capital that will be required, among others, to calculate the return and income before issuing approval to the developers to sign PPA with Nepal Electricity Authority (NEA), the bylaw reads, adding that the developer will need to submit technical and financial aspects of their power project and tentative rates for the final approval of PPA from the regulatory commission. “Before submitting the documents, they will have to hold discussions with NEA for the tentative rates.”
After the commission approves the final power purchase rate, the developer and NEA will sign the final agreement, it adds. “The commission will finalise the PPA rates within 90 days by assessing the projects’ technical and financial aspects but the financial assessment is not required for projects with installed capacity of up to 100 megawatts (MW).”
More than 40 hydropower projects have been waiting to sign the PPA were waiting for the bylaw as the PPA with NEA has been stalled since the last six months due to delay in issuing the bylaws. “The hydel projects will now be able to sign the PPA with NEA,” Singh said, adding that the power developers will, however, have to get a go-ahead from the commission – according to the bylaws – beforehand. “Earlier, the NEA could independently negotiate and determine the power purchase rates with developers.”
Though, not fixed, the NEA had been signing PPA with power developers earlier at around 17 per cent of return on equity. Singh, however, said that the new PPAs will be based on old tariff till the commission comes up with a new tariff rate.
Likewise, small hydropower plants with an installed capacity of less than 10 MW will not be penalised for falling short of production forecasts, the Electricity Regulatory Commission said. “The developers no longer need to pay additional fines to the NEA, if the power generation drops due to change in hydrology,” the bylaws read, adding that they were penalised up to 80 per cent of the deficit electricity, earlier. “Hence, the developers had been expressing strong reservations against the earlier rule and demanding that it be scrapped.”
Last month, the operators of 20 hydel projects with a combined capacity of 69.8 MW urged the government to acquire their projects citing heavy financial stress, besides calling for the removal of the availability declaration system for plants below 10 MW. “The projects are witnessing a 55 per cent fall in the power projections stated in the PPA, and their income has declined in line with the fall in output,” according to the troubled developers.
According to the bylaws, the provisions requiring developers to produce electricity up to a maximum of 70 per cent of the total annual energy output in the dry season will not be implemented for 10-MW schemes. Likewise, the NEA must pay compensation for undelivered energy to small hydel schemes by calculating the amount using a uniform formula for transmission lines, the bylaws reads.
Independent power producers welcomed the move by the Electricity Regulatory Commission.
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