Electricity regulatory commission introduces tariff guidelines

Nepal Electricity Regulatory Commission (NERC) has introduced the ‘Electricity Customer Tariff Determination Guidelines’ today.
The guideline aims at managing electricity generation, transmission, distribution and trade to balance the demand and supply of electricity for customers, according to the commission that had previously identified some key factors that play a crucial role in determining the tariff to determine the electricity tariff.
The chair of commission Dilli Bahadur Singh informed that the new guidelines will play a vital role to determine the electricity tariff for all kinds of consumers in a scientific manner. According to the guidelines, it will protect customers’ rights and assure quality electricity. “It also paves way for professionalisation of the electricity distribution company and raising its effectiveness,” he said, adding that the new guidelines also state about improvements in distribution system and building a mechanism to strengthen distribution company’s resources for future risks. “The guidelines also have a provision of ensuring respectable rate of returns for the distribution companies.”
The guidelines reads that the commission will determine overall investment in projects, including power purchase agreement (PPA) with independent power producers (IPPs), annual electricity sales and also assess income and expense statement. “The commission will also determine expenses on distribution and transmission lines, interest rate and payments, depreciation, regulatory fee and employee expenses,” it reads, adding that the commission will also determine expected annual income of distribution company. “The guidelines – based on the above mentioned factors – the electricity tariff for customers will be determined.”
The guidelines has also opened the doors for Nepal Electricity Authority (NEA) to introduce new electricity tariff for its customers. “The NEA had proposed commission to raise electricity tariff rate by 15 per cent on average for all types of customers except for dedicated feeder and trunk lines but no decision has been taken yet on it.”
According to the guidelines, before determining electricity tariff, any distribution company will have to submit the related documents to commission along with Rs 25,000 fee and the commission will finalise the electricity tariff within seven days from the application date. “At present, guidelines can only be applied to NEA as it is the country’s sole power utility but in the future if any new power distribution company is established, then it will have to follow the guidelines.”
A few weeks ago, NEA had decided to reduce the tariff rates for dedicated feeder and trunk line users, that is, industries and hospitals. According to the NEA’s decision, from now onwards dedicated feeder and trunk line users will be charged only 15 per cent more than the tariff paid by general consumers. However, the revised tariff will be implemented only if the commission approves NEA’s proposal. Currently, NEA has been charging customers minimum of Rs 4.20 per unit to a maximum of Rs 19 per unit. According to the new guidelines, power trading companies will not be allowed to fix electricity tariff more than once a year.

Stakeholders demand clean energy for all

Stakeholders today demanded clean and sustainable energy for all.
Discussing on ‘Energy that transforms - the Road to 2030’ in the capital today, they also highlighted current status of country’s climate change policy and the status of access to energy.
On the occasion, member of Nepal Electricity Regulatory Commission Ram Prasad Dhital said that the government is committed to strengthening and supporting people to ensure clean energy for all. “The the commission is committed to formulating necessary laws and pushing the government entities to enforce clean energy access,” he said, adding that the commission has just 10 years to achieve the Sustainable Development Goal (SDGs) of universal energy access. “Despite some progress, some obstacles still remain.”
Likewise, country director of Practical Action Nepal Achyut Luitel said that the government has been trying to provide affordable clean energy largely through grid extension programmes, but the quality of service has often not been good and the poor have not been able to access it in a desired manner. “The government should formulate an integrated plan and action for grid and off-grid electricity, by laying more emphasis on providing clean energy for cooking purposes too,” he said, adding that they have suggested the government to address such issues through a holistic approach and address the demand side and not just the supply side of clean energy. “We have also asked the government to support multi-stakeholder processes, embrace inclusivity and increase public funding for clean energy programmes.”
Addressing the United Nations (UN) Sustainable Energy for All (SE4ALL) programme on May 25, minister for Energy, Water Resources and Irrigation Barsha Man Pun has said that the government is achieving significant progress in areas of developing and mainstreaming hydropower as well as renewable energy projects to reduce dependency on imported fossil fuels by replacing them with clean sources of energy.

Hydel firms not allowed more than 17 per cent profit

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.