• Eight member states of SAARC would be able to conduct cross-border trade of electricity

Kathmandu, August 29

The Parliament has endorsed a regional energy cooperation agreement titled ‘SAARC Framework Agreement for Energy Cooperation (Electricity)’ today.

SAARC foreign ministers had signed the agreement during the concluding ceremony of the 18th SAARC summit held here on November 26 and 27, 2014.

The agreement has laid the foundation for trade of electricity in South Asia. As per the pact, eight member states of SAARC would be able to conduct cross-border trade of electricity on voluntary basis subject to the laws, rules and regulations of the respective member states and based on the bilateral, trilateral and mutual agreements between the concerned states.

Bilateral power trade agreements among the SAARC member states like Nepal and India; India and Bhutan are already in place.

As per the agreement, the authorised entities of the concerned member states like private or public power producer, power utility, trading company, transmission utility, distribution company or any other institution established under the law would be permitted to buy and sell electricity within the region. The buying and selling entities, as defined by the pact, can negotiate the terms and conditions, payment security mechanism and tenure of the electricity trade, and such entities will be regulated by the law of the concerned member states while purchasing and selling electricity, as per the agreement.

The agreement also says that the member states can mull over exempting export and import duties and other fees for cross-border trade and exchange of electricity between buying and selling entities.

To make the cross-border electricity trade happen, the member states can negotiate with each other to install cross-border transmission lines, cross-border interconnections and initiate the projects through bilateral, trilateral or regional agreements. The member states have agreed to provide non-discriminatory access to the regional transmission grids in their respective countries.

The agreement has also envisaged forming system operation and settlement mechanism, regulatory mechanism, and dispute settlement mechanism.

System operation and settlement mechanism will be developed in coordination with national grid operators for the secure and reliable operation of the inter-connected grids and to prepare scheduling, dispatching, energy accounting and settlement procedure of the cross-border trade.

Similarly, the regulatory mechanism would be developed to resolve the regulatory issues related to electricity exchange and trade.

The agreement also has a provision for the dispute settlement mechanism but it has identified the SAARC Arbitration Council as the final authority to settle the disputes related to energy exchange and trade among the member nations.

As per the provision of the agreement, member states can review the pact every five years from the date of its entry into force, unless the member states agree the review is not necessary and communicate the same to one another in writing.