Nepal | July 11, 2020

Hydels with 6,000 MW capacity await PPA

Himalayan News Service
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Kathmandu, December 26

Hydropower developers are still waiting to sign the power purchase agreement (PPA) with Nepal Electricity Authority (NEA) for 200 hydropower projects with total installed capacity of 6,000 megawatts of electricity. And a majority of these projects are being developed by independent power producers.

According to NEA, there are some practical issues related to the Nepal Electricity Regulatory Commission (NERC) regarding the determination of the theoretical basis to ink PPA with developers.

Prabal Adhikari, spokesperson for NEA, said as per guidelines of NERC, power developers need to complete survey, prepare environment and social impact report, obtain power generation licence, submit technical and financial aspects of their power projects and the tentative rates, among others before the PPA can be signed.

Earlier, the power utility could independently negotiate and determine the power purchase rates with the developers.

As per Article 13 (c) of NERC Act, parties that are involved in the sale and purchase of electricity can set the price per unit of power only after receiving permission from NERC. However, PPA guidelines of NEA do not have this provision.

“Since there is confusion regarding this issue in between NERC’s and NEA’s guidelines, we cannot take any decision regarding PPA unless NEA board gives a concrete answer on the issue,” informed Adhikari.

As per Dilli Bahadur Singh, chairman of NERC, NEA and other stakeholders need to follow the guidelines that the commission has prepared. “The PPA signing procedure has not been halted due to us. If the concerned parties forward their agreements to us, we will assess the proposals and take the needful decision,” he stated.

According to Singh, the commission will determine some of the provisions for approving the power purchase and sale rates, tentative investment, ratio of equity and loan, source of the loans and interests, clearance of loans and interests, returns on investment, recurrent expenditure, operational expenditure, maintenance costs, revenue and tax and other service charges, additional capital that will be required, among others.

“The concerned stakeholders need to prepare the aforesaid documents and meet the criteria as per the requirement of the commission,” Singh clarified.

Shailendra Guragain, president of Independent Power Producers Association Nepal, said the government agencies are intentionally delaying the PPA signing process with the power developers.

“The government must establish a ‘one desk’ system to perform all activities before execution of any hydropower project. At present, concerned government agencies have been playing blame game and ultimately we have to face the unnecessary consequences,” he said, adding, the Ministry of Energy, Water Resources and Irrigation must play a more constructive role to break the deadlock regarding all the problems that power developers have been facing since long.

Till a few months back, power producers needed to only approach NEA to sign PPA. But, after formation of NERC, state-owned power utility needs to get the PPA approved from NERC before inking final PPA with the developers.

A version of this article appears in print on December 27, 2019 of The Himalayan Times.

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