Nepal | May 25, 2020

NERC approval must before inking PPA

Himalayan News Service
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Kathmandu, July 16

Power developers are now required to seek final approval of Nepal Electricity Regulatory Commission (NERC) before inking any power purchase agreement (PPA) with Nepal Electricity Authority (NEA).

The commission issued a draft directive of the jurisdiction of the commission late Monday, which includes a provision that the power developers would have to get a go-ahead from NERC before signing PPA with NEA. Earlier, the power utility could independently negotiate and determine the power purchase rates with the developers.

According to Dilli Bahadur Singh, chairman of NERC, the commission has instructed NEA not to ink any more PPAs before the directive is fully implemented. He further said they have asked concerned stakeholders to submit recommendations and feedback within 15 days.

Thereafter, commission will make necessary changes to the guideline, if any, and give it a final shape.

He further said any PPA signed after formation of the commission or after May 7 will be invalid and power developers will have to take approval from the commission before signing the agreement again with NEA.

For the final approval of PPA from the commission, the developer will need to submit technical and financial aspects of their power project and tentative rates. 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 PPA.

As per Singh, the commission will determine some of the provisions for approving the rates, like 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.

If the developer provides all the documents related to aforementioned criteria as per the requirement of the commission, NERC will provide final approval for the PPA. If the PPA signing is stalled for any reason, the commission will notify the power purchaser and seller.

Moreover, if two or more developers are competing for the same project, NERC will gauge the best depending on their preparations and the processes they adopted prior to seeking the PPA approval.

Singh further said new PPAs will be based on old tariff till the NERC comes up with a new tariff rate.

A version of this article appears in print on July 17, 2019 of The Himalayan Times.

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