Nepal | May 25, 2020

NERC drafts electricity tariff guidelines

Himalayan News Service
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Kathmandu, November 6

Nepal Electricity Regulatory Commission (NERC) has drafted the ‘Electricity Customer Tariff Determination Guidelines’ aiming to manage electricity generation, transmission, distribution and trade to balance demand and supply of electricity for customers.

To determine the electricity tariff, NERC has identified the key factors that will play a crucial role to determine the tariff.

As per the drafted guidelines, it will protect customers’ rights and assure quality electricity. The draft also speaks of professionalisation of the electricity distribution company and raising its effectiveness. The new guidelines also state about improvements in distribution system and building a mechanism to strengthen the distribution company’s resources for future risks.

Moreover, guidelines also have a provision of ensuring respectable rate of returns for the distribution companies, among others.

Furthermore, the draft guidelines have stated that NERC will determine overall investment in projects, including power
purchase agreement with independent power producers, yearly electricity sales and also assess income and expense statement. The commission will also determine the expenses on distribution and transmission lines, interest rate and payments, depreciation, regulatory fee and employee expenses. NERC will also determine the expected annual income of the distribution company.

As per the guidelines, based on the above mentioned factors, the electricity tariff for customers will be determined.

This means that before determining electricity tariff, any distribution company will have to submit the related documents to NERC along with a Rs 25,000 fee. As per the guidelines, the commission will finalise the electricity tariff within seven days from the application date.

At present, guidelines can only be applied to Nepal Electricity Authority (NEA) as it is the country’s sole power utility. However, in the future if any new power distribution company is established, then it will have to follow the guidelines.

A few days ago, NEA had decided to reduce the tariff rates for dedicated feeder and trunk line users, that is, industries and hospitals. As per 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 NERC approves NEA’s proposal.

NEA has stated that without proper guidelines, it has been unable to fix and revise new tariff rates for all types of customers. As per earlier NEA tariff rate, customers are paying minimum of Rs 4.20 per unit to maximum of Rs 19 per unit.

As per the draft of the new guidelines, power trading companies will not be able to fix electricity tariff more than once a year.

A version of this article appears in print on November 07, 2019 of The Himalayan Times.

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