Nepal | September 22, 2020

NERC regulations pave way for formation of energy regulatory body

Commission responsible for fixing electricity tariffs

Himalayan News Service
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Kathmandu, September 2

The government has issued regulations for the execution of the Nepal Electricity Regulatory Commission (NERC) Act, 2017, which has paved the way for the formation of the regulatory agency in the electricity sector. The government has envisioned the commission to regulate electricity generation, transmission, distribution and cross-border power trade.

The Energy Crisis Prevention Action Plan issued by the government on February 18, 2016, had incorporated the provision for formation of a high-level electricity regulation commission, which would have the authority to regulate issues relating to transmission lines, power purchase, tariff fixing and implementation. The commission’s decisions and directions will have to be followed mandatorily, meaning that its presence will be significant in putting an end to the irregularities reported in the energy sector.

Dinesh Kumar Ghimire, joint secretary at the Ministry of Energy, Water Resources and Irrigation, has said that the ministry will set up a committee led by secretary of the ministry for the appointment of a chairman and members of the commission.

The NERC regulations published in the Nepal Gazette, recently, has also fixed the charges of commission. As per the regulations, NERC will charge
Rs 100,000 while granting permission for the power purchase agreement (PPA) for energy projects of 100 kilowatts to one megawatt. Likewise, it will charge an additional Rs 10,000 per megawatt for projects having capacity from one megawatt to 1,000 megawatts and Rs two million in lumpsum for projects of above 1,000 megawatts, as per regulations. Meanwhile, power off-takers will have to take approval of the regulatory commission to sign PPA with energy project developers.

Likewise, the NERC will charge Rs 7,500 while fixing the wholesale purchasing and selling price and the regulatory body can charge Rs 25,000 from the distribution and transmission utilities while fixing the transmission and distribution tariffs also known as wheeling charge. Also, Rs 25,000 will be charged from the power utilities while fixing the electricity tariff.

Similarly, while granting permission for mergers and acquisitions of licensed power firms, the regulatory body can charge Rs 100,000 from companies that have net worth of Rs 100 million after merger or acquisition and additional Rs 50,000 for every Rs 100 million beyond the aforementioned base value.

Following the formation of the regulatory body, private companies are expected to enter the transmission and distribution sectors, according to Ghimire. Till date, private sector engagement is only in generation and there is only one power off-taker, that is Nepal Electricity Authority.

“There will be competitive environment in power purchase, transmission and distribution and the current state of monopsony is expected to end,” said Ghimire. The NERC Act has also envisioned to regulate the quality and efficiency of the national grid and transmission safety to ensure reliable power supply to consumers.

A version of this article appears in print on September 03, 2018 of The Himalayan Times.

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