Nepal | September 26, 2020

No PPA signed till date with NEA not implementing ‘take or pay’ provision

Himalayan News Service
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Kul Man Ghising, Nepal Electricity Authority

File – Interview with Kul Man Ghising, Managing director of Nepal Electricity Authority at Ratnapark in Kathmandu on Sunday, September 25, 2016. Photo: Balkrishna Thapa Chhetri/THT

Kathmandu, March 25

Nepal Electricity Authority — the country’s power monopoly — is delaying implementation of the ‘take or pay’ provision in power purchase agreement with independent power producers.

The provision was endorsed by the NEA board in the last week of January. However, according to independent power producers, NEA has not signed a single PPA till date since the ‘take or pay’ provision came
into force.

Following repeated instructions from the energy minister, the NEA board decided to replace the ‘take and pay’ clause of the PPA with ‘take or pay’ provision for up to 90 per cent of the total generation of the project.

According to Independent Power Producers’ Association-Nepal — the umbrella body of private sector developers — there are projects with total installed capacity of around 700 megawatts that have approached NEA for grid connection agreement after the electricity utility declared the new provision for the PPA.

NEA has offered ‘take or pay’ provision for projects that will supply power to the national grid by the end of 2025.

“Delayed signing of PPA on the part of NEA may discourage IPPs willing to invest in hydropower to contribute to the government’s vision of generating 10,000 MW in the next 10 years,” said Shailendra Guragain, president of IPPAN.

The sole power off-taker has announced reforms but not implemented them: IPPs

NEA decided to apply ‘take or pay’ provision to encourage private investment in hydropower to achieve the government’s vision. As the present leadership of the Ministry of Energy and NEA have come up with
a vision for power sector reforms, the private sector had expected hassle-free service.

“However, NEA is not implementing its decision and creating hassles under various pretexts,”said Guragain. IPPs have alleged that though NEA has announced various reforms, implementation of those decisions has been dismal.

As per ‘take and pay’, NEA would procure electricity from the IPPs only when needed. Under the ‘take or pay’ provision, however, the sole power off-taker must pay for electricity generated by the IPPs, whether or not there is demand from consumers.

IPPs had long been lobbying with the government for  restoration of ‘take or pay’ provision as the NEA board meeting in August 2014 had decided to implement ‘take and pay’ clause in PPA for projects scheduled to be completed after 2017 citing that there would be surplus energy in the country.

The ‘take or pay’ provision was included in the ‘Energy Crisis Prevention and Electricity Development Decade’ — a vision document of the government for generating 10,000MW  in 10 years. It was approved by the cabinet in February 2016. NEA Managing Director Kulman Ghising was not available for comment despite repeated attempts by The Himalayan Times.

A version of this article appears in print on March 26, 2017 of The Himalayan Times.

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