The government of Nepal has opened the national electricity transmission grid to the private sector, with the Electricity Regulatory Commission (ERC), Nepal’s electricity regulator, announcing new ‘wheeling charges’ (transmission fees) on Thursday. This landmark decision, made in the presence of Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha, aims to involve the private sector in electricity trading and end the monopoly of the Nepal Electricity Authority (NEA).
New Transmission Fees Announced
For the fiscal year 2083/84, the ERC has set the wheeling charge for medium and long-term open access at Rs 413,000 per megawatt per month. For short-term open access, the fee is Rs 0.57 per kilowatt-hour. ERC Chairman Ram Prasad Dhital stated that these charges were determined based on the ‘National Electricity Transmission Grid Transmission Fee Calculation Standards, 2083’.
Dhital explained that the calculation considered the Nepal Electricity Authority’s audited financial statements for fiscal year 2081/82 and its estimated annual required income for fiscal years 2082/83 and 2083/84. The standards, which outline the calculation methodology and factors for annual required income, became effective on Bhadra 31 (BS). According to Dhital, the ERC determined these fees under an open market policy to allow third parties and the private sector to utilize the electricity transmission system.
Legal Framework and Calculation Basis
ERC Member Jayaraj Bhandari clarified that the commission established these standards under Section 13 of the Electricity Regulatory Commission Act, 2074, and Rule 13 of the Electricity Regulatory Commission Regulations, 2075. The ‘Electricity Transmission and Distribution System Open Access Directive, 2082’ also mandates the determination of transmission fees.
Bhandari detailed that the annual required income calculation for transmission fee determination includes several components: depreciation, loan interest, employee and operating expenses, transmission service costs, return on equity investment, foreign exchange expenses, and income tax. The standards ensure the full and fair recovery of the annual required income for the licensee using the transmission system.
Policy Background and Future Outlook
The Ministry of Energy, Water Resources and Irrigation initiated this path to encourage private sector involvement in electricity trade. This policy aligns with the government’s declaration in its fiscal year 2080/81 policies and programs to allow private sector electricity trading. It seeks to end NEA’s monopoly and facilitate the consumption of increasing electricity production in domestic and international markets.
Nepal’s electricity regulation began with the Electricity Act, 2051, which established the Tariff Determination Commission. The ERC itself was established on Baisakh 23, 2076 (BS), under the Electricity Regulatory Commission Act, 2074.
Bhandari also mentioned that the ERC is working on a separate directive to determine transmission fees for radial and dedicated transmission structures outside the national grid. However, further details on when this directive will be issued are not yet available. The ERC has also released a draft of the ‘Electricity Regulatory Commission (Open Access) Directive, 2082’ for public feedback, but its full implementation timeline remains unclear.
