Although the government enacted an act three decades ago that opened the way for the private sector to generate, transmit, and distribute electricity, the commission has finally issued the guidelines.
What you should know
The Electricity Regulatory Commission has issued a directive on open access to electricity transmission and distribution, 2082. With this, the monopoly of the Nepal Electricity Authority in electricity transmission and distribution is going to be broken. Section 14 of the Electricity Regulatory Commission Act, 2074 mentions maintaining competition and protecting the interests of consumers. Section 'N' of Section 14 mentions providing open access to the electricity system. The commission has stated that the directive has been issued accordingly.
Open access is the system of regulating the ownership of the electricity transmission and distribution system and the commercial factors therein. With the issuance of the directive, the private sector, which was limited to only production, will now be able to transmit and distribute electricity.
However, since the existing transmission and distribution structures were built with the investment of the Authority, the Electricity System Operation Department of the Authority (unless otherwise specified by the government) has been designated as the nodal agency for the purpose of understanding the application for open access and taking necessary action on it and providing open access.
This is not the first time that the private sector has been involved in the transmission and distribution of electricity. The government had made provisions for the participation of the private sector in transmission and distribution along with electricity generation three decades ago. Sub-section 1 of Section 4 of the Electricity Act, 2049 states that a person or organization wishing to survey, produce, transmit or distribute electricity should submit an application for a license to the designated authority by providing an economic, technical and environmental study report on the relevant subject and the details as prescribed.
In the application filed in Sub-section 2 of the same section, it is stated that the designated officer should conduct the necessary investigation and issue the license to the applicant in the prescribed format within 120 days from the date of filing the application for electricity generation, transmission or distribution license. Section 5 of the same Act states that the period of license granted for electricity generation, transmission or distribution shall be up to a maximum of 50 years.
Even though the government itself paved the way for the private sector to generate, transmit and distribute electricity in the Act made three decades ago, the Commission has finally issued the directive. The 276th meeting of the Regulatory Commission held on 4 Ashad 2082 had approved the draft of the ‘Open Access Directive, 2025’ in the electricity system and sought opinions and suggestions. The Commission meeting held on 25 Poush decided to issue the directive after receiving opinions and suggestions from the concerned bodies.
The Electricity Act, 2049 granted licenses only to the Authority and the draft directive was prepared by exercising the powers of the Commission itself, said Commission Chairman Ram Prasad Dhital. He said that with the issuance of the directive, the private sector's complaint that it had to rely on the authority for the transmission line to sell the electricity it produces will be resolved. "There was a complaint that the private sector was only generating electricity and was not allowed to sell it, but that will no longer be the case," he said.
According to the directive, projects with a capacity of 5 megawatts or more connected to a voltage level of 33 kilovolts (kV) or higher, captive projects with a minimum capacity of 1 megawatt, and industrial and commercial consumers with a contract energy of 5 megawatts or more and connected to a voltage level of 33 kV or higher can avail non-discriminatory open access to electricity.
The directive states that a minimum of 10 megawatts should be available for open access for international electricity trade. The commission has classified open access into three levels. Under long-term open access, the system can be used for more than 5 years or for the period specified in the power purchase agreement. Medium-term open access can be used for more than 1 year or up to 5 years.
It is stated that short-term open access should be used for 1 year or a minimum period of 24 hours. The Commission has stated that long-term open access will be given first priority and short-term open access will be given third priority while providing open access. The nodal agency has been designated as the Electricity System Operation Department of the NEA.
The department of the NEA will understand the application for open access and take necessary action on it and provide open access. In order to obtain open access, 9 types of fees will have to be paid, including transmission fee, wheeling fee, deviation settlement fee, cross subsidy fee, additional surcharge, stand-by fee, reactive energy fee, scheduling fee and operation fee, depending on the type of user of open access. The Commission also states that not all fees will be charged for the three types of open access users. However, Dhital also stated that these fees may change from time to time as determined by the Commission.
However, the Commission has stated that when obtaining long-term open access, the person receiving open access may also have to contribute to the amount for upgrading and strengthening the system, The authority (nodal agency) should formulate and implement detailed procedures for the implementation of open access, and the conditions for obtaining open access are mentioned in the directive on the creation of a model open access agreement between the person receiving the transmission or distribution license and the open access customer.
The open access directive should come out at some point and it has been received positively, said Rajan Dhakal, spokesperson for the authority. ‘Even if the directive is issued, it is not in a position to be implemented immediately,’ he said, ‘Various procedures and guidelines should be formulated to implement it.’ Saying that the amount of wheeling charge has not been decided, Dhakal said that even if the electricity seller and buyer make an agreement but do not comply with it, it is not even clear what will happen if it is not done. ‘The transmission fee, wheeling fee, deviation settlement fee, and metering scheme will be implemented after it is decided,’ he said.
Dhakal said that after the directive is issued, other guidelines and procedures will be formulated and formulated. ‘Open access is necessary in a place where there is an open market, there is no need to obtain a license to produce in neighboring India, whoever can build, finds a customer and seeks access to the transmission line,’ he said, ‘That is not the case with us. That is why it is difficult to go immediately. Open access was also started in India in 2005/006. Further amendments and refinements are still being made. Therefore, the start of such work should be considered positive.’
Dhakal says that there is no possibility of the private sector purchasing electricity from any promoter in the next 5/6 years. ‘It is electricity based on natural resources, not coal or gas,’ Dhakal said, ‘Banks look for long-term PPAs to invest. There may be a situation where an industrialist says he will purchase for 20/25 years, or not, otherwise there will be no investment. We have a different background.’
If there is any complaint regarding open access, an application can be filed with the Open Access Grievance Redressal Committee and if the decision of such a committee is not satisfied, an application can be filed with the Commission for dispute resolution. The Open Access Directive covers both the preparation and implementation aspects of open access.
The Commission has stated that to implement open access, the Commission should also formulate some additional directives, the central body should also formulate working procedures and draft open access agreements, and the persons holding transmission and distribution licenses will also implement metering-related work through open access, the Commission has stated. Since open access connects production with potential markets, promoters and entrepreneurs who can find markets themselves do not have to wait for the NEA's electricity PPA to build projects.
Ganesh Karki, President of Independent Energy Promoters' Association of Nepal (IPPAN), said that the introduction of the Open Access Directive is positive. However, he said that the tariffs should be fixed along with the directive and should not be arranged in installments.
'Whether the project will sell directly, whether it will be through the company, and how much the tariff is, should have been specified,' he said, 'Open access came, but it was not completed. It should have been completed all at once.’ Karki emphasized that all interrelated policies should be implemented at once, as it was said that 28,500 megawatts would be achieved in 10 years, but nothing happened after that.
