After the budget introduced a provision for conducting PPA based on 'take and pay', energy promoters had put all-out pressure on the government to scrap such a provision.
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The Ministry of Finance has sent a letter stating that the Ministry of Energy, Water Resources and Irrigation and the Nepal Electricity Authority can decide on the issue of Power Purchase Agreement (PPA) in accordance with the 'Take and Pay' concept introduced in the budget for the current fiscal year.
The Ministry of Finance sent a letter in the last week of December stating that the Ministry of Energy and the Authority can do PPA as per the prevailing law based on the analysis of demand, export and existing PPAs. The Ministry of Energy has confirmed that the letter was sent with the subject of ‘looking at the demand for energy, export potential, and ensuring that there will be no problems in electricity consumption in the future, and making PPA as per the prevailing law.’
While presenting the budget on 15th Jestha, the then Finance Minister Bishnu Poudel had said, ‘Substations and transmission lines will be constructed in a manner consistent with the completion schedule of hydropower projects. A policy will be adopted to enter into power purchase agreements in a manner that maintains a balance between electricity production and consumption. Power purchase agreements will be entered into in accordance with the ‘take and pay’ concept of the ‘Run of River’ project.’
After the provision in the budget, the PPA of the ‘Run of River-Nadi Pravi’ project has been stopped. After the provision of making PPA according to ‘take and pay’ was introduced in the budget, energy promoters had put all-out pressure to remove such a provision. Even the ruling Nepali Congress MPs had objected to ‘take and pay’. After the threat of failing the budget, the then Prime Minister KP Sharma Oli had met with former Nepali Congress President Sher Bahadur Deuba on 21 July and held discussions. Oli and Deuba had agreed to remove the provision.
On the same basis, the Prime Minister had clarified that the ‘take and pay’ provision had been removed from the budget statement on 21 July. The then Finance Minister Poudel, however, had not mentioned anything about the amendment to the ‘take and pay’ provision from the budget. ‘Based on the financial risk assessment, power purchase agreements (PPAs) can be made for projects that are certain to consume and export energy and for which the Nepal Electricity Authority can pay its obligations,’ he had said. The Independent Power Producers Association of Nepal (IPPAN) had also gradually put pressure on the ‘take and pay’ in the budget. In protest, IPPAN had sent an SMS to the Prime Minister, Finance Minister, Energy Minister and the Executive Director of the Nepal Electricity Authority requesting them to withdraw ‘take and pay’. However, the budget statement was not amended.
Therefore, the PPA for hydropower projects up to 10 MW has also been stopped. The then Energy Minister Shakti Basnet and the then Executive Director Kulman Ghising had opened the PPA for hydropower projects up to 2080 MW on 10 Magh. Since then, all PPAs have been going on with hydropower projects up to 10 MW. It has been stopped due to budget arrangements. The PPA process that the NEA had started before the budget has also been stopped.
The then Energy Minister Deepak Khadka had decided to open the PPA in the NEA board meeting held on 12 Chaitra 2081, immediately after removing Ghising and appointing Hitendradev Shakya as Executive Director of the NEA. Run-of-river and semi-reservoir hydropower projects that had completed grid connection agreements by 12 Chaitra 2081 were called for PPA. On 10 Baisakh 2082, the NEA had issued a notice to apply for PPA for hydropower projects with a capacity of more than 200 MW.
The NEA had sought applications for PPA for 1,858 MW run-of-river (ROR) and 3,177 MW semi-reservoir (PROR) hydropower projects. IPPAN Deputy Secretary General Prakash Chandra Dulal said that the PPA for the semi-reservoir hydropower project has also been stopped due to the provisions in the budget. “Despite the NEA issuing a notice before the budget, the PPA has been stopped. The PPA was stopped by showing the budget provisions for ROR. We do not know why the PROR was stopped,” he said.
In the second week of last Kartik, the then Executive Director of NEA, Manoj Silwal, had sent a letter to the Ministry of Energy through the Ministry of Energy, saying that a PPA of 5,000 MW would be done, but since it was stopped due to the budget, the PPA would be done on ‘take or pay’ or ‘take and pay’. Energy spokesperson Sandeep Dev said that the letter from the Ministry of Energy has been received and will be sent to the NEA after further discussions.
In the case of a PPA on ‘take and pay’, the NEA buys the quantity it needs and pays only for that. In the case of a PPA on ‘take and pay’, the NEA must buy electricity as per the agreement made with the promoter, and if it does not, it must pay the price to the promoter. If the promoter cannot provide electricity as per the agreement, it must also pay a fine. The NEA has been doing PPA on ‘take and pay’.
In cases where a hydropower project can be constructed but the new transmission line is not completed or the capacity of the transmission line is low, the NEA has been taking electricity and paying for it on the ‘take and pay’ basis by setting a deadline for the PPAs made on the basis of ‘take and pay’. Shakya, the NEA’s executive director, said that no letter has been received regarding the PPA.
