During the current fiscal year, Nepal has sold electricity worth Rs 20.41 billion 5.6 billion in the external market. During the same period, it has purchased electricity worth Rs 7.39 billion from India. The Nepal Electricity Authority itself has been buying and selling this electricity.

The Authority has been buying and selling electricity by exercising the authority granted by Sub-section 1 of Section 20 of the Electricity Authority Act, 2041. ‘Selling electricity to a foreign country or purchasing electricity from a foreign country,’ is mentioned in Sub-section 1 of Section 20 of the Act.

However, the Authority has established a subsidiary company, Nepal Power Trading Company Limited (NPTC), in 2073 to buy and sell electricity. The government has already designated the Authority as the nodal agency on 16 Falgun 2076 to plan for inter-country electricity import-export, transmission lines and electricity transactions with the Designated Authority of India.

The government has given prior approval to the Nepal Electricity Authority in 2077 to sell electricity to India and Bangladesh. The authority has been buying and selling electricity based on the same prior approval.

‘Pre-approval will be given to the Nepal Electricity Authority to sell or purchase the excess electricity that cannot be produced and consumed in Nepal or the electricity that is insufficient due to a decrease in domestic production to neighboring countries India and Bangladesh or from those countries on short/medium/long-term/bid/day-ahead, term-ahead and other forms,’ the decision of the Council of Ministers dated 5 Shrawan 2077 states. But even though the subsidiary of the authority was opened in 2073, it has not been able to buy and sell electricity so far.

The government has already decided to grant permission for the operation of NPTC in its Council of Ministers meeting on 8 Deush 2078. But it has not started buying and selling electricity yet. NPTC has so far prepared the company’s memorandum of association and regulations. The company has also stated that it has prepared the company’s ‘work plan’.

The NEA holds 51 percent, the Nepal Power Generation Company Limited (VUCL) 17 percent, the National Transmission Grid Company (RPGCL) 17 percent, and the Hydro Electricity Development and Investment Company (HIDCL) 15 percent in the company. The authorized capital of the company is Rs 1 billion.

NPTC has asked the NEA to grant permission for 100 MW projects that have already signed a power purchase agreement (PPA). The company has sent a proposal to purchase and sell 100 MW of electricity and the proposal will be taken to the board, says Dirghayu Shrestha, acting executive director of the NEA.

‘Initially, it is planned to start with 100 MW, for which the NEA’s board of directors has yet to give approval,’ he said. ‘Even after the authority has given approval, the Electricity Regulatory Commission’s consent must be obtained.’ Shrestha also said that NPTC has already drafted a procedure for trading electricity.

The private sector has been complaining that the government has given permission to the NEA's subsidiary company for electricity trading but not to them. Even after registering 'Nepal Power Exchange' (NEPEX) in 2018 through the Independent Power Producers Association (IPPAN) and seeking permission, the government has not yet granted permission.

Currently, companies such as NEPEX, Nepal Infrastructure Bank (NIFRA) Trading and Energy Exchange, Himalayan Trading Electricity and others are waiting for the license. They have been applying to the Ministry of Energy, Water Resources and Irrigation for permission to trade electricity for years.

Instead of waiting for the new Electricity Act, the government should issue licenses to the private sector by amending the old Electricity Regulations, 2050, says IPPAN Senior Vice President Uttam Vlon Lama. He says that the path should be opened to the private sector, saying that the electricity produced in the country is being wasted.

In the hope of getting permission, although a memorandum of understanding (MoU) was signed between NEPEX and Manikaran Power Limited of India on 27 Paush 2077 and an additional 200 MW in 2080 Baisakh for electricity trade, these agreements and understandings are limited to papers due to the government's lack of facilitation. The provision for permission to trade electricity is mentioned in the Electricity Act, 2049. Sub-section 1 of Section 4 of the said Act states that a person or organization wishing to survey, produce, transmit or distribute electricity should apply for a license to the designated authority by submitting an economic, technical and environmental study report on the relevant subject and specifying the details as prescribed.

Nepal Electricity Authority has a monopoly on electricity trade. The government has not opened the way for the private sector to sell excess electricity that is not consumed in the domestic market. "If the transmission line is not built on time, the authority will put private projects on 'contingency' (backup) and stop production as soon as the rainy season begins. In this way, electricity is wasted every year and the private sector is not allowed to sell it even though it says 'we will find a market'," said Lama.

Lama said that the government has discriminated in the distribution of electricity trading licenses. He said that even though the government has given electricity trading licenses to NPTC, a subsidiary of the Nepal Electricity Authority, it has been sidelining the private sector.

The Electricity Regulatory Commission Act, 2074 BS, provides for the purchase and sale of generated electricity. Section 13, Sub-section 1, 'b' of the Act states that until a wholesale market for electricity purchase and sale is established, the rate and process of electricity purchase and sale shall be determined between the person who has received a distribution license and the person who has received a production license or the person who has received a business license or the corporate body established by the Government of Nepal in accordance with the prevailing law.

In the same subsection, ‘c’ mentions the provision for agreeing to enter into a PPA between persons permitted to buy and sell electricity generated, and ‘e’ mentions the provision for determining transmission and distribution charges (wheeling charges). The Directive on Open Access to Electricity Transmission and Distribution System, 2082, issued by the Commission, also mentions open access for interstate electricity trade. It is mentioned that the approval and operation of electricity trade for the purpose of interstate electricity trade will be in accordance with the procedures and procedures issued by the Government of Nepal and the Directive on Interstate Electricity Trade issued by the Commission.

‘The Commission has already brought the Open Access Directive. The directive says it is included, the ministry says it should bring an act,’ said promoter Suman Joshi, ‘Government bodies are showing one after the other. Will the government die if we allow the private sector to do business?’ They are acting as if they have to hold the sky.'

Joint Secretary and Spokesperson of the Ministry of Energy Sandeep Kumar Dev said that efforts are being made to open up the private sector in the electricity trade. 'We are trying to involve the private sector in the electricity trade,' he said, 'We are discussing what amendments can be made to the Act and Regulations.'

Promoter Joshi says that the government has repeatedly said that it will bring an act and has banned the private sector from electricity trade. 'The government allows the NEA's subsidiary companies to trade electricity but it turns us away by saying that it is the new Electricity Act 2060, 2080, 2081, 2082,' she said. Although the Electricity Act, 2049, made provisions for trading electricity, she said that they have not received it yet. 'The private sector has not been allowed to sell electricity by repeatedly misinterpreting the provisions in the 2049 Act and saying that a new act should be made,' she said.