Following a decision by the board of directors of Nepal Electricity Authority (NEA), led by the energy secretary, to relax the hydrology penalty for small hydropower projects that have installed capacity ranging from one megawatt to 10 megawatts, the NEA — single power off taker of the country — has called the hydropower developers to amend the power purchase agreement (PPA).

The amended PPA will provide relaxation in the penalty.

The NEA board of directors meeting, held about a month back, had decided to relax the fine levied on small scale hydropower projects even if they fail to supply the pledged quantum of electricity to NEA. As per the previous provision, the power developers had to pay 80 per cent cost of the quantum of electricity that they were unable to provide as pledged to the power utility.

Due to the reduced quantity of water discharged the power producers were not able to produce the desired quantum of electricity and were thus being fined by NEA under the hydrology penalty. Small hydropower developers had long been urging the government to relax the penalty as their return on equity was adversely affected due to this provision.

As per the earlier provision in PPA with developers, the power projects had to supply 90 per cent of the pledged quantum of electricity during dry season and 60 per cent during wet season which will now be amended, according to Prabal Adhikari, chief of the Power Trade Department of NEA.

“Henceforth, the developers will not have to pay any penalty even if they fail to supply up to 50 per cent of pledged quantum of electricity to the power utility.”

As per the Independent Power Producers’ Association – Nepal — umbrella association of the private sector hydropower developers — 28 developers will be able to avail this facility.

Projects of up to one megawatt do not have any condition to supply any certain quantum of electricity.