The new policy will, at least, clear uncertainty regarding the development of hydel projects either by the domestic investors or by the foreign ones

The Nepal Electricity Authority (NEA), the sole power off-taker, has come up with new tariff for the peaking run-of-river and reservoir projects to be built by private developers. A meeting of the NEA board of directors took this decision after the Ministry of Energy gave a go-ahead about pricing of the peaking run-of-river and reservoir-type hydro projects which will help end power crisis during the dry season from December to May as re-defined by the power utility. NEA is the sole buyer of the electricity produced in the country by private developers. As per the NEA decision, developers of the reservoir-type projects can sell per unit of energy at Rs. 12.40 during dry season (from December to May) and at Rs. 7.10 during the wet season (from June to November). As far as the peaking run-of-river projects are concerned, the NEA has set the price for per unit of electricity at Rs. 10.55 and Rs 4.80 during the dry and wet seasons, respectively. Earlier, the NEA had already fixed the price for per unit of electricity for run-of-river projects to be developed by the private sector at Rs. 8.40 and 4.80 during the dry and wet seasons, respectively.

The peaking run-of-river projects are those hydel plants where water can be collected for a few hours so that energy can be developed at full capacity at least for four hours during peak hours in the morning or in the evening or as per the load demand. The NEA board meeting has also decided to pay foreign investment projects in US dollars for the first 10 years of power generation or until the payback period of the foreign loan, whichever comes earlier. It means that the state-owned power distributor will apply three different power purchase agreements for different types of projects to be developed by the domestic investors, foreign investors or a joint venture projects. NEA officials have said that new tariff on peaking run-of-river and reservoir projects were fixed to attract foreign investment in the energy sector by providing a level playing field to all.

However, the NEA board has attached a rider for the independent power developers on meeting the energy demand during the dry season. As per the new rule, the private developers are required to produce up to 30 percent energy of the total installed capacity of the power plant during the dry season – for six months. Earlier, the private developers had to generate up to 15 percent energy of the total installed capacity during the dry season. Hence, the private developers will have to lower the installed capacity of their projects. Till date the run-of-river projects generate electricity in full capacity during wet season and produce even less than 15 percent during dry season, leading to fluctuations in power supply during the dry and wet seasons. New provision will discourage those private developers who just want to generate flood energy during the wet season without any substantive contribution to the power grid during the dry season when energy need goes very high. The new policy will, at least, clear uncertainty regarding the development of hydel projects either by the domestic investors or by the foreign ones.