The government has amended the Electricity Act 049 through an ordinance and prepared permission for the private sector to trade in electricity. The cabinet meeting held last Friday decided to bring an ordinance to amend and unify the laws related to electricity.

The Ordinance has been sent to the Office of the President for verification. This arrangement will come into effect after the confirmation by the President.

The current Electricity Act 049 does not provide permission for the private sector to transmit, distribute and trade electricity.

In order to make the electricity market competitive, the government introduced the ‘Bill 077 to Amend and Consolidate the Electricity Law’, saying that the private sector should also be allowed to do so. But at the end of the term of the House of Representatives, the government withdrew the bill from the parliament.

Energy, Water Resources and Irrigation Minister Pampha Bhusal’s proposal regarding the withdrawal of the bill was unanimously approved in the previous Friday’s meeting of the National Assembly. The then Energy Minister Barshman Pun registered the ‘Electricity Bill 2077’ in the Parliament on 18 June 2077.

With the withdrawal of the bill, the government’s plan to allow the private sector to trade in electricity was not immediately implemented. But the government is about to bring an ordinance and make a legal arrangement to allow the private sector to do business as well.

Although the government has been saying that it will give licenses for electricity business to the private sector, it has been stopped for a long time due to the lack of legal provisions.

The Electricity Bill was under discussion in the National Assembly. It was yet to be discussed in the House of Representatives. But after the term of the House of Representatives ended on October 2, Energy Minister Bhusal withdrew this bill.

The Bill contained some important policy provisions to make electricity generation, transmission, trading and distribution competitive, among which one of them was to open the way for the private sector to trade domestically and internationally.

Reforms and amendments in the arrangements related to permits in the electricity sector and division of work according to the federal structure were also included in the bill.

By applying the concept of open access to the national transmission and distribution system, the government had been saying that the private sector would also be involved in the business to promote electricity trade. All these provisions will now come through ordinances.

It was mentioned in the draft of the bill that ‘this act is going to be introduced to address the situation where there is no fair competition between the promoters due to the provision of a single agency to do the work of electricity, transmission and distribution and to fill the lack of legal arrangements necessary for the regulation and management of electricity business.

In the bill, the responsibility of Nepal government, state government and local level for electrification in rural and remote areas was also laid down. The Ordinance also has the same arrangement.

There is a demand from the private sector that an environment of open access should be created without discrimination in the internal and external energy markets. Although the bill envisages a competitive market and gives rights to the private sector, it was stuck in the National Assembly for a long time because of the many rights reserved.

The private sector is seeking permission to sell electricity not only in the domestic market but also in regional markets including India and Bangladesh. Various companies in the private sector have also submitted petitions to the Ministry of Energy, demanding to be granted licenses for electricity trading.

According to the Ministry of Energy, 5 companies from the private sector have applied so far for power trading, including Nepal Infrastructure Bank (NIFRA), Nepal Power Exchange Limited (NepEx) promoted by Independent Power Producers Association of Nepal (IPPAN), Asian Power Trading Company Limited, Himalayan Power. Trading Company Limited and Himalayan Power Trading and Exchange Company Limited.

Despite not getting a power trade permit, NepEx has already entered into an international power trade agreement with India’s Manikaran Power Limited.

In order to allow the private sector for international electricity trade, the government had prepared and issued ‘International Electricity Trade Guideline-078’ and ‘Electricity Trade Permit Procedure-078’.

But the government’s plan was halted after the law ministry gave an opinion that ‘guidelines and procedures cannot be made on matters that are not in the law’.