Energy, Water Resources and Irrigation Minister Kulman Ghising has urged the Electricity Regulatory Commission (ERC) to introduce competitive base rates for hydropower projects, aiming to make power purchase agreements (PPAs) more transparent, fair, and market-driven.

Receiving the commission’s annual report for the fiscal year 2081/82 BS on Wednesday, Minister Ghising emphasized the need to establish a competitive pricing mechanism for electricity produced by hydropower projects, similar to that already applied in the solar energy sector. ERC Chairperson Ram Prasad Dhital submitted the report to the minister during the event.

“The solar energy sector already operates under a competitive rate structure, which has made PPAs transparent and efficient. In the same way, hydropower PPAs should also be determined through a fair competition process by setting a base rate and preparing tender-related documents,” Ghising instructed ERC officials.

Currently, the Nepal Electricity Authority (NEA) purchases solar energy through a competitive bidding process, with the maximum base rate set at Rs 5.94 per unit. In contrast, hydropower purchase rates remain fixed - Rs 4.80 per unit during the monsoon and Rs 8.40 per unit in the dry season.

Minister Ghising stressed that adopting competition-based pricing for hydropower would help ensure efficiency, transparency, and long-term sustainability in Nepal’s energy sector. He noted that such a policy shift would attract more private investment and strengthen the Nepal Electricity Authority’s financial resilience.

The minister further directed the commission to focus its regulatory functions on enhancing effectiveness, promoting private sector participation, and ensuring that NEA’s operations remain financially sustainable. He highlighted that Nepal’s energy future depends on competitive pricing mechanisms that balance affordability for consumers with fair returns for investors.

Energy experts have long advocated for a competitive PPA framework in hydropower, arguing that it would eliminate inconsistencies, reduce financial risks, and create a level playing field among domestic and international developers. The move aligns with the government’s broader energy strategy to expand renewable generation, integrate private investments, and enhance export competitiveness, particularly as Nepal positions itself as a regional clean energy hub.