- If the directive, being developed three decades after the law was enacted, gets approved, not only the Authority but also energy developers, companies involved in electricity trade, and large electricity consumers will be allowed to use the transmission line for buying and selling electricity.

- Although the government itself enacted a law three decades ago to open the door for the private sector to engage in electricity generation, transmission, and distribution, it has not been implemented to date.

Although the government had made provisions for private sector participation in electricity generation, transmission, and distribution three decades ago, it has only now begun drafting the directive. The Electricity Act, 2049 (1992), had envisioned private sector involvement not only in generation but also in transmission and distribution.

However, in order to establish open access to the electricity system, the Electricity Regulatory Commission on Wednesday prepared a draft of the “Open Access Directive, 2025” and has called for feedback and suggestions.

Sub-section 1 of Section 4 of the Electricity Act, 2049 states that any individual or organized institution wishing to conduct a survey, generate, transmit, or distribute electricity must submit an application for a license to the designated authority, along with the required details and a report on the financial, technical, and environmental study of the proposed activity.

Sub-section 2 of the same section states that the designated authority, upon conducting the necessary inquiries, must issue the license for electricity generation, transmission, or distribution in the prescribed format within 120 days from the date of application. Similarly, Section 5 of the same Act mentions that the duration of the license granted for electricity generation, transmission, or distribution shall be up to a maximum of 50 years.

Although the government enacted a law three decades ago to open the way for private sector involvement in electricity generation, transmission, and distribution, it has not been implemented to date. After three decades, on Asar 4, 2082 (June 18, 2025), the 276th meeting of the Electricity Regulatory Commission approved the draft of the “Open Access Directive, 2025” and called for feedback and suggestions.

Commission Chairman Ram Prasad Dhital stated that once the directive is approved, the Nepal Electricity Authority’s monopoly over electricity trading will be broken. “Currently, the private sector develops hydropower projects, and only the Authority engages in power trading. That monopoly will now be ended,” he said.

Once the directive is approved, energy developers, companies involved in electricity trading, and large electricity consumers - in addition to the Nepal Electricity Authority - will be allowed to use the transmission line to buy or sell electricity. Large electricity consumers will be able to enter into power purchase agreements (PPA) with private electricity producers at mutually agreed rates.

They will be able to purchase electricity. However, the draft of the directive mentions that charges such as transmission fees, wheeling charges, and deviation charges must be paid when supplying electricity through the transmission or distribution lines.

The draft states that a minimum of 5 megawatts of electricity must be sold to industrial consumers, and the minimum transaction volume for cross-border electricity trade under open access must be 10 megawatts. The Commission has categorized open access into three levels. Under long-term open access, the system can be used for more than 5 years or for the duration specified in the power purchase agreement. The draft states that medium-term open access can be used for more than 1 year or up to 5 years. Short-term open access can be used for up to 1 year or for a minimum duration of 24 hours. According to Dhital, the system can be used by entering into agreements as needed. The Nodal Agency has been designated as the Electricity System Operation Department of the Nepal Electricity Authority.

According to the Commission, when using short-term open access, the Nepal Electricity Authority must be paid a short-term indicative transmission charge of 39 paisa per unit. For long-term and medium-term access, a monthly charge of NPR 283,027 per megawatt must be paid. Although involved in the drafting, Ananda Chaudhary, Vice President of the Independent Power Producers’ Association Nepal (IPPAN), stated that they are not involved in setting the transmission and distribution line charges in the draft directive.

“Although provisions existed earlier in the law, the draft directive has only now been prepared,” he said. “Once the directive is approved, we too will be able to buy and sell electricity just like the Authority.”

The Commission has also set eligibility criteria for submitting applications in the draft directive. Projects with a capacity of 5 megawatts or more connected to a 33 kV grid substation or a 66 kV (or higher) transmission line, as well as captive projects with a minimum capacity of 1 megawatt, will be eligible to apply.

Provisions have been made to provide open access electricity services to industrial and commercial consumers who hold a distribution license, a trading license (with a minimum open access transaction volume of 1 megawatt), and contract electricity of 5 megawatts or more, and are connected to a voltage level of 33 kV or above.

According to IPPAN Vice President Ananda Chaudhary, the draft directive will not create any obstacles for cross-border trade but may cause some disruptions in the domestic trade. “Many consumers in the country are still receiving electricity through distribution lines, and there is no clear data on how many consumers use electricity through transmission and distribution lines,” he said. “There could be difficulties in domestic electricity buying and selling.”

The draft directive will not pose any obstacles to cross-border trade, but may cause some disruptions in domestic trade, said IPPAN Vice President Chaudhary. “Many consumers in the country are still receiving electricity through distribution lines, and there is no clear data on how many consumers use electricity through transmission and distribution lines,” he said. “There could be difficulties in domestic electricity buying and selling.”

The draft directive allows the private sector to buy and sell electricity through distribution lines of 33 kV or higher capacity and transmission lines of 66 kV or above, so there should be no issues, said Commission Chairman Dhital. Sub-section 1 of Section 22 of the Electricity Act, 2049 states that a licensed person may import electricity into Nepal for distribution after obtaining government approval.

Sub-section 2 of that section states that a licensed person who wishes to export the electricity they have produced abroad can do so by entering into an agreement with the Government of Nepal. Sub-section 3 states that exporters of electricity must pay export taxes to the Government of Nepal as prescribed.

The Hydropower Development Policy 2058 (2001) includes provisions for electricity export under clause 6.11. Clause 6.11.1 of the policy states that if electricity produced in the country is to be exported abroad, it shall be done according to the agreement between the exporter and the government.

Section 13, clause ‘kha’ of the Electricity Regulatory Commission Act, 2074 (2017) states that until a wholesale market for electricity trading is established, the purchase rates and procedures for electricity shall be determined between persons holding distribution licenses and those holding generation licenses, trading licenses, or organized institutions established by the government under the prevailing law.

Clause ‘ga’ of the same section provides for reaching an agreement on electricity purchase contracts between persons authorized to buy and sell electricity, and clause ‘nga’ allows for the determination of transmission and distribution charges (wheeling charges). Section 14, clause ‘nga’ of the Act mentions the establishment, operation, and regulation of the wholesale electricity market.

Dhital stated that the Electricity Act, 2049 granted licenses only to the Authority, and the draft directive has been prepared by the Commission exercising its authority under its own Act.

Source: Kantipur