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Nepal Electricity Authority’s (NEA) subsidiary, Nepal Power Trading Company Limited (NPTC), has now been cleared to engage in electricity trading. A meeting of the NEA Board of Directors has granted NPTC permission to sell up to 100 MW of electricity.

NPTC will export electricity generated by projects that have already signed Power Purchase Agreements (PPAs) with the NEA to India and other countries.

NPTC Chief Executive Officer (CEO) Kamal Acharya said that, following the board’s decision, the proposal has been forwarded to the Electricity Regulatory Commission (ERC) for approval.

“We have sought approval from the commission for electricity trading,” he said. “Once the commission grants consent, we will look for markets to sell the electricity.”

Nepal earned Rs 29.32 billion from electricity exports during the last fiscal year. During the dry season, Nepal imported electricity worth Rs 10.2274 billion from India. Until now, the Nepal Electricity Authority itself has been handling electricity imports and exports.

The NEA has been conducting electricity trading under the authority granted by Clause (d) of Sub-section (1) of Section 20 of the Nepal Electricity Authority Act, 1984. The provision states that the authority may “sell electricity to foreign countries or purchase electricity from foreign countries.”

The government granted the NEA approval in 2020, to sell electricity to India and Bangladesh. Based on that prior approval, the NEA has been conducting electricity trading. However, although its subsidiary company was established in 2016, it has not been able to start electricity trading to date.

The government’s Cabinet meeting on December 23, 2021, had already decided to allow NPTC to operate. However, the company has yet to begin electricity trading.

NEA Acting Managing Director Dirghayu Kumar Shrestha said approval has now been granted for NPTC to sell 100 MW of electricity. The company has been authorized on the condition that it does not sell electricity for less than INR 5.45 per unit and does not charge a trading margin of more than 10 paisa per Indian rupee.

NPTC will therefore not be allowed to sell the 100 MW of electricity at a price below INR 5.45 per unit. CEO Acharya said that once approval is received from the Electricity Regulatory Commission, the company will invite proposals for the sale of electricity.

The NEA holds a 51 percent stake in the company, while the Vidyut Utpadan Company Limited (VUCL) holds 17 percent, the Rastriya Prasaran Grid Company Limited (RPGCL) holds 17 percent, and the Hydroelectricity Investment and Development Company Limited (HIDCL) holds 15 percent. The company has an authorized capital of Rs 1 billion.

The private sector has been complaining that the government has allowed the NEA’s subsidiary to engage in electricity trading while denying similar permission to private companies. Through the Independent Power Producers’ Association, Nepal (IPPAN), the private sector registered Nepal Power Exchange (NEPEX) in 2018 and sought a trading license, but the government has yet to grant permission.

At present, NEPEX, NIFRA Trading and Energy Exchange, Himalayan Trading, and Bidyut are among the companies waiting for electricity trading licenses. They applied to the Ministry of Energy, Water Resources and Irrigation for permission to trade electricity years ago.

Uttam Bhlon Lama, senior vice-president of the Independent Power Producers’ Association, Nepal (IPPAN), said the government has been preventing the private sector from entering electricity trading on the grounds that the Electricity Act needs to be amended.

He said the government itself has been unable to sell all the electricity produced in the country, resulting in power being wasted, while it has also failed to open the door for private companies willing to trade electricity.

Hoping to obtain a trading license, NEPEX and India’s Manikaran Power Limited signed a memorandum of understanding (MoU) on January 11, 2021, to trade 500 MW of electricity. They signed another MoU in April/May 2023, for an additional 200 MW of electricity trading. However, due to the government’s failure to facilitate the process, these agreements and understandings have remained confined to paper.

The provision for granting permission to engage in electricity trading is already included in the Electricity Act, 1992. Section 4, Sub-section (1) of the Act states that any person or organized institution wishing to conduct electricity surveying, generation, transmission or distribution must submit an application for a license to the designated authority, along with economic, technical and environmental study reports and other prescribed details.

The Nepal Electricity Authority (NEA) currently holds a monopoly over electricity trading. Producers have been saying that the government has neither created sufficient opportunities for electricity consumption in the domestic market nor opened the way for the private sector to sell surplus electricity. They have also accused the government of discrimination in the distribution of electricity trading licenses.

Producers have complained that although the government has granted its own subsidiary, Nepal Power Trading Company Limited (NPTC), a license to trade electricity, it has continued to sideline the private sector.

The Electricity Regulatory Commission Act, 2017, contains provisions for the purchase and sale of generated electricity. Section 13, Sub-section (1), Clause (b) states that until a wholesale electricity market is established, the Electricity Regulatory Commission (ERC) shall determine the rates and procedures for electricity purchases and sales between licensed distribution entities and entities holding generation or trading licenses, as well as organized institutions established by the Government of Nepal under prevailing law.

Clause (c) of the same sub-section provides for the commission to approve power purchase agreements (PPAs) between entities licensed to purchase and sell generated electricity. Clause (e) provides for the determination of transmission and distribution charges, or wheeling charges.

The Directive on Open Access to the Electricity Transmission and Distribution System, 2082 BS, issued by the ERC, also includes provisions on open access for cross-border electricity trading.

The directive states that approval and operation of electricity trading for cross-border transactions will be governed by procedures issued by the Government of Nepal and by the directive on cross-border electricity trading issued by the commission under those procedures.

Shaligram Bhandari, joint spokesperson for the Ministry of Energy, Water Resources and Irrigation, said preparations are underway to amend the Electricity Act, 1992, to open electricity trading to the private sector.

“We are working to involve the private sector in electricity trading,” he said.

The budget for the current fiscal year also states that legal arrangements will be made to allow electricity trading by constructing transmission lines and charging wheeling fees.

In a directive issued last April as well, Energy Minister Biraj Bhakta Shrestha said the NEA Board would operate NPTC as a fully functional electricity trading entity.

Kantipur