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The government has moved forward with a process to reopen power purchase agreements (PPAs) for electricity generated by licensed power producers, with a committee formed to prepare the necessary criteria within seven days.

A meeting of the Nepal Electricity Authority (NEA) Board of Directors, chaired by Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha, on Thursday evening decided to form a subcommittee to draft the criteria required for signing new PPAs.

The subcommittee has been given seven days to prepare the proposed PPA criteria and submit them to the NEA Board for consideration.

Subcommittee formed to prepare PPA criteria

The subcommittee is coordinated by Anshukiran Shahi, a member of the NEA Board of Directors.

Other members include the Deputy Director General of the Department of Electricity Development, Chief Divisional Engineer Shaligram Bhandari representing the Ministry of Energy, Water Resources and Irrigation, and energy expert Riwaj Sharma.

The director of the NEA’s Trading Department has been designated as the member-secretary of the subcommittee.

The subcommittee will study the existing basis for signing PPAs with electricity producers holding generation licenses, along with recommendations made by a committee formed by the Ministry of Energy, Water Resources and Irrigation.

Economic Act 2083 provides basis

The NEA Board has stated that the criteria will be prepared in accordance with provisions incorporated into the Economic Act 2083.

The board decision states that the subcommittee has been formed to study and analyze the existing basis for entering into PPAs with licensed power producers and the recommendations of the ministry-level committee before preparing the new criteria.

The criteria are expected to provide the basis for determining which power projects can proceed with PPAs once the process is formally reopened.

Important development for Nepal’s hydropower sector

The move is significant for Nepal’s hydropower and energy sector, where a large number of projects have been waiting for clarity on PPA arrangements.

A PPA is a critical component in hydropower project development because it provides a contractual framework for the sale and purchase of electricity generated by a project.

By initiating the process to establish new criteria, the government has signaled its intention to address the pending demand for PPAs while ensuring that new agreements are concluded under a defined policy framework.

The seven-day deadline given to the subcommittee means the proposed criteria could soon be presented to the NEA Board for further decision-making.

Once the criteria are finalized and approved through the required process, they are expected to determine the framework under which electricity producers holding generation licenses can enter into PPAs with the state-owned power utility.

The latest decision could provide greater clarity to hydropower developers, investors and financial institutions involved in projects awaiting PPA arrangements, while also allowing the government and NEA to manage future electricity purchases within a structured framework.