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Independent Power Producers’ Association, Nepal (IPPAN) has urged the government and the Electricity Regulatory Commission to review the wheeling charge imposed for using the national electricity transmission grid.

Addressing the ‘Friday Forum’ organised by IPPAN in collaboration with the Canada Fund for Local Initiatives on Friday, IPPAN President Mohan Kumar Dangi welcomed the decision to ensure private sector access to the transmission system.

However, he said the existing charge could affect the financial viability of hydropower projects, discourage new investment and challenge the competitiveness of Nepali electricity in international markets.

President Dangi stressed the need to make the rate scientific, practical and investment-friendly.

He also called for further discussions among the government, the Electricity Regulatory Commission and the private sector on the methodology and rate used to calculate the wheeling charge.

“Hydropower projects earn an average annual revenue of around Rs. 30 million per megawatt. If they have to pay around Rs. 5 million per megawatt annually as transmission charges, it could significantly affect their revenue and return on investment,” he said. “This could weaken the financial position of operational projects and discourage private sector investment in new project development and electricity trading.” Stating that the government had set a target of generating 30,000 MW of electricity over the next 10 years, Dangi said the private sector was committed to achieving it.

He said the private sector should now be allowed to participate not only in electricity generation but also in electricity trading, transmission infrastructure development and securing markets.

“Allowing the private sector to participate in electricity trading and providing it with investment opportunities in transmission line construction would help address existing problems in the energy sector,” he said.

Former secretary at the Ministry of Energy, Water Resources and Irrigation and IPPAN's chief expert adviser Dinesh Kumar Ghimire said that it was time to reduce excessive dependence on run-of-river projects and prioritise the development of peaking run-of-river, reservoir-based, pumped-storage and solar power projects.

He said that increasing electricity generation alone was not enough, stressing the need for a balanced generation mix, expansion of transmission and distribution infrastructure, and policies to increase domestic electricity consumption to strengthen energy security.

“Run-of-river projects account for a large share of Nepal's hydropower generation. This creates a situation in which the country faces electricity shortages during the dry season and surplus generation during the rainy season. Without developing reservoir-based projects and other renewable energy sources, the reliability of the power system and long-term energy security will face challenges,” he said.

Similarly, Deepak KC, programme analyst at the United Nations Development Programme (UNDP), stressed the need to strengthen early warning systems, adopt modern technologies and enhance collaboration with the private sector to protect hydropower projects and energy infrastructure from natural disasters, drawing lessons from the recent Bhotekoshi floods.

He said that climate change was increasing the risk of glacial lake outburst floods as glaciers melted and glacial lakes expanded. Such disasters damage settlements and communities as well as hydropower projects and transmission infrastructure, dealing a heavy blow to the national economy, he added.

Open access wheeling charge can be reviewed: ERC chair Dhital

Ram Prasad Dhital, chairman of the Electricity Regulatory Commission (ERC), said that the transmission charge fixed under the open access system could be reviewed as necessary.

He said that existing methodology was a simplified model adopted for the initial stage. Once sufficient data became available, a more scientific method could be introduced based on the volume of electricity transmitted, distance and the actual cost of the system.

Dhital clarified that the objective of open access was to increase competition in the electricity market and provide consumers with cheaper electricity.He acknowledged the need to clarify the basis and process of determining the charge at 57 paisa per unit for using the national electricity transmission grid.

He said the commission was ready to make improvements based on suggestions received through further discussions with stakeholders.

“The commission determined the transmission charge based on the audited financial statements and available data of the Nepal Electricity Authority (NEA),” he said.

He also noted that identifying the actual cost of the transmission system was challenging because the NEA operates electricity generation, transmission, distribution and trading as an integrated business.

He said the commission was preparing to introduce a charge based on megawatts and kilometres for radial transmission lines, through which electricity flows in one direction.

Stating that open access would provide the private sector with an opportunity to enter electricity trading, Dhital expressed confidence that a competitive market would help lower electricity prices.

Referring to damage to hydropower projects caused by natural disasters, including the Bhotekoshi floods, Dhital said a regulatory framework was needed to develop disaster-resilient infrastructure and support post-disaster financial recovery.

He said that the commission was studying options for managing such losses, including classifying projects according to risk, insurance arrangements, relief funds and the duration of power purchase agreements (PPAs).