The Electricity Regulatory Commission (ERC) has proposed determining the electricity purchase and sale rates (PPA) for hydropower projects with reservoirs at different rates, depending on the specific project.

With the aim of attracting private sector investment in reservoir-based projects through flexible power purchase agreements, the Commission has published a draft directive, 2025 BS, regarding the purchase and sale of electricity from reservoir-based generation centers.

According to the draft, the PPA rate for reservoir-based projects will be determined based on factors such as depreciation, loan interest, operation and maintenance costs, return on equity, and royalty. Similarly, the energy schedule submitted by the power seller will also be considered as the basis for the PPA. The energy schedule includes details such as the installed capacity of the hydropower plant, monthly generation capacity, transmission line losses, and availability of peak and off-peak energy.

The proposed draft allows the determination of electricity purchase and sale rates from reservoir-based generation centers under either a single-part or two-part method.

Under the single-part method, the power seller will receive only the electricity purchase rate based on the energy produced. According to this arrangement, separate rates will be determined for the rainy season and the dry season. The rates will be based on factors such as annual fixed costs, contracted energy rates, and the standard percentage of annual energy availability.

Under the two-part method, it is proposed to ensure the purchase of a base quantity of energy, while the remaining energy would be purchased on other terms. The Commission has stated that the draft directive has been published to solicit extensive feedback from stakeholders on the proposed matters.

Currently, Nepal implements a uniform seasonal but fixed electricity purchase and sale rate across all projects. According to this, the PPA rate is NPR 4.80 per unit during the rainy season and NPR 8.40 per unit for the dry season.

Although the construction of reservoir-based projects is essential for energy balance and export in Nepal, both private and public sector investment in such projects has remained relatively low. The Commission has stated that this directive has been formulated with the aim of making these projects cost-effective and profitable.

urjasanchar