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Nepal’s energy sector is set to gain new opportunities for private investment and electricity trading after the Electricity Regulatory Commission (ERC) fixed the wheeling charge for using the national electricity transmission grid.

The commission has issued the “Procedure for Calculating Transmission Charges of the National Electricity Transmission Grid, 2083”, setting transmission charges for fiscal year 2083/84. The decision establishes an important regulatory foundation for implementing an open-access system in Nepal’s electricity transmission network.

Energy, Water Resources and Irrigation Minister Biraj Bhakta Shrestha described the determination of the wheeling charge as a significant development for the energy sector, saying it could open new avenues for an energy-based economy.

“Although it may appear to be a small step, it is a major leap for the energy sector,” Shrestha said.

The government has been seeking to expand private-sector participation beyond electricity generation to transmission and power trading. Under the 32-point executive directive issued by the minister in Baisakh, the ERC was tasked with determining the wheeling charge required to implement open access in the electricity sector.

Shrestha said the new system should be implemented without imposing additional financial burdens on ordinary consumers. He also stressed that the charges should be based on international best practices and reviewed periodically in line with costs and returns.

Since the wheeling charge will be reviewed annually, emerging problems and areas requiring improvement can be addressed progressively, he said.

ERC fixes transmission charges

Under the charges determined by the ERC, users accessing the national transmission grid under medium- and long-term open access will pay NPR 413,000 per MW per month in fiscal year 2083/84.

For short-term open access, the transmission charge has been fixed at NPR 0.57 per kWh.

The commission said the charges were determined on the basis of the Nepal Electricity Authority’s audited financial statements for fiscal year 2081/82 and its estimated annual revenue requirement for fiscal years 2082/83 and 2083/84.

The new procedure specifies how transmission charges are to be calculated and what costs and returns can be incorporated into the annual revenue requirement.

These include depreciation, interest on loans, employee and operating expenses, transmission service costs, return on equity investment, foreign-exchange-related expenses and income tax, among other costs.

The procedure also allows charges to be calculated using an appropriate methodology based on the capacity of the transmission system and the volume of electricity transmitted.

The ERC said the arrangement is intended to ensure reasonable cost recovery for entities authorized to use the transmission system while establishing a transparent basis for open access.

Private investment in transmission

ERC Chairman Dr. R. Prasad Dhital said the determination of the wheeling charge could also encourage private-sector investment in transmission infrastructure.

He said the commission had used the policy guidance received from the government as the basis for developing the regulatory mechanism and determining the charges.

“The way has been opened for the private sector to invest in transmission lines. This is the beginning of a new chapter in energy-sector trading,” Dhital said.

Energy Ministry Secretary Dr. Jagadish Karmacharya described the wheeling charge as an important link in expanding electricity trading.

According to him, the decision creates a foundation for expanding Nepal’s electricity sector beyond generation and toward transmission and electricity trading.

IPPAN welcomes long-awaited decision

Senior Vice President of the Independent Power Producers’ Association, Nepal (IPPAN), Uttam Bhlon Lama, welcomed the decision, saying the private sector had been waiting for such a regulatory framework for a long time.

He said private investors had primarily been seeking clear and stable policies, regulations and legal provisions rather than direct financial or budgetary support from the government.

Lama acknowledged that the initial wheeling charge could appear relatively high but said the rates could be improved as the system gains practical experience.

He described the open-access policy as a “pathfinder” for Nepal’s energy sector and called for its full implementation to be accelerated.

New framework for competitive electricity trading

The government has been attempting to connect rising private investment in power generation with transmission infrastructure and electricity trading.

The wheeling-charge mechanism is expected to provide a regulatory basis for electricity producers, transmission-system users and power buyers to engage in more competitive electricity transactions.

The development could also facilitate greater private-sector participation in transmission infrastructure, improve the utilization of the national grid and create new avenues for electricity trading.

For Nepal, where private investment has expanded significantly in electricity generation, the effectiveness of the open-access framework will now depend on its implementation, tariff reviews and the creation of a transparent mechanism that allows generators and consumers to access the transmission network on predictable terms.