Kathmandu: The Independent Power Producers’ Association, Nepal (IPPAN) has welcomed the issuance of a standard for determining wheeling charges for the national electricity transmission grid but has called for a review, arguing that the prescribed rates are relatively high.
The Electricity Regulatory Commission (ERC) issued the Standard for Calculating Transmission Wheeling Charges for the National Electricity Transmission Grid, 2026 on October 1, 2026. At its 207th meeting held on October 6, IPPAN welcomed the standard but expressed disagreement with the rates set under it.
According to IPPAN, the determination of transmission wheeling charges establishes a framework under which private-sector power producers can use national transmission infrastructure built and operated by the government and the Nepal Electricity Authority (NEA) by paying the prescribed fees. This has opened the way for implementing the concept of open access to the national transmission grid.
IPPAN said progress toward implementing open access, a long-standing demand of the private sector, is a positive development. It noted that the arrangement would allow electricity producers to buy, sell and trade power through the existing grid without having to build their own transmission infrastructure.
However, IPPAN maintains that the charges set by the commission are relatively expensive for domestic and cross-border electricity trading. The commission has fixed the wheeling charge at 57 paisa per kilowatt-hour for short-term open access and Rs. 412,755 per megawatt per month for medium- and long-term open access.
According to IPPAN, assuming a plant load factor (PLF) of 60–65% for hydropower projects, the effective burden of medium- and long-term open-access charges could reach approximately 95 paisa per unit. Based on annual energy generation and the assumed load factor, the monthly charge of Rs. 412,755 per megawatt translates to an estimated cost of around 73–79 paisa per unit. IPPAN argues that the need to reserve transmission capacity and other related expenses could further increase the cost.
IPPAN said the purpose of open access is to enable private-sector participation in electricity trading, expand the market and deliver generated electricity to domestic and cross-border markets at competitive prices. Therefore, it has called for transmission charges to be cost-based, scientific, transparent, predictable and competitive with regional markets.
IPPAN Seeks Disclosure of Cost Calculation Method
IPPAN has also demanded clarification regarding the expenses included in determining transmission charges and the basis for those calculations. According to the association, the commission has included employee operating expenses, depreciation, interest on loans, cross-border transmission charges and returns on equity investment, among other items, in its calculations.
In its press release, IPPAN cited the following figures:
- Employee operating expenses: Rs. 256.5 million
- Depreciation: Rs. 237 million
- Interest on long-term loans: Rs. 177.1 million
- Interest on working capital loans: Rs. 4.9 million
- Transmission service charges: Rs. 91 million
- Return on equity investment: Rs. 398.3 million
- Other income: Rs. 63.3 million
Based on these items, the association said the cost structure amounts to a total of Rs. 1.1015 billion.
Expressing disagreement with the use of such a large cost base to determine transmission charges, IPPAN has demanded the public disclosure of the complete cost structure and calculation methodology.
IPPAN also warned that adding cross-border transmission charges to domestic transmission fees could further increase the cost of electricity generated by Nepali producers. It argued that, while India provides transmission-charge concessions for green energy, imposing high charges in Nepal could make it difficult for Nepali electricity to remain competitive in the Indian market.
According to IPPAN, transmission charges could increase the cost of Nepali electricity by Rs. 1.50 to Rs. 2 per unit. The association said this could affect the financial viability of future export-oriented hydropower projects and cross-border electricity trading.
Although projects that have already signed power purchase agreements (PPAs) may not face significant immediate difficulties, IPPAN concluded that high transmission charges could pose a challenge for private developers planning future projects targeting export markets.
Four Demands for Reviewing Transmission Charges
IPPAN has made four key demands to address its concerns:
- Ensure transparency: Publish the basis for calculating transmission charges and disclose the complete cost structure.
- Review cost assumptions: Conduct a realistic assessment of transmission lines’ actual economic lifespan, depreciation and financing costs.
- Reassess medium- and long-term charges: Review whether the rates for medium- and long-term open access are compatible with private investment and the economic viability of electricity trading.
- Establish a review mechanism: Introduce a clear regulatory provision for revising wheeling charges in line with changing circumstances.
In a press release issued by IPPAN President Mohan Kumar Dang i, the association stated that issuing the standard was a theoretically significant decision for the private sector. However, it emphasized that the prescribed rates need to be reconsidered.
Nepalpurbadhar