Power producers urge regulator to speed up paperwork

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The maximum time for granting approval to power purchase agreements is 60 days

August 08, 2019

The Independent Power Producers Association of Nepal has asked the Electricity Regulatory Commission to shorten the time for granting approval to power purchase agreements between the Nepal Electricity Authority and power producers from within 60 days to 15 days.

The move from independent power producers has come a few weeks after the commission released a draft directive stating that it will allow power producers and the off taker to enter into a purchase agreement and fix the rate of the power to be traded within 60 days after receiving the required documents from the parties.

“If the commission takes two months to validate the documents which have already been approved by other government agencies, power producers will have to deal with an unwarranted backlog of work,” said Kumar Pandey, vice-president of the association. “The commission should expedite the process to pave the way for power producers to get things done quicker.”

According to Ram Prasad Dhital, spokesperson and member of the Electricity Regulatory Commission, the commission is mulling to call a stakeholders’ discussion and incorporate demands of private power producers in the agenda before it issues the final directive.

“As a regulator, we have to consider the growth of the power sector before making changes to the provisions,” said Dhital. “Based on the discussions with electricity authority officials, power producers and other stakeholders, we will issue a directive on power purchase agreements soon.”

Private power producers have also asked the commission to allow those parties who have received a survey licence for hydel schemes to apply for power purchase agreements. The draft directives makes no mention of   purchase agreements in case of parties holding survey licences.

“A survey licence holder should also be allowed to go into power purchase agreements as such an agreement will secure the market and generation of electricity by the licence holder,” Pandey said.

However, the regulator says it is beyond its scope to allow survey licence holders to enter into power purchase agreements.

“The Electricity Act does not recognise a survey licence holder as an eligible party to apply for power purchase agreements,” said Dhital. “Hence, the commission has only allowed those parties with generation licences to go into purchase agreements with the power utility upon its approval.”

The Electricity Regulatory Commission has also asked power producers to file annual audit reports and agendas of annual general meetings prior to holding them. But power producers have asked the commission to scrap this directive terming it impractical.

“The directive should incorporate provisions on the import and export of electricity in line with the clauses of the Electricity Act,” said the association.

Dhital said that the terms of cross-border trade of electricity was a policy-level agenda, and the Energy Ministry and Parliament was responsible for fixing the terms of cross-border power trade through the Electricity Act.

Once the proposed directive goes into effect, the Nepal Electricity Authority and power producers can fix the rate of power purchase and enter into an agreement only after the commission gives the nod over the rate and terms.

As per the draft directive, the commission will fix the power purchase rates based on an evaluation of the projects’ investment, portion of debt and equity, source of loans and interest, projected rate of return, operating expenses and other criteria.

In the absence of such a directive and delayed formation of the electricity market regulator, the Nepal Electricity Authority, the country’s sole off taker of power, has not been able to enter into power purchase agreements with hydel schemes with a combined capacity of more than 6,000 megawatts. A power purchase agreement secures the market for power generated by hydel schemes.

Prahlad Rijal

Source: The Kathmandu Post