Private Sector Power Producers Concerned About New Electricity Bill 2023

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The Independent Power Producers’ Association, Nepal (IPPAN) has called on the government to make amendments to the Electricity Bill, 2023, tabled at the Parliament to maintain a fair and competitive environment in the energy sector.

Issuing a 12-point memo highlighting the private producers’ concerns over the new bill, the association has requested the removal of Section 7, Clause (b) of the Electricity Bill which states that permits will be given based on the amount of free shares, free electricity to be provided by the company, and agreements reached to pay advance in a lump sum, as well as to make payments in annual instalments and the rate of electricity tariffs to be fixed.

Instead, IPPAN has suggested the government to ensure level playing field as providing the mentioned services and making huge payments at once before the construction of a project will increase the construction cost and make electricity expensive for both domestic use and trade purposes, crippling the country’s competitiveness in the international market.

IPPAN has also raised concern over Clause (b) of Sub-section 3, Section 5 of the new bill that allows any organisation or entity that is owned or has 51 per cent share of the government to develop and operate power projects designated by the government with joint or single investments from the federal government, provincial government, and the local government. Stating that the power projects developed by the government are thrice as expensive as the projects developed by the private sector, the decision will also make electricity costlier in the international market as well as for domestic consumers.

At a press conference held here today, IPPAN shared that while many of the rules and guidelines listed in the Electricity Bill look positive, some have raised eyebrows of the stakeholders.

Speaking at the conference, IPPAN President Ganesh Karki said that apart from issuing electricity distribution and customer service licences and paving the way for electricity trade for the private sector, some of the arrangements listed in the bill have undermined the role of the private sector in the energy development process of the country.

Karki said that the government’s plan to bring prosperity through the development of energy sector will not be fulfilled as the new act prohibits the private sector, which accounts for 70 per cent of electricity production, from fair market competition.

Responding to questions raised at the conference, Karki clarified that the private sector is in favour of fair competition, ‘but if the government is ready to develop all the major projects by itself and leave the private sector to compete for abandoned projects, electricity produced in the country will become more expensive and affect the overall economic growth of Nepal’.

In addition, IPAAN has requested the government to amend Sub-section 5 of Section 19 of the new Electricity Bill to make all permits issued in accordance with the Electricity Bill 1992 to be made applicable in line with the new bill after it is passed by the Parliament. The association has also urged the government to allow the private sector to identify and develop hydropower projects as provided by the previous Electricity Bill, not to reduce the duration of electricity production permit to 50 years for hydroelectric reservoirs and 45 years for other hydro projects, and to increase permit duration for clean energy projects including solar plants to 35 years.

Similarly, IPPAN has demanded the government not to increase the royalty to be collected per kilowatt from projects having a production capacity of less than 25 megawatts and to keep it unchanged for other projects.

The association has also urged authorities not to cancel the survey permits of companies who have filed an application to receive production permits but have failed to submit a study report, feasibility report, environment study report, and other documents related to legal and financial management as billion of rupees invested by the private sector on projects having a total production capacity of 7,545 MW will go to waste.

Similarly, as Sub-section 2 of Section 41 of the Electricity Bill, 2023 states that permits will not be given for the construction of solar power projects on arable land, parks, and reserves, the association has also urged the government to replace arable land with areas where irrigation facilities are available as all lands outside of forests are considered arable in Nepal, which will make it difficult for solar projects to receive permits.

IPPAN General Secretary Balaram Khatiwada said that since the positive aspects of the proposed bill will also open the doors of electricity trade to the private sector, it will create an environment wherein electricity can be exported alongside production.

“Only if there is an arrangement for equal competition in all sectors, will there be competition in the rate of electricity tariffs as well. As a result, Nepalis will get electricity at a discount, leading to increased consumption, and a reduction in electricity tariffs compared to neighbouring countries. It will also lead to the establishment of large industries, create jobs, increase revenue for the government, and lead the country to prosperity,” he added.