Regulating agency must for development of hydropower sector

ippanKATHMANDU, Nov 15: Independent hydropower developers fear the country´s hydropower sector will fall prey to a syndicate if a regulating body is not institutde in time.

“The situation might be like the transportation sector where an entrepreneur cannot add vehicles at will,” Khadga Bahadur Bisht, president of Independent Power Producers´ Association Nepal (IPPAN), said, urging the government to form a regulating body at the earliest to control untoward market collusion and abuse of the country´s electricity market.

The private sector´s concern has come at a time when the country is doing groundwork for setting up separate companies for overseeing power trading and transmission lines to implement the Power Trade Agreement (PTA) signed with India on September 5.

At present, Nepal Electricity Authority (NEA) purchases electricity on a flat rate of Rs 4.8 per unit in summer and Rs 8.4 in dry season without considering project costs and rate of return of project developers.

“Regulating agency should evaluate the cost of project by studying civil, electro-mechanic and other components before deciding the power purchase rate so that developers get logical return,” added Bisht. “The agency should fix wholesale and retail rate of electricity.”

The draft bill for Electricity Regulating Commission was formulated back in 2008. But the bill is yet to be tabled in the parliament. Energy Secretary Rajendra Kishore Kshatri recently told the Agriculture and Water Resources Committee of legislature-parliament that the bill will be finalized by mid-January.

Speaking at a program on ´Essential Restructuring of Electricity Sector´ organized by IPPAN on Friday, Janak Lal Karmacharya, an energy expert, said that the current electricity pricing system lacks competitiveness. “Fair energy trading is impossible in the absence of regulating body and the grid company,” added Karmacharya. “An open bidding system for selling energy should be introduced so that only commercially feasible and attractive projects will be developed.”

Bisht also said unhealthy practices of raising project cost unnaturally to secure better Power Purchase Agreement from the Nepal Electricity Authority (NEA) is on the rise. “Such practices will increase further if the regulating agency is not formed in time,” added Bisht.

About half a dozen hydropower companies have gone public. General public hold up to 30 percent stakes in such companies. Experts doubt general public will get better returns for their investment unless the regulating commission is formed.

IPPAN has also demanded that an electricity trading company be formed to ensure level playing field as the government is also involved in hydropower development. The association also said the government should play a role of facilitator instead of developing power projects on its own.

Independent developers also say the regulating agency will determine whether power purchase agreement in foreign currency is necessary.

Source : Republica