Managing power purchases has become a great challenge for the NEA. On the one hand, its power purchase costs have been increasing significantly annually while it is under pressure form IPPs to sign new power purchase agreements (PPAs).

The NEA has attributed the rise in power purchase costs to factors such as an increment in the number of IPPs in its system, higher power imports from India, provision for annual hikes in the power rates and depreciation of the Nepali currency vis-à-vis the US dollar that affects PPAs stipulating payment in dollars. Of the total amount of power purchased by the NEA, 46 percent is imported from India and the rest comes from local IPPs.

Hitendra Dev Shakya, head of the business division at the NEA, said its power purchases were likely to rise as demand for electricity is bound to increase in the days to come. “Demand for electricity is increasing compelling the NEA to sign PPAs with IPPs and increase imports from India. The trend is likely to continue in the coming years as well,” added Shakya.  

As of the end of the fiscal year 2013-14, the state-owned power utility had completed PPAs with 148 projects that would generate nearly 2,000 MW upon their completion. In the fiscal year 2013-14, a total of six projects developed by IPPs with a combined capacity of 23,558 kW were commissioned. The NEA had made PPAs with Lower Chaku Khola, Ankhu Khola 1, Bhairav Kunda, Radhi Khola, Mailung Khola and Chhote Khola projects in the previous fiscal year.

With this, the number of IPP-owned projects that are in operation has reached 39 with a combined installed capacity of 255.65 MW. During the previous fiscal year, nine new PPAs for a total capacity of 175.47 MW were signed.

Khadga Bisht, president of the Independent Power Producers Association (IPPAN), said that the financial health of the NEA was unlikely to improve unless it adjusts the electricity tariff. “The NEA needs to increase the power tariff by 5-7 percent. This way, its financial health can be smooth and the impact on the general people too won’t be that severe,” Bisht said.  

The annual peak power demand of the Integrated Nepal Power System (INPS) in the fiscal year 2013-14 was estimated to be 1,201 MW, with 410 MW of power estimated to have been shed. Out of the 791 MW of power actually supplied, 436.4 MW was contributed by NEA hydro, 22 MW by NEA thermal, 216.4 MW by IPP hydro and the rest 116.2 MW was imported.

Of the total energy volume, 3,559.28 GWh or 76.8 percent, was contributed by domestic generation and 1,072.23 GWh or 23.2 percent was imported from India.

In the previous fiscal year, the NEA increased power imports from India by 35.7 percent as compared to the previous year to minimize load-shedding especially in the dry season. Nepal

imported 1,072.23 GWh of energy in the previous fiscal year. Power purchases from IPPs in Nepal also increased to 1,258.94 GWh.

Power Purchase Expenditure

Year     Amount

2014    Rs 16.38 billion

2013    Rs 13.57 billion

2012    Rs 11.94 billion

2011    Rs 10.49 billion

2010    Rs 9.74 billion

2009    Rs 7.69 billion

2008    Rs 7.43 billion

2007    Rs 6.96 billion

2006    Rs 6.39 billion

PPA Commissioned in FY 2013-14

Project                      Capacity

Lower Chaku Khola    1,765 kW

Ankhu Khola         18,400 kW

Bhairav Kunda     3,000 kW

Radhi Khola         4,400 kW

Mailung Khola      5,000 kW

Chhote Khola       993 kW

Total                      23,558 kW