Utility will have to submit projected revenue requirement to revise tariffCharges likely to be slashed for industrial consumers receiving energy through dedicated feeders.
After the directive is endorsed, the power utility will be able to impose new rates for general and commercial users of energy.
The move comes more than a year after the government dissolved the Electricity Tariff Fixation Commission halting work related to tariff revision and sparking a row between industrial customers and power utility officials.
In the absence of a regulatory body overseeing the electricity tariff, the power utility was unable to make price adjustments while industrialists have been complaining that they are being forced to pay high rates which were imposed when the country was in the grip of a power crisis.
“We have taken a balanced approach while drafting the new rules so that future tariff revisions will not harm the power utility’s health, and at the same time, spare consumers from paying high charges for electricity,” said Ram Prasad Dhital, member of the commission who oversees legal and external affairs.
“We will carry out a detailed evaluation of the power utility’s financials, its revenue requirements, expenses and the country’s economic indicators, and allow the utility to make changes in the tariff if necessary, but only after a public hearing on the proposed rates.”
According to Dhital, the new directives will also pave the way for the power utility to enforce its recent decision to slash the tariff for industries and other commercial entities receiving energy through 24-hour dedicated feeders.
A board meeting of the Nepal Electricity Authority held last week decided to forward its recommendations to the commission on charging users of dedicated feeders only 20 percent more than general consumers.
As per the existing billing provisions, any industry that wishes to consume electricity from a dedicated feeder system is required to pay around 70 percent more than general consumers.
The regulator in the proposed rules has said that it will base its decision on the tariff after evaluating the power utility’s audited financial report of the past two years and its financial projections for the current and next fiscal years.
“If the power utility cannot make available the audited financial statements, it can apply to impose new rates by allowing the commission to evaluate the financial statements approved by the power utility's management,” states the directive.
When asked whether the move by the regulator has come to cap the profits of the power utility, office bearers of the commission said that the regulator will allow the utility to earn as per its requirements while making sure that consumers don’t suffer high electricity charges.
“We will only put the directive into effect after conducting a stakeholder review, and it will create a win-win situation for all,” said Dhital.
The move from the regulator has also come at a time when talks have surfaced on reducing electricity charges for all types of consumers as the country moves towards becoming self-reliant in electricity.
As per the directive, the commission will review the capacity demand charge levied on industrial consumers, the energy charge paid by general consumers, the annual return of the power utility from investments, the cost, quality and quantity of electricity supplied through the country in relation to the source, the interest expenses and the power purchase commitments of the power utility before making a decision on revising the tariff.
“The tariff will also be set keeping in mind the cash windfall given to the power utility for limiting the increase in electricity charges, the country’s economic indicators and the government’s policy on electricity development,” said the commission.
“Tasks pertaining to tariff will revolve around the principles of consumer rights protection, quality supply of electricity, enhancement of the power utility’s business prowess, investments needed for grid reinforcement and a fair return on the utility’s investment.”