As the private sector has not been able to receive licences for power trading due to a lack of laws, there has been little progress towards formulating necessary rules on providing open access to transmission lines to the private sector and the wheeling charge they are supposed to pay.

As a result, the private sector entering the electricity trading anytime soon is unlikely.

The government’s move to grant trading licences to the private sector through an ordinance nearly three months ago faced another hurdle after President Bidya Devi Bhandari sat on the piece of legislation.

After withdrawing a more than two-year-old bill with similar provisions on September 16, the Cabinet on September 26 approved the ordinance to amend the Electricity Act and forwarded it to the President’s Office for approval.

On the other hand, there is no clarity about whether the private sector would get an open access to the existing transmission line being operated by the Nepal Electricity Authority and how much wheeling charge the private sector would be required to pay for trading in electricity.

The withdrawn bill had not only made provisions for granting trading licences to the private sector, but also envisioned providing the licensed power trading companies the access to the National Transmission Grid, which will be operated by an agency determined by the government.

Currently, only the Nepal Electricity Authority has a complete network of transmission lines across the country.

“As there is no clarity on whether the private sector would get a trading licence and whether they are to be provided open access to the existing transmission infrastructure, it has been difficult to prepare the guidelines on open access,” said Gokarna Raj Pantha, secretary at the Electricity Regulatory Commission.

As per the Electricity Regulatory Commision Act, it is mandatory to determine the wheeling charge for the use of the transmission facilities. The government has also agreed to a condition of the World Bank that the commission would issue guidelines on open access and transmission pricing while accepting its development policy credit in 2020.

“The commission will also issue the grid code and supply code and regulations on power trading, to mention a few,” the World Bank said while approving the second energy sector Development Policy Credit in June 2020. “Put together, this series of DPC prior actions will help institute a new regulatory framework that provides private investors with a fair, rule-based investment environment.”

The World Bank has approved $73.3 million SDR (100 million dollar) to implement reforms in the power sector of Nepal.

In order to fulfil the conditions of the World Bank, the commission is now preparing a draft guidelines on open access, which will also contain the wheeling charge.

According to Panth, a group of experts are working on it and its first draft may be ready by October end.

“In fact, even the drafts of the guidelines have not been prepared yet,” he confirmed. “The World Bank, the USAID, and Foreign, Commonwealth and Development Office of the United Kingdom are providing the technical assistance for the preparation of these guidelines.”

Even if the private sector is granted a trading licence, they can trade electricity without getting open access to use the existing transmission line.

“The law should also open the door for providing open access to the transmission infrastructure for the private sector participants,” said Pantha.

However, in a recent interview, Anup Kumar Upadhyay, former energy secretary, told the Post that the commission could prepare the guidelines on open access and determine wheeling charges.

“The law is necessary mainly to grant a licence to the private sector to engage in trading of power domestically and across the border,” he said.

There is no clarity about whether the government would establish a separate entity to look after the national transmission grid or tell the NEA itself to work as such an entity.

“For this, the guidelines should be prepared on how the private sector can access the national grid,” said Panth.

Officials at the commission said that bad blood between Energy Minister Pampha Bhusal and officer bearers of the commission had affected the commission’s work.

In January, the cabinet suspended Chairman of the Commission Dilli Bahadur Singh and members Rameshwar Kalawar and Bhagirathi Gyawali by forming a probe committee to investigate their alleged wrongdoings. They were appointed by the erstwhile KP Sharma Oli-led government. The government later sacked them, based on the probe committee’s report. But, in March, the Supreme Court reinstated them through an interim order.

“I have not seen any direct communication between the minister and the office bearers of the commission,” said a senior official of the commission. “Even when the government recently sent an ordinance to amend the Electricity Act to the President for authentication, the commission was not consulted.”

The official said that the issues related to guidelines on open access and wheeling charge could be addressed through coordination between the two sides.

In the absence of the necessary legal basis, the private sector may have to wait for a prolonged period to engage in electricity trade, particularly exporting electricity to India.

Currently, only Nepal Electricity Authority, the state-owned power utility, has been engaged in cross-border electricity trade. The NEA has been exporting a maximum 364 megawatts of electricity to India through Indian Energy Exchange Limited, the power trading platform.

Lately, about a half dozen Nepali companies have shown interest in selling power, particularly to India and potentially to Bangladesh.

The private sector has been urging the government to act fast on the matter as allowing the private sector to engage in power trading would benefit the entire power sector of the country.

“Providing cross-border trading licences to the private sector—will help develop the energy market in the country and attract more investments into the sector,” said Ashish Garg, vice-president of the Independent Power Producers Association of Nepal (IPPAN).

“Currently, the Nepal Electricity Authority alone signs power purchase agreements with power developers. With the private sector also coming into the business, there will be more alternatives for the power developers to sell electricity.”

Most importantly, according to Garg, more power trading firms in the country would help develop a domestic power exchange market like that of India.