Line Ministry responsible for development & Protection of N

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Location Map - Nepal
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Source Great Rivers of the World, National
Geographic Society, 1984
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Hydropower Potential of Nepal

• Average annual flow 225 Billion m3

• Theoretical generation capacity 83,000 MW
• Economically feasible capacity 44,000 MW
• Number of feasible sites 66

• Existing, under construction
• and committed capacity 666 MW
• Potential to meet national and regional needs

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Major River Basins and Hydropower Projects in Ne
pal
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Nepal Power Demand and Supply

• Demand by 2005 622 MW

• Existing Capacity 535 MW
• Committed additions 23 MW
• Private Sector 16 MW
• Public Sector 7 MW
• -20 population have access to electricity
• Total generation by 2005 660 MW

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Scenario of Generation by 2002/03

• Peaking Capacity 604 MW
• Expected Peak (annual) 482 MW
• Max. Surplus (wet season) 154 MW
• Surplus Capacity (dry season) 41 MW
• Average Energy 3260 GWh
• Demand Energy 2110 GWh
• Surplus Energy 1150 GWh

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Policy Legal Framework

• Hydropower Development Policy - 1992
• Industrial Policy - 1992
• Foreign Investment One-Window Policy-1992

• Electricity Act - 1992 (Regulations 1993)
• Electricity Theft Control Act - 2002
• Industrial Enterprises Act - 1992
• Foreign Investment and Technology Tfr.
  Act,1992
  

• Environment Conservation Act - 1996
  (Regulation-1997)
  
• National Environmental Impact Assessment Guideline
  s - 1993

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Legal Framework

• Survey license issued within 30 days
• Period of such licence up to 5 years
• Project license issued within 120 days
• Period of such license up to 50 years
• Exclusive water rights
• Public consultation before issuance of Project
  license
  
• Government land provided on lease or acquisition
  of private land

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Major Players in Water and Energy Sector

• Ministry of Water Resources (MOWR)
• Line Ministry responsible for development
  Protection of Nepals Water and Energy Resources
  
• Overall regulatory authority for Power Sector
• Oversight of operation of Public and Private
  Power sector development
  
• Water and Energy Commission its Secretariat
  (WEC/WECS)
  
• Formulation policy and Strategy
• Analyzing Bilateral and Multilateral Projects
• Reviewing multipurpose large medium projects
• Coordinating national sectoral policies
• Tariff Fixation Commission (TFC)
• Review on electricity tariff levels
• Fixation of tariff structures
• Fixation of charges for all consumers

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Major Players in Water and Energy Sector

• Tariff Fixation Commission (TFC)
• Composition
• Person nominated by His Majestys Government from
  non-governmental
  
• sector Chairman
• Representative , Ministry of Water Resources
  Member
  
• Economist nominated by His Majestys Government
  from non-government
  
• sector Member
• Person nominated by His Majestys Government
  among the licensee of the
  
• electricity generation, transmission or
  distribution Member
  
• Representative, Federation of Nepal Chamber of
  Commerce and Industry Member
  
• Person nominated by His majestys Government from
  among the
  
• Consumers Member
• Director General, Department of Electricity
  Development Member Secr
  etary
  

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Major Players in Water and Energy Sector

• Department of Electricity Development (DoED)
• Study and Development of Multipurpose, Bilateral
  and Major Hydropower Projects
  
• Promotion and Development of Private investment
  in Power Sector including Licensing
  
• Preparation of Standards for Transmission and
  Distribution of electricity and Inspection
  Monitoring for its compliance
  
• Advisory assistance to MOWR
• Acts as secretariat of Tariff Fixation
  Commission.
  
• Department of Electricity Development (DOED) has
  been established as One Window for
  
• Issuance of survey project licenses
• Providing concessions incentives
• Assistance in importing goods
• Assistance in obtaining land
• Assistance in obtaining permits, approvals
• Acts as a Regulatory and monitoring body

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Institutional Aspect contd

• Nepal Electricity Authority (NEA)
• An HMG/N undertaking established under NEA ACT
  1984
  
• Generation of Electricity
• Transmission of Electricity
• Distribution of Electricity

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Market

• Domestic Nepal Electricity Authority
• Foreign India
• Huge power demand
• Under Power exchange arrangement
• Present - 50 MW. Agreed - 150 MW
• 132 kV links available at two points, three
  additional identified
  
• Under Power trade agreement signed in June
  1997.
  
• Regional
• Under Growth quadrangle concept within
  SAARC.

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Present Tariff Structure

• Meter Capacity Minimum charge Street lamp
• Up to 5 Amp Rs. 80.00 Rs. 2.00
• 15 Amp Rs. 299.00 Rs.10.00
• 30 Amp Rs. 664.00 Rs. 30.00
• 60 Amp Rs. 1394.00 Rs. 100.00
• Three Phase Rs. 3244.00 Rs. 100.00
• Energy Charge per unit up to 20 units Rs. 4.00
  per unit 21 to 250 units Rs. 7.30 per unit
  above 250 units Rs. 9.90 per unit.
  

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HMGN/NEA Policy onPower Purchases from Small
Projects
Rate Rs 3 per unit during mid April-mid
November Rs 4.25 during mid December-mid
April - an annual escalation of 6 percent pe
r annum for five years and will be
reviewed thereafter. - PPA for 25 years -
100KW to 1000KW will be purchased by NEA with
- an immediate effect
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Basis of Tariff Fixation

• Rate of Depreciation,
• Reasonable profit
• Mode of the operation of the plant
• Change in the consumers price index,
• Royalty and the policy adopted by His Majestys
  Government to the development of electricity
  
• Marginal cost of electricity generation
• The exchange rate of convertible foreign
  currency
  
• The cost of fuel to be used for the production of
  electricity
  

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Tariff Fixation contd.

• Review the financial agreement entered between
  the licensee and the financial institution
  providing loan or investing capital in the
  concerned electricity project
• Types of Consumers
• Social Liability
• Cross Subsidies
• Potential for demand side management
• Organizational Efficiency

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Issues and Challenges tariff

• Affordability and Tariff Rationalization
• Tariff design should give due considerations for
  the economic standards of people
  
• Subsidy to the needy, effective mechanism to be
  devised and needs to be made transparent
  
• Tariff should be based on only prudent
  investments and efficient operations
  
• Independent Tariff Fixation Commission ( Consumer
  protection)
  
• Appeal provision on TFC decision.

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HMGN/NEA Policy onPower Purchases from Small
Projects
Rate Rs 3 per unit during mid April-mid
November Rs 4.25 during mid December-mid
April - an annual escalation of 6 percent pe
r annum for five years and will be
reviewed thereafter. - PPA for 25 years -
100KW to 1000KW will be purchased by NEA with
- an immediate effect
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Issues and Challenges hydropower

• Producing Cheap Power
• Increasing Accessibility
• Improving Efficiency
• Mobilization of Resources
• Affordability and Tariff Rationalization
• Improving the selection process of projects
• Addressing Environmental concerns
• Improving the policy and Regulatory framework
• Establishment of Institutional set up

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New Hydropower Policy

• Approved by HMG/N in October 2001
• Emphasis on Expansion of Power System and Rural
  Electrification
  
• Develop Electricity as Export Commodity
• Increased participation of private sector
• Restructuring of power sector to create an
  enabling environment for private sector
  participation

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New Hydropower Policy

• Major Deviation From Existing Legal Provision

• Duration of Generation License
• Maximum of 35 years as against 50 years
• Royalty
• Rs. 100-200/kW/Year in capacity as against Rs.
  100/kW/Year
  
• 1.75 - 2 /kWh in energy as against 2

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New Hydropower Policy

• Income Tax
• Corporate Tax max. 20 as per Income Tax Act
• Institutional Arrangement
• Regulatory body
• Promotional body
• Electricity Energy Management Study Institution
• Unbundling of Nepal Electricity Authority

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New Hydropower Policy Institutional

• Regulatory body The present TFC to be developed
  into a Regulatory body
  
• Functions
• To fix the electricity tariff and wheeling
  tariff
  
• To monitor the safety of electricity system and
  regularity in supply, to supervise and monitor
  the quality of electricity, to set standards for
  the safety of electricity system and regularity
  in supply,
• To protect consumers interest
• To prepare a grid code
• To set standards and develop criteria for quality
  control
  

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New Hydropower Policy

• To review the basis of electricity purchase as
  per understanding reached between buyers and
  sellers
  
• To fix the electricity tariff rates to be sold to
  consumers
  

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New Hydropower Policy

• Promotional body Department of Electricity
  Development
  
• Functions
• To organize competitive bidding in the process of
  issuing license
  
• To provide facilities to be available under One
  Window Policy and attract private sector
  investment for hydropower development
  
• To encourage private sector participation in
  hydropower projects
  
• To process and approve the hydropower projects
  above 1MW for its best use

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New Hydropower Policy

• To conduct feasibility study of hydropower
  projects and study of multipurpose projects
  
• To perform activities pertaining to promotional
  measures and monitoring and also render
  assistance to the private sector in the
  implementation of projects.

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New Hydropower Policy

• Water and Energy Commission Secretariat
• Functions
• To conduct study pertaining to national
  electricity demand forecast and system planning
  
• To conduct the preliminary identification of the
  hydro projects
  
• To conduct various policy research works for the
  development of electricity sector.

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New Hydropower Policy

• Electricity Energy Management Study Institution
• To conduct research works pertaining to
  financial, legal, environmental and technical
  aspects in the field of electricity
  
• To provide training in the above matters
• Unbundling of Nepal Electricity Authority
• - A proper institutional arrangement shall be
  made after the gradual unbundling of generation,
  transmission and national grid system presently
  under the ownership of NEA

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New Hydropower Policy

• The national grid system shall be handed over to
  an autonomous public entity
  
• - Local agencies, communities/ cooperative
  institution and private sector shall be
  encouraged in the distribution of electricity.
  

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Consumers Protection Act, 1997

• To protect the interest of consumers from illegal
  business activities
  
• Consumers Protection Council of 13 members headed
  by Minister of supplies
  
• -Provision of imprisonment along with fines in
  violation of the activities as mentioned in the
  Act
  
• His Majestys Government will be the plaintiff in
  the cases under this Act
  
• Cases to be filed in District Court

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Consumers Protection Act, 1997

• Complaint can be filed for compensation for the
  loss suffered as a result of activities
  prohibited by this Act before the Compensation
  Committee
• Compensation Committee in each district headed by
  Chief District Officer
  
• Appeal can be filed before the Appellate Court
  against the decision of Compensation Committee