IPPAN demands amendment in the Electricity Bill 2023

As the long-anticipated Electricity Bill 2023 was introduced in the federal parliament by the government, certain aspects of the legislation have raised concerns within the private sector.

The Independent Power Producers Association, Nepal (IPPAN), has strongly objected, asserting that the government's proposed bill appears to diminish the private sector's role in advancing the country's energy sector development.

In a press conference held on Sunday, IPPAN has called for revisions to 12 specific provisions of the Electricity Bill. They are advocating for the private sector's increased involvement in the hydropower sector, akin to the provisions outlined in the Electricity Act of 1992, to be incorporated into the new electricity legislation. IPPAN is proposing that the private sector should be entrusted with the responsibility of identifying and developing hydropower projects. In contrast, the Electricity Bill 2023 currently suggests that the government will handle the survey and detailed design of these projects and subsequently invite private sector participation through competitive licensing. IPPAN argues that this provision would essentially limit the private sector's role in the construction phase of hydropower projects. 

IPPAN also has concerns regarding the proposed permit durations for privately developed hydropower projects. According to Section 19, Clause 1(a) of the Electricity Bill-2023, the permit duration has been adjusted to 50 years for reservoir hydropower projects and 45 years for other types of hydropower projects. IPPAN is advocating for the retention of provisions similar to those in the Electricity Act of 1992, where hydropower developers were granted a five-year period for survey licenses and 50-year generation licenses. 

One provision within the bill stipulates that hydropower projects initiated and managed by the government of Nepal, provinces, and local authorities, either individually or through joint investments, will receive permits without the need for competitive processes. IPPAN President Ganesh Karki has insisted on the elimination of this provision and has urged for the establishment of equitable conditions that apply to all parties involved. "It appears that the government intends to independently pursue high-quality projects while leaving only the remaining projects for the private sector's involvement," said Karki.

Independent power producers (IPPs) have asserted that the private sector demonstrates greater efficiency in constructing hydropower projects compared to government-led endeavors. They contend that hydropower projects operated by the government can be up to three times more expensive than those overseen by the private sector.

IPPAN President Karki expressed his dissatisfaction with the bill's introduction, highlighting that there was no prior formal dialogue with the private sector. This lack of consultation, in his view, diminishes the private sector's role. He has also called for amendments to the bill to incorporate the private sector's demands.

However, IPPAN has welcomed the provision within the bill that opens the door for the private sector to engage in power trading. IPPAN stated, "This will introduce competition in electricity pricing, ultimately benefiting consumers."

Once the bill receives parliamentary endorsement and presidential authentication, Nepali private sector entities, traditionally involved exclusively in electricity generation, will gain the opportunity to participate in power trading. Currently, the state-owned Nepal Electricity Authority (NEA) holds a monopoly on power trading.

This marks a significant transformation in the power sector, as it permits private enterprises to actively engage in the buying and selling of electricity. The proposed legislation seeks to establish a framework that facilitates private sector participation and fosters competition within the power trading market.

The Nepali private sector, including independent power producers, has long advocated for their inclusion in power trading. This demand arises from the fact that the Nepal Electricity Authority (NEA) currently monopolizes power purchase agreements (PPAs), leaving no other entity in the country authorized to enter into such agreements. The bill suggests that the Energy Ministry should grant licenses to registered entities with the intent of engaging in power trade.