The Electricity Regulatory Commission (ERC) has decided to conduct a feasibility study for the development of a wholesale electricity market in Nepal. The 279th meeting of the ERC approved its annual plans and programs for fiscal year 2025/26.
According to ERC, the wholesale market would act as a bridge between producers, sellers and buyers of electricity, enabling direct energy trade and competitive pricing. It believes that such a platform will promote private sector participation, ensure long-term supply and make the power sector more competitive.
Indian Energy Exchange (IEX) and Power Exchange India Ltd (PXIL) serve as wholesale electricity markets in India. Nepal Electricity Authority (NEA) has also been selling its surplus energy in the day-ahead market of the IEX. ERC officials say the feasibility study will examine legal and institutional frameworks, technological requirements, potential models for market development and phased implementation strategies. Based on the findings of the feasibility study, the ERC will develop a long-term policy roadmap and necessary regulatory provisions for the wholesale market.
The ERC has also approved plans to determine a cost-based, transparent structure for transmission and wheeling charges to promote open access and fair pricing. It is expected to improve power trade and attract investment in the energy sector. The ERC has also said that it would also review the existing structure of Power Purchase Agreements (PPAs). The current PPA formats depend on the nature of the investment and there are separate PPA formats for projects developed by the private sector and government entities. The ERC plans to standardize the framework to ensure equal treatment for all investors.
It also plans to assess the actual cost of hydropower generation through a cost benchmarking study. The study will include analysis of river flow levels, discharge, and topography to estimate the likely cost of specific project types, giving investors clearer guidance on the viability of their investments. This will help formulate effective pricing strategies for electricity purchase agreements, according to the ERC. Likewise, it plans to verify and evaluate the technical and financial progress of hydropower projects through independent third parties or consultants. It also plans to introduce a distinct tariff structure for reservoir-based and other storage projects.
With technologies such as pumped storage, battery storage, and reservoir-based hydropower playing an increasingly critical role in system stability and peak-time energy supply, the ERC plans to conduct technical, economic and regulatory studies to establish fair, transparent, and investment-friendly tariff rates. So far, no specific tariff structure exists for such projects. The ERC has also said that it would set clear criteria and justifications under which electricity can be curtailed or disconnected.
