PPA delayed due to confusions between NEA, ERC

 · 40 hydroelectric projects affected

· Currently waiting on the Regulatory Commission’s 

procedures: Electricity Authority

· The procedures are on their final stage: Regulatory Commission

· Private sector’s are on halt: Promoters

 The prevailing legal confusions between the Nepal Electricity Authority (NEA) and Electricity Regulatory Commission (ERC) have caused a delay in the Power Purchase Agreement (PPA). As a result of the disagreement between the authorities regarding the PPA process, the PPA’s of around 40 hydropower projects generating 3,000 megawatts have come to a halt. The confusions surfacing the implementation of the legal system, which requires the Electricity Authority to seek approval from the Regulatory Commission prior to conducting a PPA with Hydropower promoters, have hence affected the private sector as well.
According to the Electricity Authority, along with the 11 projects that have already received approval from the Board of directors, the PPA process of around 30 other projects, which have completed their grid connections and financial management, have been delayed as well. The Electricity Authority is struggling with the dilemma of whether seeking the Commission’s PPA approval during the first or the final stages of private projects. On the other-hand, the Regulatory Commission claims that the Electricity Authority has not yet sent any files for approval, whilst denying the blame imposed upon them.
As stated by the Electricity Authority, the Authority has been anticipating the establishment of an interim procedure set up by the Regulatory Commission, as it will also help in determining the appropriate stage of the projects for seeking PPA approval. As quoted by Prawalraj Adhikari, the spokesperson for the Electricity Authority, “ Since it has not yet been decided as to when to seek for PPA approval, we have been waiting for the Regulatory Commission to set up the interim procedure, as it will help in determining so” as well as “ upon the completion of the drafting of the procedures, which will help in solving the latest prominent issues in an integrated way, we shall send out commissions to approve separate projects.” According to him, during his discussions with the Regulatory Commission officers, it was said that the procedures are supposed to address the interests of the Authority. However, if the authority is in anticipation of the procedures, the PPA process of 40 hydropower projects, with the capacity of harnessing 3000 megawatts, are being obstructed due to this.
Usually, the hydropower projects have to conduct and complete a technological and financial analysis for the Regulatory Commission to approve the PPA of the projects suggested by the Authority, however, as of now, the Commission lacks the manpower to do so. Due to the inability of the Commission to draft a policy for PPA analysis, the Authority is said to have not yet submitted any files for PPA approval. On the other hand, the Commission states that the Electricity Authority has not sent any files for PPA approval till this date. Similarly, one of the Commission officers has claimed that the Authority has been blaming the Commission for the delay instead of realizing its own fault of not sending in any files for approval. The officer quotes “ the Authority has failed to submit even the projects that have been passed by the Board, instead of being understanding and helping out in this situation, they have been blaming the Commission for delaying the process of PPA.” The spokesperson of the Commission has said that the interim procedure has been drafted and has reached its final stage of consultancy; therefore it shall be sent to all the related authorities upon its completion. The confusions and lack of coordination between the Electricity Authority and Regulatory Commission have adversely affected private hydropower promoters as well. According to them, the untimeliness of project approvals can cause difficulties in the license period of the projects, which will also affect their constructions. “ The delay in the PPA has affected private sector projects. Problems regarding the dismissal of projects due to license termination can arise as well, which will also have a set back in project completion periods.” The president of the Independent Power Producers’ Association, Nepal (IPPAN), Shailendra Guragain also states “ not only is this going to affect Hydropower promoters, but is also going to leave a negative impact on the nation’s economy, along with delaying the collection of revenue and royalty.”