Government's Preparation to Involve Private Sector in Electricity Trade
As Nepal's electricity generation capacity increases, the government is preparing to regulate private sector participation to expand the cross-border market for surplus electricity alongside domestic consumption. Under the proposed arrangement, the private sector will be involved in market exploration, partner identification, and risk management, but letters of consent or intent will not be considered final trade permits.
Kathmandu. The government is preparing to regulate the participation of the private sector to expand the cross-border market for surplus electricity alongside domestic consumption.
As Nepal's electricity generation capacity increases, preparations are being made to strengthen the legal, regulatory, and institutional foundations for market expansion while maintaining a balance between production and demand. The Ministry of Energy, Water Resources and Irrigation has adopted a policy to develop the electricity sector as an integrated system connecting production, transmission, domestic consumption, electricity trade, and the regional energy market.
Under the proposed arrangement, the private sector will be involved in market exploration, partner identification, and risk management. For this purpose, the proposed electricity trading company is to be provided with a letter of consent or intent as a preliminary preparation.
However, such a certificate or letter of intent will not be considered a final trade permit, a guarantee of electricity purchase and sale in a fixed quantity, reservation of transmission capacity, open access, or automatic approval for cross-border electricity trade. Its main objective is to facilitate the company in making legal, institutional, financial, and technical preparations.
For actual electricity trade, prevailing laws, regulatory arrangements, and technical standards must be met. Risks related to the market, price, payment, trading partners, and foreign exchange must be borne by the concerned company itself. Electricity trade includes not only the sale of electricity but also processes such as purchase and sale, market exploration, agreements, risk management, transmission utilization, electricity scheduling, metering, account reconciliation, and payment.
Since an effective electricity market requires clarity on open access, transmission capacity allocation, payment security, risk management, market conduct, and regulatory compliance, these arrangements are being further streamlined. Regulatory arrangements are being developed under the Electricity Regulatory Commission Act, 2074, and a directive on open access has been issued, with further technical arrangements being made.
For cross-border electricity trade, market rules of the concerned country, government approval, and a mechanism for cross-border trade are necessary, so emphasis is also placed on clear responsibilities and coordination among the concerned agencies.