Nepal allows private companies to prepare for electricity trading — Kathmandu Post

In Nepal, the Ministry of Energy, Water Resources and Irrigation has decided to issue letters of intent to private companies to prepare for cross-border electricity trade. At the same time, such companies will be able to buy or sell electricity only after amendments are made to the Electricity Act of 1992 and the relevant licences are obtained, The Kathmandu Post reports.

Letters to prepare for the market

A letter of intent is a preliminary permit that enables businesses to study the market, seek potential partners and assess investment opportunities. According to Energy Minister Biraj Bhakta Shrestha, private companies will be able to participate not only in electricity generation but also in its international trade.

Twelve companies have applied for such letters, including Nepal Power Exchange, NIFRA Trading and Energy Exchange, Green Energy Power Trading, and Trans Asia Power Trading. The documents will be valid for a maximum of two years, and companies will have to submit progress reports to the ministry every three months.

The letters of intent do not grant the right to conclude electricity purchase agreements, reserve grid capacity, or use open access to transmission systems. The ministry also stressed that this document does not guarantee automatic receipt of a licence, and that the state will not be responsible for arrangements concluded by companies.

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Legislative and technical limitations

The ministry has already launched the procedure to amend the Electricity Act in order to create a legal basis for licensing private traders. The draft bill has been sent to the Ministry of Law for approval, after which it must be approved by the Cabinet of Ministers.

Currently, the Nepal Electricity Authority is the only officially designated coordinator of cross-border electricity trade between Nepal and India. Nepal also exports hydropower to Bangladesh through Indian transmission infrastructure.

Uttam Bholon Lama, a representative of the Independent Power Producers’ Association of Nepal, noted that companies also need India’s approvals and access to the power grid. Even after obtaining a Nepalese licence, exports through a power exchange will require permission under cross-border trade rules established by India’s Central Electricity Authority.