THE STATUS OF POWER SECTOR
REGULATION IN NEPAL
THE ELECTRICITY TARIFF FIXATION COMMISSION
FORMED IN 1994
IN ACCORDANCE WITH ELECTRICITY ACT OF 1993
ELECTRICITY TARIFF
FIXATION COMMISSION
COMPOSITION OF REGULATORY COMMISSION
 SIX MEMBERS INCLUDING CHAIRMAN
 ONLY CHAIRMAN WORKS FULLTIME AND PAID BY GOVT.
FOR HIS/HER SERVICES
 OTHER MEMBERS ARE PART-TIME
 DoED IS SECRETARIAT TO ETFC
 DIRECTOR GENERAL OF DoED IS SECRETARY OF ETFC
 TECHNICAL & ADMINISTRATIVE SUPPORT IS GIVEN BY DoED
ELECTRICITY TARIFF
FIXATION COMMISSION
COMPOSITION OF REGULATORY COMMISSION
 CHAIRMAN APPOINTED BY HMG/N (NON GOVERNMENT)
 REPRESENTATIVE FROM FNCCI
 REPRESENTATIVE FROM CONSUMERS
 INDEPENDENT ECONOMIST
 REPRESENTATIVE FROM UTILITY
 REPRESENTATIVE OF MoWR
COMPOSITION OF
REGULATORY COMMISSION
 THIS IS TO REPRESENT ALL STAKE HOLDERS IN THE
COMMISSION ITSELF
 THIS IS NOT IN CONFORMINITY WITH REGULAR PRACTICE OF
APPOINTING REGULATORS WHO ARE TOTALLY INDEPENDANT
AND HAS NO CONNECTION AT ALL WITH THE POWER SECTOR
 BUT OUR COMMISSION HAS WORKED SATISFACTORILY SO FAR
AS IT IS SMALL SYSTEM AND FULLY PUBLIC OWNED
FUNCTION OF
REGULATORY COMMISSION
PRESENT FUNCTION LIMITED TO SETTING RETAIL
POWER TARIFF AND OTHER ASSOCIATED CHARGES
PROCEDURE OF
TARIFF REVIEW
 THE LICENSEE FOR THE DISTRIBUTION OF ELECTRICITY IS
REQUIRED TO SUBMIT AN APPLICATION IN PRESCRIBED FORMAT
TO ETFC TO REVIEW THE TARIFF RATE AND OTHER CHARGE
 THE LICENSEE TO SUBMIT FINANCIAL, TECHNICAL AND OTHER
RELEVANT DOCUMENTS TO JUSTIFY TARIFF REVIEW
 IF ETFC REQUIRES ANY FURTHER DOCUMENTS/DATA/EXPLANATION
IT HAS TO NOTIFY THE APPLICANT WITHIN 35 DAYS OF SUBMISSION
OF APPLICATION. DATE OF SUBMISSION OF ALL DOCUMENTS/
CALCULATIONS SATISFACTORY TO ETFC SHALL BE DEEMED TO BE
THE DATE OF RESUBMISSION OF THE APPLICATION
 ETFC HAS TO GIVE ITS DECISION ON THE REVIEWED TARIFF WITHIN
60 DAYS OF SUBMISSION OF APPLICATION
TARIFF DECISION
 THE TARIFF DECISION MADE BY ETFC IS FINAL. IT DOES NOT HAVE
TO GO TO GOVERNMENT.
 THE UTILITY IS NOTIFIED AS SOON AS DECISION IS MADE.
 NEW TARIFF RATES AND OTHER CHARGES ARE PUBLISHED FOR
GENERAL PUBLIC.
 THERE IS NO PROVISION FOR APPEAL ON THE ELECTRICITY RATES
SET BY THE COMMISSION.
 APPEALS CAN ONLY BE MADE ON PROCEDURAL MATTERS.
EXPANSION OF FUNCTIONS
OF THE COMMISSION
SO FAR FUNCTION OF SETTING ONLY RETAIL TARIFF WAS ADAQUETE AS
IT WAS VERTICALLY INTEGRATED FULLY PUBLIC OWNED UTILITY.
NOW PRIVATE GENERATION HAS ENTERED THE POWER SECTOR
PRESENT SET UP IS INADEQUATE.
NEW HYDRO POWER POLICY APPROVED IN 2001. THIS WILL EXPAND
FUNCTIONS OF COMMISSION:
 TO BRING POWER PURCHASE AGREEMENTS UNDER ITS REVIEW.
 TO SET WHEELING CHARGES.
 TO SET QUALITY / SAFETY STANDARD OF SERVICES.
PERFORMANCE OF
COMMISSION TO DATE
HAS PASSED FOUR TARIFF ORDERS SINCE ITS FORMATION
1. HAS BROUGHT TARIFF LEVELS TO REFLECT COST PLUS A
REASONABLE RETURN ON INVESTMENTS.
THIS WILL MAKE POWER SECTOR FINANCIALLY VIABLE AND ABLE
TO INVEST TO SUSTAIN RELIABLE SUPPLY AND LESS DEPENDANT
UPON DONER / LENDING AGENCIES.
THIS HAS BEEN VERY DIFFICULT AS PEOPLE OF WHOLE SOUTH ASIA
REGION HAS BEEN USED TO HIGHLY SUBSIDISED VERY LOW TARIFF
FOR A LONG PERIOD.
OBJECTIVES IN
FIXING THE TARIFF
1. TO MAKE UTILITY ABLE TO
I. SUPPLY RELIABLE POWER
II. TO MEET GROWING DEMAND
III. TO EXPAND SYSTEM TO COVER NEW AREAS. PRESENTLY ONLY
ABOUT 20% OF THE POPULATION HAS ACCESS TO ELECTRICITY.
2. TO MAKE THE POWER SECTOR LESS DEPENDANT ON GOVERNMENT
FUNDING. GOVERNMENT HAS MORE URGENT NEEDS TO INVEST IN
SOCIAL SECTORS LIKE EDUCATION, HEALTH ETC.
3. TO MAKE POWER SECTOR LESS DEPENDANT ON DONOR AGENCIES.
4. TO ATTRACT PRIVATE SECTOR IN THE POWER SECTOR.
TARIFF
TARIFF CALCULATIONS BASED TO COVER
COSTS
-
O&M
DEPRECIATION
INTEREST ON LOAN
POWER PURCHASE
GOVERNMENT ROYALTY
CORPORATE TAX
RATE OF RETURN
-
6% OF ASSETS
`
TO ACHIEVE A SFR OF ABOUT 20/23% ON FUTURE INVESTMENTS.
SOME FEATURES OF
PRESENT TARIFF
1. ONE OF THE HIGHEST IN THE SOUTH ASIA REGION. AVERAGE PRICE
ALMOST 8.5 U.S. CENT/KWH.
2. NO CROSS SUBSIDIES BETWEEN DIFFERENT CATAGORIES OF
CONSUMERS. EG. INDUSTRIES CONSUMES 38% OF ENERGY AND
CONTRIBUTES 36% OF REVENUE. DOMESTIC CONSUMES 37% OF
ENERGY AND CONTRIBUTES 37% OF REVENUE.
3. BUT THERE IS CROSS SUBSIDY WITHIN THE DOMESTIC SECTOR.
RATE VARIES FROM:
5 U.S. CENT/KWH
LOW CONSUMERS
9 U.S. CENT/KWH
AVERAGE CONSUMERS
12 U.S. CENT/KWH
HIGH CONSUMERS
4. TWO PART TARIFF FOR ALL HIGH VOLTAGE (11KV & ABOVE)
CONSUMERS.
5. TIME OF DAY TARIFF FOR LARGE CONSUMERS. PEAK TIME-15%
EXTRA ON NORMAL TARIFF. OFF PEAK TIME (NIGHT)-30% REBATE
ON NORMAL TARIFF. TOD TARIFF APPLIED BECAUSE VERY LOW
DEMAND AT NIGHT. WASTED ENERGY AT NIGHT FROM RUN OF
RIVER HYDRO PROJECTS.
PRESENT POSITION OF UTILITY
1. FAIRLY STABLE FINANCIAL POSITION.
2. ON WAY TO ACHIEVE 6% ROR AND 20% SFR.
3. PRIVATE SECTOR INVESTING IN POWER SECTOR (GENERATION)
FOUR PRIVATE POWER GENERATORS ALREADY SUPPLYING ABOUT
30% OF ENERGY DEMAND.
4. MANY PRIVATE SECTOR PARTIES SHOWING INTEREST IN NEW
PROJECTS.
5. HIGH ELECTRICITY PRICES BEGINNING TO BE ACCEPTED AS
QUALITY OF POWER IS IMPROVING. POWER CUTS WHICH USED
TO BE FREQUENT IN PAST YEARS IS NEGLEGIBLE NOW. ON GOING
NEW POWER PROJECTS SHOULD MEET THE DEMAND TILL 2006.