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THE STATUS OF POWER SECTOR REGULATION IN NEPAL

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

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THE STATUS OF POWER SECTOR REGULATION IN NEPAL

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  1. THE STATUS OF POWER SECTOR REGULATION IN NEPAL THE ELECTRICITY TARIFF FIXATION COMMISSION FORMED IN 1994 IN ACCORDANCE WITH ELECTRICITY ACT OF 1993

  2. ELECTRICITY TARIFFFIXATION 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

  3. ELECTRICITY TARIFFFIXATION 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

  4. COMPOSITION OFREGULATORY 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

  5. FUNCTION OFREGULATORY COMMISSION PRESENT FUNCTION LIMITED TO SETTING RETAIL POWER TARIFF AND OTHER ASSOCIATED CHARGES

  6. PROCEDURE OFTARIFF 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

  7. 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.

  8. EXPANSION OF FUNCTIONSOF 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.

  9. PERFORMANCE OFCOMMISSION 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.

  10. 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.

  11. T A R I F F 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.

  12. 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.

  13. 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.

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