Nepal has decided to issue letters of intent to private companies seeking to enter cross-border electricity trading
KATHMANDU — Nepal has decided to issue letters of intent to private companies seeking to enter cross-border electricity trading, but they will have to wait for amendments to the country’s Electricity Act and obtain licences before they can actually trade, according to a local media report.
The decision was taken by Nepal’s Ministry of Energy, Water Resources and Irrigation last Friday. Twelve companies, including Nepal Power Exchange, NIFRA Trading and Energy Exchange, Green Energy Power Trading and Trans Asia Power Trading, have applied for the letters of intent, The Kathmandu Post reported on Saturday.
The letters will allow companies to study potential markets, identify partners and prepare for electricity trading, but will not permit them to enter into power purchase agreements, book transmission capacity or use open access for electricity transmission.
Nepal Electricity Authority (NEA) is currently the country’s designated nodal agency for cross-border electricity trade with India. Nepal also exports hydropower to Bangladesh using India’s transmission network.
The Energy Ministry has initiated the process of amending the Electricity Act, 1992, to create a legal framework for licensing private electricity traders. The proposed amendment has been sent to the Ministry of Law for approval and will subsequently require Cabinet endorsement, the report said.
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Private companies can obtain electricity trading licences only after the law is amended, energy ministry joint-secretary Sunil Paudel was quoted as saying.
The letters of intent will be valid for up to two years, during which companies will have to submit quarterly progress reports to the ministry.
Even after obtaining a licence in Nepal, companies will require approval under India’s cross-border electricity trade guidelines to export power to India or other countries through power exchanges, the report said.