Nepal power utility mulls scrapping pacts with nine companies

Nepal Electricity Authority (NEA), the state-owned power utility, is likely to scrap agreements signed with nine companies that have been roped in to install 22 grid-connected solar projects with a total installed capacity of 61MW, as the power purchase rate has been revised downwards since the deals were sealed. When NEA entered into deals with developers of solar projects, it had expressed interest to purchase each unit of solar electricity at the rate of Rs8.45 to Rs9.61. But a guideline recently introduced by the ministry of energy has fixed the purchase price of solar energy at Rs7.30 per unit. The tariff was reduced at a time when solar energy prices have been falling rampantly in the international market. The power utility has, however, said it would not scrap the agreements without holding consultation with the energy ministry. “The NEA management is waiting for the new energy minister to assume office to hold the discussion,” said a reliable source. “If the project developers do not agree to revise the price downwards, the power utility will not sign power purchase agreements with them.” The state-owned power utility had fixed published the base price of Rs9.61 per unit June 2016. The power purchase rate was fixed as per the guideline on National Energy Crisis Reduction and Electricity Development Decade introduced by the government in February 2016.  The NEA had then selected nine companies that had quoted prices ranging from Rs8.45 to Rs9.61 for per unit of electricity. These projects had expressed commitment to set up solar projects with installed capacity ranging from 0.5MW to 8.5MW at 22 different locations mostly in the Tarai region. These companies have already signed draft power purchase agreements with the power utility and are now putting pressure on the NEA management to get those agreements approved by its board of directors. However, the power utility wants to renegotiate the deal and revise down the power purchase rate, as “solar energy prices are declining in the international market”. NEA managing director Kulman Ghising said it would be difficult to sign power purchase agreements without downward revision of rates.  “I am not of the view that agreements should be scrapped, but since there is a new guideline governing the purchase rate of solar energy, the tariff should be revised,” said Ghising. If developers refuse to revise the prices downwards, NEA has indicated it would be compelled to scrap the agreements, as pacts signed with the nine companies, entitle the state-owned power utility to terminate the deals at any point.