May 16: The Nepal Electricity Authority (NEA) has decided not to slap any penalty to the promoters of old hydropower projects with capacity of less than 10 MW for reduced electricity production. The NEA took such decision after various rounds of discussions with the Electricity Regulatory Commission.
Promoters hydropower projects with capacity of less than 10 MW that came into operation before March 22 will not be penalized if the reduction in flow of water results in production of less electricity than the prescribed amount. Rameshwar Poudel, an ex-officio member of the NEA Board of Directors, said that the decision was taken in line with a directive issued by the commission.
The Electricity Regulatory Commission had instructed NEA to make such arrangement around two months ago. NEA had been urging the commission to reconsider the decision, saying such an arrangement would affect its financial system and other aspects. However, after discussions at various stages, NEA has decided to provide such facility to the specified projects as per the decision and instructions of the commission.
"We had requested the commission to reconsider the directive as it would affect the financial condition of the authority," Poudel said, adding, “The decision, which is beneficial for both the promoters and the NEA was taken after discussions with the commission at various stages.”

Similarly, the commission has decided not to impose any penalty if NEA fails to construct transmission line on time due to special circumstances.
According to Poudel, the commission has clarified that no fine has to be paid if the transmission line cannot be built due to special circumstances.

As per the directive of the commission, NEA has made an arrangement that no penalty will be levied if the power generation of the projects is less than the commitment made only if it is due to hydrology. If the power generation is less than the prescribed amount due to other reasons, a penalty of 10 percent will have to be paid for insufficient electricity production.
Earlier, the projects had to pay the prescribed amount of penalty to the power buyer (Nepal Electricity Authority) even if the power generation was reduced due to hydrology. But, now they won't have to pay such a penalty.
Even when the power generation was low due to natural calamities, the projects had to pay the penalty. The promoters have been urging the commission to come up with the necessary policy in this regard. Regarding such concerns, the commission had decided not to penalize old projects.
From now on, the concerned projects will have to submit the details of their production capacity on a weekly basis to NEA. In addition, details of how much electricity is generated every month will have to be submitted to NEA.
Although NEA has signed power purchase agreement (PPA) with NEA the promoter companies according to the full capacity of the projects, power generation is not always optimal due to hydrology.
Earlier, the minimum commitment was to generate 60 percent electricity in winter and 90 percent in the rainy season. However, such a limit has now been removed. Provision has been made for the project to generate electricity as estimated and if it is not produced, the penalty will be levied accordingly. In addition, as per the decision of the commission, if the projects generate more electricity than expected, they will receive an additional amount from NEA.
Earlier, if excess electricity was generated than previously committed, the project would not get anything more that mentioned in the agreement. But now they will get the additional amount from NEA at the rate of 50 percent of the surplus electricity. This provision will not be applicable in case is electricity is generated more than the capacity mentioned in the PPA. In order to implement these provisions, the previous PPA between the projects and the NEA need to be amended.