Transcript Hydropower Development Policies of Nepal: A Brief Assessment

Hydropower Development Policy
&
Regulatory Framework
Keshab Dhoj Adhikari
Senior Divisional Engineer
Ministry of Water Resource
23 September 2008
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What Constitute HP Policy
• Hydropower Development Policy2001
• Water Resources Strategy-2002
• Electricity Act 1992 & Rules 1993
• Periodic plans, annual budget
speech, EPA & EPR, custom & tax
provisions, etc.
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What Constitute HP Policy contd…
Other relevant Acts & Regulations
• Foreign Investment and Technology
Transfer Act
• Company Act
• Electricity Tariff Fixation Regulation,
etc.
3
Other important Acts on anvil
• Electricity Act and Rules
(proposed)
• Nepal Electricity Regulatory
Commission Act (proposed)
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Institutions currently involved
• MoWR and DoED
• Electricity Tariff Fixation
Committee
– Ministry of Environment, Science
and Technology
–Ministry of Forest and Soil
Conservation
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Objectives of HP-2001
• Generate electricity at low cost;
• Provide reliable and quality electricity at a
reasonable price;
• Combine electrification with the economic
activities;
• Extend rural electrification; and
• Develop hydropower as an export
commodity
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Key Policy Provisions (HP-2001)
• ‘Competition’ emphasized
• BOOT model; first sector to adopt one
(not under the BOOT ACT)
• In case of multipurpose projects, GoN
may participate
• Environment- 10% d/s release (min)
• Facilitate property acquisition
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Key Policy Provisions (HP-2001) contd…
•
•
•
•
Water rights guaranteed
Various provisions for RE
No expropriation
Foreign exchange facility for dividend
and loan
• Additional 5 year term (max) for
projects at risk
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Other Important Aspects of Policies
Terms of License
• Survey License for 5 years
• Generation License
– Internal consumption 35 years
– Export Oriented 30 years
– In case of reservoir 5 years extension on the
basis of construction period
– Captive Plant as it remains in operation
– Transmission and Distribution 25 years with
ten years renewable
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Some Important Aspects of Policies (contd..)
Transfer of Projects
• Every hydropower project has to be
transferred to the government, free of costs,
after the completion of license period
• Licensee has to involve the government in the
operation of the project two years prior to the
completion of license period
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Some Important Aspects of Policies (contd..)
• Utilization of Local Resources
• Developers are encouraged to– utilize Nepalese labour, skill, means and
resources to the maximum extent possible and
have to give priority to utilize local labour
– carry out works in such a way so as to transfer
technology to the Nepalese citizens
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Private Sector Participation
Ever since Hydropower Development
Policy 1992 was formulated, Government
hasn’t turned back and made adequate
policy commitments for the enhanced
participation of private sector.
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Emerging Institutions
• Independent Electricity Regulatory
Commission (NERC) to replace ETFC with
enhanced regulatory role
• Existing vertically integrated utility(ies) to be
unbundled
• One agency will be allowed to do business
either generation or transmission or
distribution
• Separate Rural Electrification Fund
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Establishment of Grid Authority
• Operation and control of the National Grid
shall be in accordance with the Grid Code
• A Licensee may transmit the electric powers
inside or outside the country by obtaining
access to the National Grid
• No discrimination in accessing grid
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Special provisions in new EA
• >100 kW developer-registered firm; <100 kW
individual and firm
• After completion of submission, award of
license
– Survey within 21 days
– Cap. <10 MW within 60 days
– 10 MW<Cap.<50 MW within 90 days
– Cap.> 50 MW within 120 days
– T & D within 90 days; Trade within 45 days
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Special provisions in new EA
• A developer to get license either for
generation or for transmission or for
distribution except in special cases
• Security deposit for construction license
• Duration
– Survey license initially for 2 years and extension
up to a total maximum of 5 years
– Generation 35 years for domestic consumption;
30 years for export
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Special provisions in new EA
• Duration contd..
– 15 years for thermal
– 35 years for captive hydro and in case of captive
thermal till the industry is operated
– May be extended by 5 years, at the most, for
storage projects
– May be extended by 5 years, at the most, if the
project suffers from serious geological and
hydrological uncertainties
– 25 years for transmission, distribution and
trading
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Provisions in new EA
• National Grid
– GoN, in consultation with NERC, to declare national grid
and its codes
– Indiscriminate access to grid
• Power purchase & import/export
– Price to be set on the basis of fixed percentage of avoided
cost or average tariff or ROE
– Also by bidding following a NERC declared procedure
– NERC may declare other methods once power whole sale
market is established
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Provisions in new EA
• Import/Export
– Trade license for power import and export
– No separate export license needed for export
oriented generation licensee
– GoN may ask for selling 10%(max) of energy for
domestic consumption
• Royalty (as per HP-2001)
– Applicable only for > 2 MW projects
– Currency of royalty payment same as the
currency of power purchase
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Water rights & environment
• Water rights ensured for generation period
• Downstream release of 10% of mean
monthly flow or as stipulated in approved EIA
report whichever is greater
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Land acquisition, resettlement
• Govt. land and forest area to be provided on
lease
• Govt. to facilitate acquiring private land and
property
• Developers to compensate for land and
properties thus acquired
• Developers to prepare and implement R&R
plan
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Tax Exemption
• custom duty 1% of cost of imported material
and equipment and NO VAT
• Above exemption only for the construction
period and applicable for spare parts also
• No income tax for > 2MW
• Income tax holiday for first 10 years after
commissioning and first 7 years incase of
transmission and distributio
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Other incentives
• 15% tax on the annual income for generation
companies
• Expatriates to get other incentives like
foreign exchange, duty free and visa facilities
• Protection from change in law regarding tax
exemption for the entire license period
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Some other important provisions
• No expropriation
• All power projects to be considered as
Priority Projects and incentives to be
provided accordingly
• A bonus of 2% of net income (not exceeding
annual salary) for the employees; the surplus
in welfare fund
• Annual Reports to be submitted to NERC and
DOED
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Draft NERC Act
• NERC- 5 man strong commission (including at
least a woman)
• GON appoints Chairperson and members of
NERC
• Recommendation Committee
– VC (NPC), Coordinator
– Power sector expert from private sector (GON
nominee), Member
– MOWR Secretary, Member
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Draft NERC Act
• Eligibility criterion- Master degree in
Economics or Commerce or Management or
Accounts or Law or Engineering and a
minimum of 10 years experience in relevant
field
• 5 year term and can be reappointed for one
more term
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Roles and responsibilities
• Technical aspect
– Regulate for maintaining safety and quality
– Formulate policy and action plan for the
reliability and effectiveness of power system
– Prepare O&M procedure code
– Prepare and enforce Grid code and distribution
code
– Review LCGE and see whether a project fits it
(not applicable for <10 MW)
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Roles and responsibilities
• Tariff fixation
– Declare bases of tariff
– Determine wholesale price
– Determine PPA process and buy back rate for 1 to
10 MW plants
– Fix wheeling charge and retail tariff
– Review and provide consent to PPAs, etc.
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Roles and responsibilities
• Maintain competition and protect
consumers’ interest
– Avoid monopoly or find out ways and means to
avoid monopoly
– Regulate merging, sale of plant, acquisition or
takeover, etc.
• Capacity building and enhancing good
governance in companies
• Advise GoN in related matters
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Roles and responsibilities
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Monitoring and inspection
Dispute resolution
Impose fines- up to Rs. 500,000.00
Public hearing in the process of tariff fixation
Employ a NGO to advocate on behalf of
consumers
• NERC may review its own doing
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Some other provisions in NERC Act
• NERC will get 1% of revenue from companies
(except generation)
• Appeal in Appellate Courts
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