August 14: It has been found that one of the members of the Electricity Regulatory Commission has been creating obstacles for hydropower promoters by working against the regulations.

There is a provision in the Electricity Purchase Regulation that a public hearing is not required if the energy buyer enters into a power purchase agreement (PPA) and seeks the approval of the commission for hydropower projects with a capacity of less than 100 megawatts.

However, Rameshwar Prasad Kalwar, a member of the commission, insists that a public hearing should be held for any project which is in violation with the regulation, a hydroelectric power promoter told New Business Age.

The project seeking approval for PPA has not received approval from the commission due to the stance taken by Kalwar, causing a delay in the financial management of the project. The cost of the project is increasing due to the inordinate delay in obtaining the PPA approval.

Also, the cost of construction of small hydropower projects is higher than that of large projects. On top of that, the cost of the project is expected to increase further after the members of the regulatory commission insisted on not giving consent to the PPA without a public hearing.

The Government of Nepal has treats the projects smaller than 100 megawatts and projects larger than that differently. For example, when constructing a project larger than 100 MW, the government will build the road and transmission line for the project site. However, small projects have to do it on their own. If the transmission line is not built on time, the generated electricity will be wasted.

Similarly, if a project larger than 100 megawatts is backed by foreign investment, the PPA is done in terms of dollars. There is also arrangement for hedging, facility to take the profit abroad in dollars, and the government will also take 70 per cent of the loan risk through hedging. Therefore, the commission should hold a public hearing while giving consent to the PPA of projects of this nature. Since the PPA rate of big projects is not fixed, a public hearing is also required to increase the purchase and sale rate.

However, small projects don't even ask for dollar facilities and they don't need hedging facility either. The promoters have to bear a 100 per cent loan. The electricity authority has fixed the PPA rate at Rs 4.8 in the rainy season and Rs 8.4 in winter.