Nepal Electricity Authority (NEA) has said project’s generating one to 10 megawatts of electricity will not be fined even if they fail to supply up to 50 percent of power they had pledged to sell to NEA at the time of signing power purchase agreement (PPA).

NEA’s decision to relax the hydrology penalty provision has been approved by its board of directors.

Under previous provision, power producers had to supply up to 60 percent of electricity pledged at the time of signing PPA during wet season and up to 90 percent during dry season. 

If the shortfall exceeded the ceiling, power producers had to pay a penalty of up to 80 percent of the total cost of the deficit electricity. 

“We took this decision so that small- and medium-sized hydropower projects wouldn’t suffer huge losses due to penalty,” said Prabal Adhikari, chief of NEA’s power trading department. 

“We have dispatched letters to various independent power sellers to contact our office to make amendment in their PPAs.”

Independent Power Producers’ Association, Nepal (IPPAN) welcomed the NEA decision, saying it will provide relief to small- and medium-sized hydropower plants facing dual problems—low energy generation due decreased discharge in water and hefty penalty for supplying less energy than pledged in the PPA. “IPPAN welcomes NEA’s move,” said its president Sailendra Guragain.

NEA’s move will benefit 28 small- and medium-sized hydropower projects that have signed PPA with the state-owned power utility. 

IPPAN had long been demanding annulment of the hydrology penalty provision. “According to the new provision, power producers will be penalised if they supply less than 50 percent of the pledged energy. 

But our demand was to completely scrap the provision of levying hydrology penalty irrespective of the quantum of energy produced,” said a power producer seeking anonymity. 

“However, we are glad that our concern has been partially addressed. Something is always better than nothing.” 

IPPAN had also asked NEA to provide such a relaxation to projects with installed capacity of up to 20MW, said the source. 

NEA, however, said the relaxation can’t be offered to larger projects as it would affect the energy distribution plan of the power utility. 

“We make our plan based on the quantum of energy that power sellers have committed to supply to us,” said Adhikari. “So if there is a fluctuation in power supply, our entire distribution plan will be hit.”