The Nepal Electricity Authority (NEA) is under pressure from experts and now the government, to sell millions of units of electricity it allows to go waste every year for a reduced price. Ironically, this is happening at a time when the NEA has been going for declared and undeclared load shedding because one of the turbines of Kali Gandaki A project has off and on remained out of order.
Although there has been a big increase in generation capacity in the past five years, 60 percent of the power comes from hydro power plants and most of them are 'run of the river' schemes and not reservoirs. This means their power capacity depends on the flow of the river, and there is excess power during the monsoon months when demand is lowest.
As a result upto one billion units of electricity are wasted as 'spill' every year. With an installed capacity of 610 MegaWatts, the NEA system generates more than 2,500 GigaWatts hour (GWh) of energy a year. One fourth of it is wasted as spill and NEA is under pressure to do something about it.
One option is to have differential tariffs for time of day and time of year: power is cheaper if consumed during off peak night-time hours or during the monsoon months. "We are working out the rates for the sale of the spill power," Minister of State of Water Resources Thakur Prasad Sharma told us on Tuesday. "The idea is to provide relief to the people at a time when they have been bearing the brunt of the fuel price hike."
ea is not new. Successive governments have tried to use the wasted monsoon power by seasonal tariffs and other innovations. But differential pricing has so far been implemented only for the industrial sector. Nearly half the power in the country is used by the domestic and commercial segments and seasonal pricing has not been offered even to the industrial sector.
"We are trying to introduce both seasonal and time of day tariffs," Minister Sharma said, "A consultant has been hired and these will be announced within next week."
Working out the tariffs is one thing but experts say implementing them is something else altogether. Reason: it needs a formal nod from the Tariff Fixation Commission. In the past, the NEA and the Commission have locked horns over turf and tariff. When the Lokendra Bahadur Chand government leaned on NEA to introduce seasonal pricing two years ago, the tariff commission rejected the idea.
"The tariff commission is so autonomous that it is unanswerable to man or beast," said Chand's Water Resources Minister, Dipak Gyawali who pushed it. "It should be responsible for making sure a new tariff is announced and implemented each fiscal year."
But a commission official said the recommendation was rejected because differential pricing was proposed only for consumers using more than 150 units of power. "That would not have been fair to poorer consumers who use less energy," said the official, "Also, there is no infrastructure for the recommended pricing."
Gyawali argues that rebates were offered for lower slab consumers who would pay bills on time. "Innovations on pricing cannot be implemented at once, they can be done phasewise."
The commission says it is ready to talk to the NEA on new pricing to sell the spill energy. Minister Sharma doesn't think there will be a problem this time. "We have sounded them out, everything looks positive," he said. The Price Fixation Commission was set up 10 years ago as an independent body to regulate pricing mechanisms of the NEA. But in most cases the prices have been raised by the government or the NEA, under pressure from multilateral donors.
When the World Bank was in negotiation with the government over the aborted Arun III project in the early 1990s, the power tariff was raised by around 300 percent. When it provided a loan for the NEA's rural electrification project a few years ago, the Asian Development Bank got the NEA to jack up tariff by 60 percent. At the time, the banks blamed the government for not adjusting tariff with inflation for populist reasons.
Past electricity tariff hikes have, except for the time of day mechanism for industries, been flat increases. Energy experts are glad the government is finally considering differential tariffs so the monsoon spill is not wasted. But they say the government also needs to introduce power in such a way that there is less pressure during peak hours to reduce the need for load shedding. "For that the price of power during peak hours in the dry season has to be made expensive," suggests energy expert Ratna Sansar Shrestha, "demand can be controlled by pricing."
But since differential pricing for domestic and commercial consumers still doesn't exist, the NEA has been forced this week to restart load shedding because one of the 144 Mega Watt turbines at Kali Gandaki conked out. As the demand-supply gap grows, experts predict that power cuts will be chronic at least till 2008 because of delays in the Middle Marsyangdi. (See: 'Long dark winters ahead', #229) The situation is already fragile: peak load will touch 560 MegaWatts this year, while the installed capacity is just 610 MegaWatts.
NEA forecasts an eight percent increase in peak load this year, 7.8 percent next year and almost nine percent in 2007. But supply has been stagnant and no major capacity has been added since the 144 MegaWatt Kali Gandaki went into operation two years ago. The construction of the 70 MegaWatt Middle Marsyangdi was supposed to be finished this month but is already two years behind schedule. New plans like the West Seti and Upper Karnali are not even in the design stage.