Thursday, December 14, 2023

Reform to End NEA’s Exploitation of Consumers

A finding of Auditor General’s Office stated that the average cost of powerhouses built by Nepal Electricity Authority (NEA) was Rs 364.6 million per MW, basically due to failure in financial engineering manifest in cost and time overruns. Specifically, the cost of 60 MW Upper Trishuli was Rs 280.5 million/MW, 14 MW Kulekhani III Rs 323.5 million/MW and 30 MW Chameliya Rs 490 million/MW. While, independent power producers’ (IPPs) average cost was Rs 162.2 million/MW only. Of which, 42 MW Mistri Khola cost Rs 134.3 million/MW, 3.8 MW Super Mai Cascade Rs 146.8 million/MW, 7.8 MW Super Mai II Rs 190.8 million/MW and 6.6 MW Rudi Khola 'B' Rs 177 million/MW. NEA’s subsidiary too spent hopping Rs 196.2 million/MW on 456 MW Upper Tama Koshi, which was announced to be the most attractive project initially; almost thrice the estimated cost and 20% more than IPP average cost. Construction cost and tariff Logically consumer tariff from expensive powerhouses would be higher than from inexpensive powerhouses. Because the tariff is based on cost of generation which is based mostly on construction cost. In the competitive electricity market, the electricity from expensive powerhouses would not find buyers or even if found, will incur loss or the profit will be very slim, while the powerhouses built at low cost would be profitable. This is a general principle of economics that applies to all commodities and products. Ground reality But the ground reality of Nepal’s electricity sector is just the opposite. Although NEA constructed costly powerhouses, it made an astoundingly high net profit of Rs 21.38 billion (after adjusting loss on trade with India) by selling electricity worth Rs 89.57 billion to domestic consumers last fiscal year; net profit 24% of sales. It is a manifestation of NEA profiteering by exploiting consumers, although it failed to achieve economy, efficiency and effectiveness in construction of powerhouses. According to Section 3 of the “Black Market and Some Other Social Crimes and Punishment Act 2032,” more than 20% profit constitutes profiteering and is punishable. Legally a profiteer is subject to imprisonment for up to 1 year or fine up to Rs 250,000 or both. If an ordinary businessperson had committed such a crime, s/he would have been prosecuted and sentenced with imprisonment or fine. However, NEA has not been prosecuted for profiteering at all. NEA did not just make profit by more than 20%, rather net profit of 24%. When net profit is 24%, the proportion of profit must be a lot higher. Moreover, NEA is a monopoly and it is a heinous crime for a monopoly to profiteer by exploiting consumers. However, the state agencies including the Electricity Regulatory Commission (ERC) turned deaf ear and consumerist NGOs adopted a mysterious silence. This is a huge distortion and anomaly existing in the electricity sector, which has to be abolished. Unbundling Electricity Sector Section 18 of the Electricity Bill, currently under consideration of the House of Representatives, has provision for unbundling of the electricity sector which will mitigate the distortions and anomalies, under which a single organization could not be generator, transmitter or distributor. Once the bill is passed, a competitive market will be established where consumers could buy electricity directly from generators that build powerhouses economically, efficiently and effectively thereby ending NEA’s profiteering. Natural monopoly NEA is a natural monopoly from an infrastructural standpoint. As the electricity generated by powerhouses reach the consumers through the transmission and distribution networks, it is physically impossible for each generator to build separate sets of transmission and distribution networks to sell electricity to each individual consumer. Before the introduction of cellphones, Nepal Telecommunication Corporation too had a natural monopoly on landline telephone systems (actually monopoly over landline phones had been broken in some western countries, but due to space constraints it’s not possible to discuss here). Before NEA was established, there were the Electricity Department of GoN, Nepal Electricity Corporation, Purvanchal Electricity Corporation and the Small Hydropower Development Board. Therefore, it was possible to compare the cost of powerhouse construction and competition existed to an extent. But after the promulgation of the Nepal Electricity Authority Act 2041, these four institutions were merged to establish NEA, which was given full monopoly in electricity generation, transmission and distribution. Electricity Act As mentioned above, although electricity is part of the infrastructure sector, the Electricity Act 2049, had a provision to issue licenses to the private sector for generation, transmission and distribution. First license was issued for the 60 MW Khimti project in late 2049 and NEA signed the first power purchase agreement (PPA) for it in late 2050, thereby breaking the monopoly of NEA in generation. Now there are almost 400 IPPs generating, constructing powerhouses and awaiting financial closure. The private sector did not evince interest in transmission. NEA has a monopoly over 90% distribution, while community entities and BPC distribute to 10% consumers. In this manner, as an integral part of the reform of electricity sector, the first stage of competition was implemented by disallowing NEA to have monopoly over generation, due to which comparison of construction cost between NEA and IPPs has become possible. Prior to the 1990s nobody was in a position to question NEA in this respect. Monopsony and monopoly At present, IPPs are not allowed to sell electricity anywhere else. Therefore, NEA is the single buyer, ergo a monopsony. On the other hand, NEA, community entities and BPC enjoy monopoly over distribution in respective areas. Hence, there is monopsony and monopoly together currently in the electricity sector, a manifestation of anomalies and distortions. Due to which, notwithstanding that NEA has built costly powerhouses, it succeeded to make a huge net profit of Rs 20 billion, illegally. If any IPP was to build a costly powerhouse it would go bankrupt since NEA would not purchase at rates higher than agreed in the PPA and, consequently, that IPP would suffer loss. Electricity Regulation Commission IPPs are forced to avoid cost and time overrun during construction, due to risk of bankruptcy. But NEA did not have to go bankrupt even though it had incurred huge time and cost overrun; on the contrary it illegally made huge “net profit.” Because ERC fixes consumer tariff based on cost of generation and purchase from IPPs. ERC is required by section 13 (1) (d) of Electricity Regulation Commission Act 2074 “to identify and implement measures to minimize the cost of electricity.” In other words, ERC has the mandate to tell NEA that it cannot impose its failures to control time and cost overrun in the construction of powerhouses upon the consumers and refuse to fix unconscionably high tariffs. ERC should have refused to accept additional costs incurred due to time and cost overrun while fixing tariff. But ERC demonstrated dereliction in fixing consumer tariffs. Hope it is not for lack of competence on the part of the chair, members of ERC and its bureaucracy. Competitive wholesale market The second stage of reform is introduction of competition in the wholesale electricity market. Distribution companies (DISCOs) would be set up in geographic regions and these would buy electricity in bulk directly from generators of any region at competitive wholesale rates. At this stage, the transmission network operator facilitates the wholesale market, which would levy wheeling charges. For example, Kanchanpur district DISCO in Sudur Paschim Province can buy from a generator in Panchthar district of Koshi Province and retail it to consumers in Kanchanpur district. Due to the competition between the generators, powerhouses built economically, efficiently and effectively would be able to fix low wholesale rates. And since profiteering is illegal, DISCOs buying at low wholesale rate would be forced to sell to consumers at low tariff. Competitive retail market Last stage of the reform is competition in the retail market; consumers would also be allowed to participate in the competition. Like the transmission network operator facilitating the wholesale market, at the final stage the distribution network operator would facilitate the retail market for a certain fee. The consumers would not be limited to the DISCOs of their respective regions. Any consumer can buy from any DISCO that offers competitive rates. At this stage, not only generators and distributors do not have to be bound by geographic boundaries, but consumers too would not be bound by geographic boundaries. A DISCO in any region can sell to a consumer in another DISCO’s area at a competitive rate. In other words, in the second stage, the generator is not limited to the geographic area and could sell to any DISCOs. In the final stage, DISCOs can also buy from the generator anywhere and sell to the consumer everywhere. For example, Sunsari district DISCO of Koshi Province can buy electricity from a generator in Darchula district in Far Western Province, while a consumer in Kathmandu in Bagmati Province can buy electricity from Kaski district DISCO of Gandaki Province. That is, Jhapa DISCO can buy from the generator in Tanahun district and sell to the consumer in Bardia district. In this manner, full competition in the electricity sector becomes possible, ending the current situation where NEA as a monopsony exploits IPPs while consumers are exploited by monopoly distributors. Conclusion Some officials of NEA, its unions, misguided intellectuals, etc., reportedly, have opposed the above-mentioned provision of the Bill. It must have been done so due to failure to fully appreciate this provision. Since all the generators and consumers will benefit after this provision is fully implemented, the employees of NEA and their family members will also benefit as they too are consumers and it is illogical for them to oppose this provision. Moreover, due to competition in generation, cost of construction of powerhouses including by NEA would be reduced substantially and electricity tariff would be reduced by a lot, which will not only benefit all segments of consumers, but the economy and the country. Therefore, it is important to fully appreciate the spirit enshrined in the said section and help in the implementation of such a positive revolutionary step. Ratna Sansar Shrestha Published in People’s Review of December 14, 2023.

Wednesday, December 6, 2023

प्रतिस्पर्धात्मक विद्युत् क्षेत्र

नेपाल विद्युत् प्राधिकरणले औसत प्रतिमेगावाट ३६.४६ करोड रुपियाँ लागतमा जलविद्युत् गृहहरू बनाएको सार्वजनिक भएको छ । जसमध्ये ६० मेगावाटको अप्पर त्रिशूलीको २८.०५ करोड, १४ मेगावाटको कुलेखानी तेस्रोको ३२.३५ करोड र ३० मेगावाटको चमेलियाको ४९ करोड परेछ । तर निजी क्षेत्रले भने औसत प्रतिमेगावाट १६.२२ करोड रुपियाँमा जलविद्युत् आयोजनाहरू निर्माण गरेको रहेछ । जसमध्ये ४२ मेगावाट क्षमताको मिस्त्रीखोलाको १३.४३ करोड, ३.८ मेगावाट क्षमताको सुपर माइ क्यास्केडको १४.६८ करोड, ७.८ मेगावाट क्षमताको सुपरमाइ दोस्रोको १९.०८ करोड र ६.६ मेगावाट क्षमताको रुदी खोला ‘बि’ को १७.७ करोड परेको रहेछ । प्राधिकरणको सहायक कम्पनीले ४५६ मेगावाटको माथिल्लो तामाकोसी आयोजनाको १९.६ करोड पर्‍यो, अनुमानितभन्दा झण्डै ३ गुणा र निजी क्षेत्रभन्दा २० प्रतिशत बढी । सामान्य अवस्थामा महँगो लागतमा निर्मित विद्युत् गृहको बिजुली उपभोक्तालाई महँगो पर्छ भने कम लागतमा सस्तो । किनभने विद्युत् उत्पादन लागत निर्माण लागतमा आधारित हुन्छ र त्यसैबमोजिम उपभोक्ता महसुल निर्धारित हुन्छ । यस्तो अवस्थामा प्रतिस्पर्धात्मक विद्युत् बजार भएको भए महँगो विद्युत् गृहको बिजुली बिक्री हुँदैन वा बिक्री भए पनि उत्पादक घाटामा जान्छ वा मुनाफा निकै कम हुन्छ भने कम लागतमा निर्मित विद्युत् गृहले मुनाफा कमाउँछ । सबै वस्तु–सामग्रीमा लागु हुने अर्थशास्त्रको सामान्य सिद्धान्त हो यो । जुन अधिकांशले बुझेका छन् । धरातलीय यथार्थ विद्युत् क्षेत्रको अवस्था ठीक उल्टो छ । प्राधिकरणले बढी लागतमा विद्युत् गृहहरू निर्माण गरे तापनि गत आर्थिक वर्ष देशमा ८९.५७ अर्ब रुपियाँको बिजुली बिक्री गरेर २१.३८ अर्ब रुपियाँ खुद मुनाफा ग¥यो (भारतसँगको व्यापारमा भएको घाटा कटाएर), जुन बिक्रीको २४ प्रतिशत हो । जबकि ‘कालोबजार तथा केही अन्य सामाजिक अपराध तथा सजाय ऐन २०३२’ को दफा ३ अनुसार २० प्रतिशतभन्दा बढी मुनाफा गरे नाफाखोरी ठहरिन्छ र दण्डनीय हो । २० प्रतिशतभन्दा बढी नाफा लिन नहुनेमा प्राधिकरणले त खुद मुनाफा नै २४ प्रतिशत लियो । स्मरणीय छ, खुद मुनाफा २४ प्रतिशत हुँदा मुनाफाको अनुपात अझ बढी हुन्छ । नाफाखोरी गर्नेलाई उक्त व्यवस्थाअनुसार १ वर्षसम्म कैद वा २ लाख ५० हजार रुपियाँसम्म जरिवाना वा दुवै हुन्छ । सामान्य व्यापारी–व्यवसायीले २० प्रतिशतभन्दा बढी मुनाफा (खुद मुनाफा होइन) लिएको भए थुनामा राखेर कारबाही गरेर कैद नै गरिन्थ्यो वा जरिवाना पक्कै हुन्थ्यो । प्राधिकरणले नाफा २० प्रतिशतभन्दा बढी लिएको नभएर खुद मुनाफा नै २४ प्रतिशत लियो । तथापि प्राधिकरणमाथि कारबाही भएन । अझ प्राधिकरणलाई विद्युत् क्षेत्रमा एकाधिकार प्राप्त छ र एकाधिकार प्राप्त संस्थाले चर्को मूल्यमा बिक्री गरेर उपभोक्ताको दोहन, शोषण गरेर मुनाफाखोरी गर्नु जघन्य अपराध हो । तथापि विद्युत् नियमन आयोगलगायत राज्यका निकायहरू चेतनाशून्य देखिए भने उपभोक्तावादी गैरसरकारी संस्थाहरूले रहस्यमय मौनता अवलम्बन गरे । यो नै विद्युत् क्षेत्रको सबभन्दा ठूलो विकृति विसंगति हो, जसको निराकरण अनिवार्य, अपरिहार्य छ । दफा १८ हाल प्रतिनिधि सभामा विचाराधीन विद्युत् विधेयकको दफा १८ ले यो विकृति विसंगति धेरै हदसम्म निराकरण गर्छ जसअनुसार एउटै संस्थाले विद्युत् उत्पादन, प्रशारण वा वितरण गर्न पाउँदैन । विधेयक संसद्बाट पारित भएपछि प्राधिकरणको एकाधिकार तोडिन्छ र कम लागतमा विद्युत् गृह निर्माण गर्ने उत्पादकबाट उपभोक्ताले सोझै सुपथ मूल्यमा बिजुली किन्न सक्ने प्रतिस्पर्धी बजार स्थापनामा आइ प्राधिकरणको मुनाफाखोरी अन्त्य हुनेछ भने कम लागतमा विद्युत् गृह निर्माण प्रोत्साहित भएर सबै उपभोक्ता र देशको अर्थतन्त्र लाभान्वित हुन्छ । प्राकृतिक एकाधिकार प्राविधिक कारणले प्राधिकरण प्राकृतिक एकाधिकार हो । विद्युत् गृहबाट उत्पादित बिजुली प्रशारण सञ्जाल तथा वितरण सञ्जालबाट उपभोक्तासम्म पुग्छ । प्रत्येक उत्पादकले छुट्टाछुट्टै प्रशारण तथा वितरण सञ्जाल निर्माण गरेर हरेक उपभोक्तालाई बिजुली बिक्री गर्न भौतिकरूपमा असम्भव छ । मोबाइल फोन प्रचलनमा आउनुअघि टेलिफोन सेवामा पनि प्राकृतिक कारणले नेपाल दूरसञ्चार कर्पोरेसनको प्राकृतिक एकाधिकार थियो (कतिपय पाश्चात्य देशमा ल्यान्डलाइन फोनमा समेत एकाधिकार तोडिइसकेको थियो तर यस सम्बन्धमा विवेचना गर्न स्थानाभावको कारण यहाँ सम्भव छैन ।) २०४१ सालमा प्राधिकरण स्थापना हुनुअघि नेपाल सरकारको तत्कालीन विद्युत् विभाग, नेपाल विद्युत् कर्पोरेसन, पूर्वाञ्चल विद्युत् कर्पोरेसन र साना जलविद्युत् विकास समितिसमेत चार वटा छुट्टाछुट्टै संस्था थिए । जसले गर्दा विद्युत् गृह निर्माण लागतको हिसाबले तुलना गर्न सम्भव भएर केही हदसम्म प्रतिस्पर्धा हुन्थ्यो । तर नेपाल विद्युत् प्राधिकरण ऐन २०४१ जारी भएपछि यी चारै संस्था विलय गरिएर प्राधिकरण स्थापना गरियो, जसलाई विद्युत् उत्पादन, प्रशारण तथा वितरणमा एकाधिकार दिइयो । विद्युत् ऐन विद्युत् पूर्वाधार क्षेत्र भए तापनि निजी क्षेत्रलाई आकृष्ट गर्न २०४९ सालमा विद्युत् ऐन ल्याइयो । यसमा विद्युत् उत्पादन, प्रशारण र वितरण गर्न व्यक्ति वा संगठित संस्थाले अनुमतिपत्र पाउने प्रावधान राखियो । लगत्तै सरकारले २०४९ सालको उत्तराद्र्धमा ६० मेगावाटको खिम्ती आयोजनालाई पहिलो अनुमतिपत्र जारी ग¥यो भने प्राधिकरणले २०५० सालको उत्तराद्र्धमा यसका लागि पहिलो विद्युत् खरिद सम्झौता गरेर उत्पादनतर्फ प्राधिकरणको एकाधिकार तोडिन सुरु भयो । अहिले उत्पादनरत, निर्माणाधीन र निर्माण सुरु गर्न लागेकोसमेत झण्डै चार सय निजी कम्पनी अस्तित्वमा आएर बहुलता आइसक्यो । प्रशारणतर्फ निजी क्षेत्रले चासो देखाएन । वितरणतर्फ ९० प्रतिशत उपभोक्तामाथि प्राधिकरणको एकाधिकार छ भने सामुदायिक संस्था र बिपिसीले एकाधिकारसहित १० प्रतिशत उपभोक्तालाई वितरण गर्दैछन् । साथै यही विधेयकको दफा १४ मा पनि उत्पादन, प्रशारण, वितरण आदिका लागि निजी क्षेत्रलाई अनुमतिपत्र दिने व्यवस्थालाई निरन्तरता दिइएको छ । यसरी उत्पादनतर्m प्राधिकरणको एकाधिकार तोडिएर प्रतिस्पर्धाको पहिलो चरणमा विद्युत् क्षेत्र प्रवेश गरिसकेको छ, फलस्वरूप अहिले प्राधिकरण र निजी क्षेत्रबीच विद्युत् गृह निर्माणमा प्रतिस्पर्धा छ, निर्माण लागत तुलना सम्भव भएको छ । एकल क्रेता र एकाधिकार प्राप्त वितरक अहिले निजी क्षेत्रबाट उत्पादित बिजुली कानुनतः अन्यत्र बिक्री गर्न नमिल्ने हुनाले प्राधिकरण एकल क्रेता हो । अर्कोतिर वितरणतर्फ पनि एकाधिकार प्राप्त संस्थाहरू छन् । त्यसैले विद्युत् क्षेत्रमा एकैसाथ एकल क्रेता र एकाधिकार जस्तो वर्णशंकर अवस्था हुनाले थुप्रै विसंगति विकृति देखापरेको छ । जस्तै प्राधिकरणले अत्यन्त महँगोमा विद्युत् गृह निर्माण गर्दा पनि गैरकानुनीरूपमा २०औँ अर्ब खुद मुनाफा गर्छ, तर निजी क्षेत्रले महँगोमा विद्युत् गृह निर्माण गरे तिनीहरू टाट उल्टन्छन् । किनभने प्राधिकरणले उपभोक्ताबाट असुल गर्ने महसुल उसको लागतमा आधारित गरेर विद्युत् नियमन आयोगले निर्धारण गर्छ भने निजी क्षेत्रले महँगो लागतमा विद्युत् गृह निर्माण गरेको अवस्थामा प्राधिकरणले सम्झौतामा तोकिएभन्दा बढी दरमा खरिद गर्दैन र घाटामा जान्छ । प्रतिस्पर्धात्मक थोक बजार विद्युत् क्षेत्रमा प्रतिस्पर्धाको दोस्रो चरणमा बिजुलीको थोक बजारमा प्रतिस्पर्धा प्रादुर्भाव गराइन्छ । यसका लागि विभिन्न भौगालिक क्षेत्रहरूमा छुट्टाछुट्टै वितरण कम्पनीहरू (खुद्रा व्यापारी) स्थापना गरिएर यी वितरकहरू तथा ठूलो परिमाणका खरिदकर्ताहरूले जुनसुकै भूगोलको उत्पादकहरूबाट सोझै प्रतिस्पर्धात्मक थोक दरमा किन्ने व्यवस्था हुन्छ । यो चरणमा प्रशारण सञ्जाल सञ्चालकले थोक बजारको सहजीकरण गर्छ, जसले ह्विलिंग चार्जलगायतका प्रशारण महसुल असुल गर्छ । उदाहरणका लागि सुदूरपश्चिम प्रदेशको कञ्चनपुर जिल्लाका वितरकले कोसी प्रदेशको पाँचथर जिल्लास्थित उत्पादकबाट थोकमा किनेर कञ्चनपुर जिल्लाका ग्राहकलाई वितरण गर्न सक्नेछ । स्मरणीय छ, उत्पादनमा प्रतिस्पर्धा भएर मितव्ययी, प्रभावकारी तथा कार्यकौशलसहित विद्युत् गृहहरू निर्माण हुँदा उत्पादन लागतमा ठूलो कमी आएर थोक दर सस्तिन्छ । अनि सस्तो थोक दरमा वितरकले किनेको बिजुलीमा कानुनतः नाफाखोरी गर्न प्रतिबन्ध हुनाले उपभोक्ताहरूले अहिले भन्दा धेरै कम महसुलमा आआफ्ना क्षेत्रका वितरकबाट किन्न पाउँछन् । प्रतिस्पर्धात्मक खुद्रा बजार अन्तिम चरणमा उपभोक्ताहरू पनि प्रतिस्पर्धामा सहभागी हुन्छन् । प्रशारण सञ्जाल सञ्चालकले थोक बजारको सहजीकरण गरेझैँ अन्तिम चरणमा वितरण सञ्जाल सञ्चालकले खुद्रा बजार सहजीकरण गर्छ, तोकिएको महसुल लिएर । अनि देशभित्रका सबै साना ठूला उपभोक्ताले आआफ्नो भूगोलका वितरकमा मात्र सीमित रहन पदैन । देशभित्रका कुनै पनि उपभोक्ताले प्रतिस्पर्धात्मक दरमा आपूर्ति गर्न सक्ने कुनै पनि वितरकबाट किन्न सक्छन् । यो चरणमा उत्पादकहरू तथा वितरकहरू मात्र भौगालिक सीमामा नबाँधिइने होइन, उपभोक्ता पनि भौगालिक सीमामा बाँधिन पर्दैन । जुनसुकै क्षेत्रको वितरकले अर्को जुनसुकै क्षेत्रको उपभोक्तालाई सुपथ दरमा बिक्री गर्न सक्छ । अर्थात् दोस्रो चरणमा उत्पादकले भौगोलिक क्षेत्रमा सीमित नभएर जुनसुकै क्षेत्रको वितरकलाई थोकमा बिक्री गरेझैँ यो चरणमा वितरकले पनि जुनसुकै क्षेत्रको उत्पादकबाट किनेर जुनसुकै क्षेत्रको उपभोक्तालाई बिक्री गर्न सक्छ । उदाहरणका लागि कोसी प्रदेशको सुनसरीका वितरकले सुदूरपश्चिम प्रदेशको दार्चुलाका उत्पादकबाट बिजुली किन्न सक्छ भने वाग्मती प्रदेशका काठमाडौँका उपभोक्ताले गण्डकी प्रदेशको कास्कीको वितरकबाट बिजुली किन्न सक्छ । अर्थात झापाका वितरकले कास्कीका उत्पादकबाट किनेर बर्दियाका उपभोक्तालाई बिक्री गर्न सक्छ । यो दृष्यपटलमा विद्युत् व्यापारमा पूर्ण प्रतिस्पर्धा सम्भव भएर एकल क्रेताले निजी उत्पादकको शोषण गर्ने र एकाधिकार प्राप्त वितरकले उपभोक्ताहरूको दोहन शोषण गर्ने वर्तमान अवस्थाको अन्त्य हुन्छ । निष्कर्ष प्राधिकरणका केही पदाधिकारी, कर्मचारीहरूको युनियनहरूका साथै केही कर्मचारी, दिग्भ्रमित बुद्धिजीवीलगायतले विधेयकको यो प्रावधानको विरोध गरेको सुनिन्छ । यो प्रावधानबारे समुचितरूपमा बोध नभएकाले विरोध गरेको हुनुपर्छ । यो प्रावधान पूर्णतः कार्यान्वयनमा आएपछि देशका सबै उत्पादक तथा उपभोक्ता लाभान्वित हुने हुनाले प्राधिकरणका कर्मचारी र तिनका परिवारका सदस्यहरू पनि उपभोक्ता नै हुनाले लाभान्वित हुनेमा उनीहरू पनि हुन्छन् र यो प्रावधानको विरोध गर्नु युक्तिसंगत छैन । यसका साथै यी प्रक्रियाबाट विद्युत् गृह निर्माण लागतमा ठूलो कमी आएर विद्युत् महसुल सस्तो हुँदा गार्हस्थ्य उपभोक्ता, विद्युतीय प्रविधि उपयोग गर्ने कृषक, बिजुलीले पानी तानेर सिँचाइ गर्ने किसान, कृषि, वन पैदावार, जडीबुटी आदि प्रशोधन गर्नेसमेतका उद्योगी, पर्यटन व्यवसायी, विद्युतीय परिवहन प्रयोगकर्ता, अत्याधुनिक सञ्चार माध्यम प्रयोग गर्ने शैक्षिक संस्था, इन्टरनेट व्यवसायी, अत्यधिक बिजुली खपत गर्ने ब्यांक तथा वित्तीय संस्था, पत्रपत्रिकालगायतका विद्युतीय सञ्चार माध्यम, मुद्रक आदि सबै लाभान्वित भएर देशको अर्थतन्त्र नै समृद्ध हुन्छ । त्यसैले यो प्रावधान पूर्णरूपमा बुझेर यस्तो सकारात्मक क्रान्तिकारी कदमको सबैले समर्थन गरेर कार्यान्वयन गर्न सहयोग गर्नु जरुरी छ । Ratna Sansar Shrestha २०८० मार्ग ६ गते नागरिकमा प्रकाशित

Friday, December 1, 2023

Unbundling Electricity Sector

Sub-section (1) of Section 18 of the Electricity Bill 2023, which is under active consideration by the House of Representatives, stipulates that a single organization cannot generate, transmit and/or distribute electricity. It means, a power producer cannot transmit or distribute electricity, a transmission company cannot generate or distribute electricity, and a distribution company cannot produce or transmit it. In other words, a generator can only sell the electricity in bulk, the transmission company’s responsibility is limited to operation of transmission infrastructure and transmission of electricity and the distribution company is only to buy bulk electricity from the generator and retail it. Existing institutions Similarly, sub-section (4) of section 18 of the Bill makes it mandatory for vertically integrated institutions currently engaged in electricity generation, transmission and distribution businesses to form separate organizations for generation, transmission and distribution within 5 years. Accordingly, the Nepal Electricity Authority (NEA), which is a vertically integrated institution, will not be able to continue the generation, transmission and distribution 5 years after the Bill is passed by the parliament. Section 6.15.2 of the Hydropower Development Policy 2001 also stipulated that “the functions pertaining to the operation of the power centers, operation of electricity transmission and national grid, and electricity distribution owned by NEA shall be gradually unbundled and appropriate institutional arrangement shall be made therefor.” It also states that an autonomous public body shall be entrusted with the responsibility for the operation of the national grid. It had envisaged that local bodies, community organizations and the private sector shall also be allowed in distribution business. Currently Butwal Power Company (BPC) is also generating electricity and is also distributing it in 4 districts. According to this Bill, BPC too will have to set up separate organizations within 5 years for generation and distribution. This provision has been denounced by certain sections of the populace and some have even started to protest. In this backdrop, a critical assessment of this provision is warranted. Distribution In the last fiscal year, NEA had 5.13 million consumers and 471 community rural electrification entities (CREEs) had 514,000 consumers in 43 districts. Meaning more than 10 percent of the consumers were served by CREEs. Similarly, BPC too generated hydropower from Andhikhola and Jhimruk and retailed it to 62,000 consumers in Syangja, Palpa, Pyuthan and Arghakhanchi districts and sold the remaining to NEA in bulk. CREEs and BPC retail electricity mostly in rural areas. The consumers of CREEs and BPC are not required to spend almost equal to or more than the electricity bill on the bus fare or be absent from work for the whole day in order to travel to pay the bill. Also, the non-technical leakage of these institutions is significantly lower than NEA’s. From this NEA also benefits. Moreover, the problem of unpaid bills under CREEs and BPC is almost nonexistent. Therefore, unbundling of distribution business will be beneficial not only to the consumers, but also to NEA and the country. If all the 753 local bodies are to be allowed to distribute electricity as envisaged by the Policy, the above mentioned benefits would also increase exponentially. From this perspective, the principle enshrined in Section 18 of the Electricity Bill has already been implemented to an extent and its full implementation is in the interest of consumers, the sector and the country. Transmission NEA is currently operating the existing 66 kV, 132 kV, 220 kV and 400 kV transmission infrastructure and is also engaged in constructing new transmission lines of different capacities. Moreover, the Rastriya Prasaran Grid Company Limited was established in 2018 by GoN to transmit and evacuate electricity; also, to collect revenue like wheeling charges, royalties, etc. from the users of the grid. This provision is in line with the Electricity Bill and the Policy. Generation Total generation capacity last year was 2,684 MW, of which NEA owned 583 MW hydropower, 53 MW of thermal and 25 MW solar power. NEA’s subsidiaries, with investment from the general public generated 478 MW hydropower. Similarly, Independent power producers (IPPs) generated 1,477 MW hydropower, 62 MW solar power and 6 MW from bagasse. In other words, of the total electricity generation, NEA generated 662 MW and NEA’s subsidiaries with general public investment and IPPs together generated 2,023 MW. Therefore, only 25% electricity was generated by NEA while 75% electricity was generated with the private sector investment. Besides NEA, 2 subsidiaries of NEA with investment from the general public and 157 IPPs had generated electricity. In other words, NEA generated 25% electricity, while 159 organizations with private investment generated 75%. Moreover, 3 subsidiaries of NEA and 3 more with investment from the general public are constructing power plants, while 114 IPPs are constructing hydropower plants and 4 IPPs are constructing solar power projects. Further, 106 IPPs and 1 subsidiary of NEA are awaiting financial closure. Hence, there are in total 391 organizations in generation business, some already generating, some constructing power plants and some awaiting financial closure. From this, it becomes clear that NEA does not enjoy monopoly over electricity generation business anymore and multiplicity has come to exist in it. Furthermore, Vidyut Utpadan Company Limited was established in 2016 by GoN, with 29 percent shares from project-affected local people, under-privileged and general public. Of course, the proportion of electricity generated by NEA will become very small in the near future. Hydropower construction cost In view of the multiplicity in the generation business, construction cost should be compared. The Auditor General's Office in its 60th report had pointed out that the average construction cost of IPPs was Rs 162.2 million per MW while it cost Rs 364.6 million/MW to NEA; more than double. The construction cost of hydropower projects of IPPs was Rs 134.3 million/MW for 42 MW Mistrikhola, Rs 146.8 million for 3.8 MW Super Mai Cascade, Rs 198 million/MW for 7.8 MW Super Mai II and Rs 177 million/MW for 6.6 MW Vindhyavasini. While it cost NEA Rs 285 million/MW for Upper Trishuli, Rs 323.5 million/MW for 14 MW Kulekhani III and Rs 490 million/MW for 30 MW Chamelia. NEA blamed COVID19 pandemic and repeated lockdowns for the cost overrun. But, both NEA and IPP projects were commissioned during the same period. Whereas, NEA had begun construction of Upper Trishuli in 2011, Kulekhani III in 2010 and Chameliya in 2005. Moreover, Upper Tamakoshi project, 456 MW, built by NEA’s subsidiary with investment from the general public cost Rs 196 million/MW, which initially was described as the most attractive project and was estimated to cost only Rs 77 million/MW. But it ended up costing nearly 3 times the estimate, and 20% more than IPPs. According to the theory of economies of scale, larger projects should cost relatively less than smaller ones. Although NEA and its subsidiaries have constructed relatively large projects, the cost of IPP projects are substantially lower; in direct contrast to the principle of economies of scale. By allowing IPPs to construct power projects, NEA’s high cost of construction has been exposed. It becomes clear from this analysis that compared to NEA and its subsidiaries, the IPPs are more economic, efficient and effective. From the perspective of the country, its people and the economy, if hydropower projects are constructed at lower cost, electricity generation cost in turn would be substantially lower and, therefore, retail tariff too would be lower. Nepal Electricity Regulatory Commission takes the construction/generation cost into account when fixing electricity tariff. From this perspective, section 18 of the Electricity Bill is in the interest of the country, the people and the economy. Conclusion Unbundling of NEA into generation, transmission and distribution businesses should not be equated with partitioning of that empire in the lines of creation of Kathmandu, Lalitpur and Bhaktapur states after the death of Yaksha Malla, last king of unified Nepal Mandal in 1538. Unbundling is not the disintegration of NEA, rather it is the spinning off of specialized entities to do generation, transmission and distribution businesses separately. Currently anomalies and distortions have crept in the vertically integrated entity involved in the disparate nature of businesses. Large scale industries too specialize in production only and they do not involve in transportation of their production, nor do they retail it. It is now clear that unbundling will benefit the consumers, the country's economy and the related organizations. Once the generation, transmission and distribution businesses are unbundled, it could be easily determined how much electricity was handed over for transmission by the generator, how much electricity was received and transmitted by the transmitter and how much electricity received from the transmitter was distributed to the consumers. It would afford a double entry bookkeeping system and would help determine how much and where leakages occurred, and help eradicate it. The provision in the Bill to provide value added water and lean season augmented flow to downstream countries free of cost is anti-national. Whereas, the provision related to unbundling is in national interest. Ratna Sansar Shrestha, FCA Published in People’s Review on November 30, 2023