The government has moved to end the monopoly of the Nepal Electricity Authority (NEA) on power trade by approving the Open Access Directive 2025, which allows private hydropower producers to sell electricity directly to their clients.

At present, only the state-owned NEA is mandated to distribute all electricity produced by private sector power producers as well as by the NEA and its subsidiaries. Seven months ago, the Electricity Regulatory Commission (ERC) prepared a draft directive seeking to facilitate private sector participation in electricity sales.

ERC Chairperson Ram Prasad Dhital said that the commission’s board meeting held on January 9 approved the directive. “Under the new provision, the private sector will now have equal access to electricity transmission and distribution networks, similar to the NEA, for power generated by them,” Dhital said.

The directive permits captive power plants with a minimum capacity of 1 MW and contract energy projects of 5 MW or more connected to 33 kV transmission lines to sell electricity directly to domestic manufacturing and commercial enterprises. For cross-border sales, private producers must supply at least 10 MW to foreign buyers.

However, private sector power producers will not be able to sell electricity entirely independently. The directive designates the NEA’s System Operation Department as the nodal agency for overseeing these transactions. The nodal agency will be responsible for receiving applications, scrutinising them, identifying the supply capacity of respective power plants, and providing licences for the use of the open access system.

Under the directive, buyers using the open access system will be required to pay fees under nine different headings. These include transmission fees, wheeling charges (distribution fees), deviation settlement fees, cross-subsidy surcharges, additional surcharges, standby service recipient fees, scheduling fees, reactive energy fees, and operating charges.

In recent years, the government has gradually introduced more flexible policies to encourage private sector involvement in electricity distribution. Last December, the Ministry of Energy, Water Resources and Irrigation signed a public-private partnership (PPP) agreement with private firms to jointly develop transmission infrastructure, although the private sector is still awaiting permission to build its own transmission lines.

Nepal has signed a long-term agreement with India to export 10,000 MW of electricity over the next decade. Bangladesh, meanwhile, plans to import 9,000 MW of clean energy from Nepal by 2040 and has already begun purchasing 40 MW.

To meet its ambitious target of generating 28,500 MW of electricity by 2035, the government has been promoting private sector participation in the sector, recognising that the NEA alone cannot build the required transmission capacity.