The Electricity Regulatory Commission (ERC) of Nepal has announced plans to conduct a comprehensive feasibility study for establishing a wholesale electricity market within the country. The initiative, detailed in the Commission’s annual report for fiscal year 2025/26, is part of broader efforts to foster competition, encourage private sector participation, and ensure long-term energy security.
The study will assess the legal, institutional, and technological infrastructure required to operationalize a wholesale electricity market. The Commission emphasized the strategic importance of such a platform, where large-scale producers and buyers of electricity can directly transact.
Dr. Ram Prasad Dhital, chair of the ERC, explained that wholesale markets allow electricity trading companies to purchase power in bulk and resell it to consumers, a model already used for importing electricity from India.
In support of this initiative, the Commission recently introduced a policy framework granting third-party access to the national transmission grid operated by the Nepal Electricity Authority (NEA). This regulatory step is seen as a prerequisite for the eventual establishment of a functional wholesale market.
The ERC also announced plans to review existing Power Purchase Agreements (PPAs), citing inconsistencies between private sector and government-promoted energy projects. The objective is to establish uniform contractual standards to ensure transparency and fairness across the sector.
Additionally, the Commission highlighted the growing importance of energy storage technologies such as reservoir-based hydropower, pumped storage, and battery storage for maintaining grid reliability and supply-demand balance. To facilitate investment in such projects, the ERC aims to introduce a fair, transparent, and investor-friendly tariff structure, backed by technical, economic, and regulatory studies.
In line with this, the Commission will develop a cost-reflective framework for transmission and wheeling charges to promote open access and encourage investment. This includes revising methodologies and rate structures based on system usage, international benchmarks, and a balanced approach to the interests of both service providers and users.
The ERC will also assess the actual production costs of hydropower projects to inform future tariff strategies. This will involve detailed analysis of project expenses to determine appropriate pricing for power transactions.
Other key initiatives in the 2025/26 annual program include:
Performance Evaluation of Licensed Entities
The ERC will establish evaluation criteria to assess the technical, managerial, financial, and service quality performance of licensed operators, ensuring accountability and service reliability.
Code of Conduct for License Holders and Officials
A formal code of conduct will be introduced to regulate the professional behavior of licensees and associated personnel, in line with Section 15(b) of the ERC Act, to promote transparency and accountability.
Third-Party Regulatory Assessment of Project Progress
From the next fiscal year, the ERC will mandate independent consultants to conduct on-site inspections and verify the construction progress of energy projects. These assessments will help ensure compliance with license terms, construction quality, and timelines, and will inform potential regulatory interventions.
Regulatory Framework Review
Existing regulations, guidelines, and instruments will be reviewed and updated to reflect practical challenges, evolving market conditions, and international best practices. The review will prioritize regulatory simplification, private sector participation, and consumer protection.
Enhanced Monitoring and Supervision
The ERC will strengthen its oversight mechanisms to ensure that license holders comply with applicable laws, regulations, and license conditions through regular inspections and monitoring activities.
