Kathmandu, Kartik 10 – The Government of Nepal has started issuing Letters of Intent (LOIs) to private companies interested in cross-border electricity trading, allowing them to study markets, identify potential buyers and partners, and prepare possible electricity purchase and sale arrangements.
However, an LOI does not permit companies to actually buy, sell or export electricity. The Energy Ministry has clarified that commercial trading can begin only after Nepal establishes the necessary legal framework and companies obtain formal trading licenses and other regulatory approvals.
The main legal obstacle is the existing Electricity Act, 2049, which provides licensing mechanisms for electricity generation, transmission and distribution but does not specifically regulate private electricity trading. The government is therefore working on legal amendments to create a proper licensing and regulatory system.
Companies receiving an LOI can currently explore domestic and foreign markets and conduct technical and financial studies, but they cannot yet execute commercial electricity transactions or use the national transmission system solely on the basis of the LOI. The letters are valid for up to two years, and companies are required to submit periodic progress reports.
So far, 12 companies have reportedly applied to participate in the proposed electricity-trading market. The Electricity Regulatory Commission has also introduced open-access transmission charges, creating a possible mechanism for private traders to use the national grid once the legal framework is completed.
Cross-border electricity trading will also require compliance with the rules of neighboring countries. At present, the Nepal Electricity Authority remains the designated agency for Nepal-India electricity trade, meaning private companies would still need to satisfy both Nepali licensing requirements and relevant foreign regulatory approvals.
The move is therefore an important step toward greater private participation in Nepal’s electricity market, but the legal transition is still incomplete. For now, private companies have been allowed to prepare for electricity trading, not conduct it.
Source: Ratopati
