Licensing provisions in hydropower policy

Licensing in Nepal is governed by the Electricity Act 2049 BS (1992), the Electricity Regulation 2050 BS and the Hydropower Development Policy 2058 BS (2001). Under this system, generation, transmission and distribution all need a licence from the government. At federal level the licensing authority is the Department of Electricity Development (DoED). Under the present federal structure, small projects are handled by local or provincial governments.

Main provisions

• Projects up to 1 MW: No licence is required; only registration with (notice to) the local authority is needed.
• Survey licence: For projects above 1 MW. Valid for up to 5 years (can be extended). It gives the exclusive right to study the site, so no one else can study it.
• Generation licence: Given after the study is accepted. Under HDP 2001 it is valid for up to 35 years for projects supplying the domestic market and up to 30 years for export-oriented projects. It allows the licensee to build and run the plant.
• Transmission and distribution licences are separate.
• Environment: An Initial Environmental Examination (IEE) is required for 1-50 MW projects, and an EIA for projects above 50 MW (Environment Protection Rules 2054).
• Royalty and tax: The licensee pays capacity royalty and energy royalty at the rates set in the policy and regulation.
• The licence can be cancelled if the developer does not meet the schedule in the licence.

Procedure for a 5 MW RoR project

1. Form a company and apply to the DoED for a survey licence, with the company registration, proposal, site map and fee.
2. DoED publishes a notice to invite objections and then issues the survey licence (exclusive right, up to 5 years).
3. Carry out the feasibility study (hydrology, geology, topography, design, cost and financial analysis) and the IEE, and have the IEE approved by the Ministry of Forests and Environment.
4. Sign a Power Purchase Agreement (PPA) with NEA, so that the energy has an assured buyer.
5. Arrange finance (financial closure) and land.
6. Apply to the DoED for the generation licence, with the feasibility report, IEE approval, PPA and proof of financing.
7. DoED grants the generation licence (up to 35 years for a domestic-supply project). Construction must start and finish within the schedule.
8. After commissioning, operate the plant, pay royalty and tax, and send reports to the licensing body.