Electricity Tariffs and the Electricity Regulatory Commission
Nepal's electricity regulator is six years old and runs on thirty staff, while the utility it regulates owns the grid, dispatches it and generates.
Nepal created an electricity regulator in 2076 (2019), twenty-seven years after it opened generation to private investment and thirty-four years after the Nepal Electricity Authority was formed. The sequence matters. In most systems the regulator is built alongside the market it supervises. Here it arrived after a private generation industry of more than three thousand megawatts had grown up around a single state buyer. Its job since has been to impose rules on arrangements settled before it existed.
Who the regulator is
The Electricity Regulatory Commission was established under the Electricity Regulatory Commission Act 2074 (2017) and the Commission Regulations 2075. It describes its own remit as the regulation of generation, transmission, distribution and trade of electricity, the balance of supply and demand, tariffs and consumer protection.
Its FY 2081/82 annual report gives the institutional picture without embellishment. One chairperson, appointed in Jestha 2081, and four members, one of them a woman member appointed at the start of the same month. Twelve civil servants seconded from ministries and departments. Eighteen contract staff, described as computer operators, drivers and office assistants. Permanent recruitment through the Public Service Commission had only just begun.
Thirty-five people, most of them not permanent, regulating a sector carrying more than a trillion rupees of committed investment and nearly a thousand licensed projects. Every judgement about what this regulator can and cannot do should start from that number.
What the Commission has issued
Rate-setting. The published tariff orders are the Nepal Electricity Authority’s consumer tariff determination of 2078, covering bulk and wholesale consumers, plus two orders for Butwal Power Company covering its Andhikhola distribution centre and an amended consumer tariff. A private distributor on that short list is a reminder that the Commission’s tariff jurisdiction reaches beyond the state utility, even though the state utility dominates it. On 7 August 2026 the Commission added a Consumer Tariff Determination Directive 2083, which sets the method for determining tariffs rather than the tariffs themselves.
Purchase and sale. The Electricity Purchase and Sale, and Conditions to be Complied with by Licensees, Regulations 2076 sit above the utility’s contracting, and a dedicated directive of 2082 governs purchase from reservoir-based generation. The second instrument answers a structural failure. Nepal has exactly one storage power purchase agreement, for 140 MW.
System rules. The Nepal Electricity Grid Code 2080 binds generators, transmission, distribution and trading licensees. Balancing and settlement directives followed on 14 August 2026.
Consumers. A consumer protection directive of 2080, a public hearing directive of 2076, and from 14 August 2026 a grievance redressal mechanism specific to open access customers.
Capital. A directive of 2078 requires an electricity company to obtain the Commission’s prior approval before issuing shares to the public, and a directive of 2077 governs mergers, acquisitions and share transfers by licensees. An energy regulator holding a gatekeeping power over securities issuance is unusual. It reflects something particular about Nepal. Hydropower is one of the largest groups on the Nepal Stock Exchange, and much of the sector’s equity is held directly by households.
Tariff regulation in action
The clearest published example in the Commission’s own record is a small one. In FY 2081/82 it reviewed the consumer tariff of the Arun Diversion distribution centre and cut an increase previously approved at 39 per cent to roughly 30 per cent.
That is a genuine exercise of the power: an application made, examined and cut back. It also concerns a distribution centre rather than the national utility. The Commission’s published order for the Nepal Electricity Authority’s own consumer and bulk tariffs is dated 2078. We draw no conclusion from that, since a determination may exist without appearing on the page. But a reader looking for evidence of periodic, methodical revision of the national retail tariff will not find it in the published record, and for that reason we state no current retail rates here.
Open access
This regulator’s real leverage lies in open access rather than in tariff orders.
The Open Access Directives 2082 require non-discriminatory access to the transmission and distribution networks. On the eligibility thresholds reported for the directive, generators of 5 MW and above qualify, along with captive generators of 1 MW and above connected at 11 kV or higher, consumers of 5 MW and above at 33 kV or higher, and distribution and trading licensees. Transactions are tiered as long-term, medium-term and short-term with a minimum size of 1 MW.
Administered neutrally, those rights let a generator sell directly to a large industrial consumer without the Nepal Electricity Authority as counterparty. It is the only mechanism now in existence capable of relieving the offtake queue described in power purchase agreements and the offtake constraint. Administered otherwise, the directive is a set of forms.
The reason to doubt is structural. The body that must grant access, schedule the transaction and settle the deviation sits inside the incumbent buyer, which is also a competing generator and the owner of a network already spilling energy for want of capacity. The Commission has moved on exactly that point. The August 2026 balancing and settlement directives establish how deviations are settled, and the parallel grievance directive gives open access customers a route to complain that does not run through the utility. Those are the right instruments. Whether thirty-five people can enforce them against a utility of the Authority’s size is the open question of the next two years.
Limits on the Commission
Three limits define what a developer or a large consumer can realistically ask the Commission to fix.
It does not license generation. Survey and generation licences come from the Department of Electricity Development under the Electricity Act 2049, a statute that predates the Commission by twenty-five years and never mentions it. The regulator has no direct control over the volume of licensed capacity chasing a fixed quantity of offtake.
It does not decide whether the utility signs a power purchase agreement. It regulates the terms and conditions of purchase and sale, and has issued a directive on purchase from storage projects. The decision to enter into an agreement at all rests with the Nepal Electricity Authority and, through budget statements, with the government. A regulator that governs the price of a contract nobody is offering has limited reach.
It is not the only forum. The Commission has its own dispute resolution regulations, published as the 2082 instrument, and its FY 2081/82 annual report records a dispute resolution regulation taking effect in Poush 2081. Alongside it sit the ordinary courts, arbitration under the Arbitration Act 2055 where a contract provides for it, and, for foreign-invested projects, the dispute provisions of the Foreign Investment and Technology Transfer Act 2075. Which forum governs a given electricity dispute is a question of the contract before it is a question of the regulations.
Unbundling the utility
The FY 2026/27 budget announced that the Nepal Electricity Authority will be restructured into three companies covering generation, transmission and distribution, and that private companies will be allowed to trade electricity internationally. Neither has implementing legislation, and the Electricity Act 2049 provides for neither.
If it happened, it would change the regulator’s job more than any tariff order could. Separating the network from the buyer removes the conflict open access is currently designed to work around. It would also multiply the regulated entities, create transfer pricing between them, and require a transmission tariff that does not yet exist as a standalone instrument. A regulator that has not finished permanent recruitment would be asked to supervise three utilities instead of one.
That is the sequencing risk worth watching. Announcing unbundling is cheap. Regulating an unbundled system is not, and the capacity to do it has to exist before the split rather than after.
Sources
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Electricity Regulatory Commission · Posted to the Commission's website February 2026 · Tier 2 — Official publication
Supports: Composition of one chairperson and four members with appointment dates in Jestha 2081; staffing of 12 seconded civil servants and 18 contract staff; the Arun Diversion tariff review reducing an approved 39% increase to about 30%; discussion papers on storage purchase rates and open access principles; and the list of directives still awaiting approval in that year.
Accessed 26 August 2026
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Introduction to the Commission
Electricity Regulatory Commission · Accessed 26 August 2026 · Tier 2 — Official publication
Supports: Establishment in Baisakh 2076 under the Electricity Regulatory Commission Act 2074 and Regulations 2075, and the Commission's statement of its regulatory scope over generation, transmission, distribution and trade.
Accessed 26 August 2026
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Electricity Regulatory Commission · Accessed 26 August 2026 · Tier 1 — Primary legal instrument
Supports: That the published tariff orders are the Nepal Electricity Authority consumer and bulk tariff determination of 2078 and two Butwal Power Company determinations.
Accessed 26 August 2026
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Electricity Consumer Tariff Determination Directive, 2083
Electricity Regulatory Commission · Posted 7 August 2026 · Tier 1 — Primary legal instrument
Supports: That the Commission issued a new tariff determination methodology directive in August 2026.
Accessed 26 August 2026
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Electricity Regulatory Commission · Both posted 14 August 2026 · Tier 1 — Primary legal instrument
Supports: That deviation settlement rules and a dedicated grievance route for open access customers were issued in August 2026.
Accessed 26 August 2026
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Directive on prior approval and regulation of public issue of shares by electricity companies, 2078
Electricity Regulatory Commission · Posted to the Commission's website 15 February 2026 · Tier 1 — Primary legal instrument
Supports: That an electricity company must obtain the Commission's prior approval before a public issue of shares.
Accessed 26 August 2026
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