Under the updated directive, electricity tariffs will be calculated using core operational expenses, including power purchase costs, operations and maintenance, employee salaries, loan interest, depreciation, income tax, and return on equity. Tariff structures will vary based on consumer category, voltage level, time of use, and seasonal shifts.
Caps on Return on Capital
The framework establishes strict limits on self-capital returns for power sector companies:
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Distribution Business: Up to 16.5%
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Generation Business: Up to 16.0%
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Transmission Business: Up to 15.5%
Companies that complete projects within stipulated deadlines or successfully reduce distribution losses are eligible for an additional 1% performance incentive.
Submission Timeline and Review Process
Licensed utilities must submit formal tariff proposals to the ERC at least 120 days prior to the start of a new fiscal year. Licensees are limited to one tariff determination application per fiscal year, with a mandatory comprehensive review required at least once every three years.
The directive mandates annual reviews of actual income and expenditure for necessary rate adjustments, along with mandatory public hearings prior to any tariff revision.
Implementation Timeline
Newly approved tariffs will take effect 30 days after public notification. Existing rate structures will remain active until new adjustments are finalized.
ERC Chairman Ram Prasad Dhital noted that the directive outlines clear expectations for the Nepal Electricity Authority (NEA) and other stakeholders when submitting proposals. The new rates will take effect only after NEA's formal submission, stakeholder discussions, public hearings, and final commission approval.
