Brief on Open Access Directives 2026 (2082)

Introduction

The Directive on Open Access in Transmission and Distribution System, 2026 (hereinafter referred to as the “Directive”) has been issued by the Electricity Regulatory Commission (“ERC”) on 9 January 2026, in line with the General Network Framework issued by the Ministry of Energy, Water Resources, and Irrigation. The Directive will come into effect upon public notification of its effectiveness by ERC. ERC is expected to publish further directives, including the Open Access Grievance Resolution Directive, Balancing and Settlement Directive, Metering Directive, Grid Connectivity Directive, and Captive Electricity Production Directive, by 9 May 2026, which will provide additional guidance on open access framework.

Under the existing energy market structure, Nepal Electricity Authority (“NEA”) is involved in generation, transmission and distribution of electricity. NEA is the sole large-scale purchaser of electricity and controls almost entirety of the national transmission grid. Further, NEA is the major distributor of electricity alongside other distributors like Butwal Power Company (“BPC”) which operates within designated service areas. NEA by itself and through its subsidiaries also generates around 627 MW of electricity. Such bundled and vertically integrated structure across generation, transmission and distribution has resulted in restrained competition, limited grid access for independent power producers, and restricted consumer choices. Several legislations including Hydropower Development Policy, 2001, National Energy Strategy of Nepal, Electricity Bill, 2023 have emphasized on the need of unbundling of vertically integrated structure of NEA to promote market competition in energy sector.

The Directive seeks to address these limitations by enabling non-discriminatory open access in transmission and distribution systems for eligible entities. The objective of the Directive is to enhance competition, promote a level playing field for the commercial operation of the power sector, and to ensure greater transparency.

Who is Eligible to Use Open Access?

a. Generators

Generation licensees with an installed capacity of 5 MW or more, connected to the transmission system (66 kV or higher) or the distribution system (33 kV grid substation), are eligible to use open access. In Nepal, transmission lines operate at 66 kV, 132 kV, 220 kV, and 400 kV, while the distribution network consists of medium voltage (MV) systems (11 kV or 33 kV) and low voltage (400 V or 230 V).

Currently, out of the 187 hydropower projects above 1 MW, approximately 59% have a capacity greater than 5 MW, while among the 10 solar projects with generation license, 4 exceeds a capacity of 5 MW. This ensures that around 115 or more generators are eligible to engage in transaction of electricity through open access.

b. Captive Electricity Generators

Captive electricity generators with a minimum power output of 1 MW or more operating at a voltage level of 11 kV or higher are eligible for open access. The Directive defines captive generation as electricity produced by any company, entity, or group specifically for their own private use, with no specification as to the amount of energy they need to consume. The Electricity Bill, on the other hand, specifies that captive generators have to consume 51% of the total electricity produced by themselves. The Directive does not clarify whether a captive power producer must consume a certain amount of the electricity generated for its own use, or if the entire output can be sold. The Directive also does not clarify if the generation unit should be within the industrial premise or if only certain share ownership is sufficient to classify a generation unit as a captive plant.

The directive does not clarify other several key issues, including whether a distributed generation system wherein a power plant such as a solar rooftop or wind generator, owned and operated by a company but generating electricity for an industrial consumer’s consumption in the premise of the consumer, under a tariff-based model/opex model, can be considered a captive power plant.

The Directive, however, obliges ERC to prepare a further directive on Captive Electricity Production, which is expected to address these unresolved issues.

c. Industrial or Commercial Consumers

Industrial or commercial consumers with a contract demand of 5 MW or more, connected at a voltage level of 33 kV or higher, can also use open access. This provision targets large bulk electricity consumers, such as large cement industries, steel industries, and other similar industries, that require 5 MW of capacity and can operate at a primary voltage level of 33 kV or higher. Thus, to qualify for open access, industrial consumers must have a contract demand of at least 5 MW.

d. Distribution Licensee

The Directive allows distribution licenses to access open access to distribute power to its consumers. Distribution Licensee is defined as any person who has obtained a license to distribute electricity under the Electricity Act, 2049, and the Electricity Rules, 2050.

Currently, the NEA and Butwal Power Company Limited (BPC) are the two distributors of electricity, with BPC distributing electricity in limited areas in Syangja, Palpa, Pyuthan, Arghakhanchi, and serving 62,000 consumers.

e. Trading Licensee

Trading licensee are also eligible to use open access. The trading licensees can obtain electricity from several generators and sell the accumulated electricity to consumers.

The Electricity Act and the Regulations do not envision a Trading License, and this concept is only found in the Electricity Regulatory Commission Act, 2017, which defines a licensee as a person having trading license and the Electricity Bill, 2023 also envisions trading license. Other than that, there is no existing legal mechanism for granting a trading license to a private entity under thecurrent framework.

In 2017, following a cabinet decision, a trading license was granted to Nepal Power Trading Company, a subsidiary of NEA, on ad-hoc basis, however, it has not yet been operationalized.

What is the Minimum Transaction Capacity of Electricity to be Traded?

The minimum amount of electricity to be traded/ used through open access is 1 MW for internal use and 10 MW for cross-border trade of electricity. This is the minimum amount of electricity to be transacted while using open access.

Is Use of Open Access a Right Under the Directive?

The Directive defines Open Access as a right to use the transmission and distribution system, along with the associated facilities, without any discrimination. This ensures that eligible entities have the right of open access and obligates the transmission and distribution utilities to provide access to their systems, provided that sufficient capacity is available.

Although open access is a right provided to eligible entities, the system operator reserves the right to curtail its use in the event of any obstruction or technical issues within the transmission or distribution system. The Directive, however, does not classify the types of issues that may lead to curtailment, such as whether the issue must be purely related to technical matters or if economic hardships can also qualify as an obstruction or problem within the system. There needs to be standard reliability or grid code that addresses these issues and identifies ground for curtailment.

The Directive lists the order in which curtailment will be done. Short-Term Open Access will be curtailed first, followed by Medium-Term and Long-Term Open Access. If multiple customers within the same category (e.g., several short-term users) are affected by a system issue, the reduction in electricity quantity will be applied proportionally among them.

Other key Provisions in the Directive

Priorities to Use Open Access

The Directive outlines priorities for using open access based on the duration of access. Approval of the use of open access is granted in the following order.

Long Term Open Access (LTOA): For a duration exceeding five years or for the period specified in power purchase agreement.

Medium -Term Open access (MTOA): For a duration ranging from more than one year up to 5 years.

Short-Term Open Access (STOA): For a duration ranging from twenty-four hours up to one year.

If multiple applications are filed for the same category, priority is given on a first-come, first-served basis. While the Directive sets priorities for open access based on the aforementioned categories, if a distribution licensee applies for open access to provide service to consumers within its distribution area, the application of such distribution licensee will be given priority.

Nodal Agency

The Directives provides that the Nodal Agency will be as designated by the Ministry of Energy, Water Resources, and Irrigation. The Directives also provides that Electricity System Operation Department within the Nepal Electricity Authority (NEA) will serve as the Nodal Agency in the interim till such designation made.

Several policy documents including the Hydropower Development Policy, 2001, the National Energy Strategy of Nepal, and the Electricity Bill, 2023 have envisioned unbundling of the NEA to allow healthy competition and a level playing field for the commercial operation of the power sector. Designating the role of Nodal Agency to NEA in long term would not align with these policies.

Responsibility/ Obligation of Nodal Agency under the Directive

1. Managing and approving open access applications.
2. Determining the available capacity of the transmission or distribution system.
3. Preparing detailed statements and accounts for the payment of transactions related to open access.
4. Preparing a model
5. Access Agreement.
6. Publishing up-to-date information on its website regarding available capacity for:
   • Long-term access (quarterly)
   • Medium-term access (monthly)
   • Short-term access (daily)
7. Submitting a report on its website within fifteen days of the end of each month, detailing:
   • Customer names
   • Duration of access
   • Injection and withdrawal points
   • The system used
   • Approved schedules
   • Submitting annual reports to the Electricity Regulatory Commission (ERC)

System Operator

The Directive has designated the Electricity System Operation Department of the Nepal Electricity Authority (NEA) as the system operator for the Open Access Network. Unlike the Nodal Agency, which serves on an interim basis, this role is defined by the Directive as a permanent body.

The Rastriya Prasaran Grid Company Limited (RPGCL) was established in 2015 by a cabinet decision to develop, expand, and operate the transmission system, with the mandate to function as an independent transmission system operator that owns transmission assets and provides open access transmission services to stakeholders. Additionally, it was envisioned that NEA’s electricity transmission assets would be gradually transferred to RPGCL. However, the Directive has instead established the Electricity System Operation Department of NEA as the system operator for the Open Access Network.

NEA, as both a generator and distributor, cannot operate as an independent and impartial system operator. Even if RPGCL is designated as the system operator, its position remains questionable, as NEA holds a majority stake of 48.3% in RPGCL, with eight other ministries holding the remaining shares. Further through process is required to ensure transparency and independence of the entity functioning as system operator in the long run.

Open Access Agreement

The open access customer is required to conclude an Open Access Agreement with the transmission or distribution licensee to use the open access network. The standardized format for the Open Access Agreement shall be provided by the Nodal Agency.

As per the Directive, the following should be included in the Open Access Agreement:

1. Names and addresses of the entities involved.
2. Details of the transmission or distribution system being used.
3. Specific injection (entry) and withdrawal (exit) points.
4. The quantity of electricity and the duration of the access.
5. Arrangements for stand-by power services.
6. A breakdown of all applicable charges (transmission, wheeling, surcharges, etc.).
7. Payment methods, timelines, and payment security (such as bank guarantees).
8. Provisions for metering, meter reading, and accounting.
9. Commitment to follow the Nepal Grid Code.
10. Procedures for dispute resolution.

Applicable Charges to Use Open Access

The following are the charges applicable for the use of open access network.

1. Transmission Charge: Fee for the use of the transmission system, payable to the Transmission Licensee.
2. Distribution/ Wheeling Charge: Fee for utilizing the distribution network to deliver power to end consumer, payable to the Distribution Licensee.
3. Deviation Settlement Charge: Fee applied when there is a difference between the scheduled energy and the actual energy injected or withdrawn.
4. Cross-Subsidy Surcharge: Fee applied to certain consumers to compensate for the difference between the average cost of supply and the specific tariff rate.
5. Additional Surcharge: Fee applied to cover the unavoidable fixed costs of the distribution licensee.
6. Stand-by Service fee: Fee applied for back up charges if open Access is not functional.
7. Scheduling Fee: Fee for Scheduling of open access service.
8. Operating Fee: Fee for operation, supervision, and control of the transaction
9. Reactive Energy Charge: Fee applied to open access customers for technical deviations related to voltage levels.

Captive Power Plant are exempt from Cross-subsidy Surcharge and Additional Surcharge.

Cross-Border Trade

The Directive has defined intercountry electricity trade as the act of buying and selling electricity through import or export between Nepal and entities of other countries. The approval and operation of electricity trade for the purpose of cross-border electricity trade shall be in accordance with the procedures issued by the Government of Nepal, based on which the ERC will issue Cross-Border Electricity Trade Directive.

Relinquishment of Open Access Right

The Directive allows the open access customer to partially or fully relinquish or surrender the granted capacity by providing advance notice to the Nodal Agency, except for short-term open access. The notice must be provided at least 30 days in advance for MTOA and at least 1 year in advance for LTOA. The open access customer is required to pay transmission or distribution charges (wheeling charges) in the case of MTOA, either for the duration until the relinquishment is officially accepted or for the 30-day notice period, whichever is shorter. For LTOA, it is calculated as a percentage of the transmission and distribution charges for the remaining period of the agreement.

Application for Open Access

The process to obtain permission for open access is listed below:

1. The eligible open Access customer may apply to the Nodal agency to get access to the Network. The copy of application submitted to the Nodal Agency must also be circulated to Transmission or distribution licensee.
2. At the time of submission, a non-refundable application fee as follows must be paid.

3. Upon receiving the application, The Nodal Agency registers it and must provide information regarding the registration to the applicant within twenty-four hours. The Agency assesses the application and if any technical errors are found, the applicant is notified to correct them.
4. The Nodal Agency evaluates whether the requested capacity is available in the existing system. The timelines for providing a written decision on whether access can be granted are as follows:

5. If the Nodal Agency determines that the current system cannot support the requested load, it may conduct further studies, such as Detailed Load Flow studies and technical calculations. The agency can then inform the applicant about the necessary system enhancement or strengthening work required to facilitate the access, including estimated costs and timelines.
6. For long-term and medium-term access, the customer must also provide payment security in the form of an Irrevocable Letter of Credit (LC) or a Bank Guarantee from a “Class A” commercial bank, covering approximately three months of estimated charges.

Dispute Resolution

As per the directive, disputes or grievance related to open access will be addressed according to a separate directive issued by the Grievance Redressal Commission. However, if the dispute or grievance is related to the interpretation of provisions under this directive or other related directives, the dissatisfied party may submit a petition to the ERC, which will look into the matter in in accordance with the applicable laws, regulations, and the dispute resolution procedures issued by the Commission.

Additional Regulations

The Directive imposes obligation on ERC and NEA for the issuance of further legal instruments for the effective operationalization of open Access within 120 days of the issuance of this Directive.