In a landmark policy shift, the government has moved to break the long-standing monopoly of the Nepal Electricity Authority (NEA) in electricity trade, opening the door for private hydropower producers to sell electricity directly to clients. The Electricity Regulatory Commission (ERC) on Wednesday unveiled the draft Open Access Directive 2025, paving the way for liberalized power market operations.
The draft, now open to public feedback for 30 days, outlines provisions that would allow private power producers to directly engage with large consumers—such as industrial and commercial enterprises—bypassing NEA’s centralized purchasing system. Producers will be permitted to use NEA’s transmission and distribution infrastructure by paying wheeling charges, deviation settlement costs, and applicable distribution fees.
ERC Chairperson Ram Prasad Dhital stated that the directive is a step toward modernizing Nepal’s electricity sector. “This will attract more investment, enhance competition, lower risks for service providers, and open avenues for participation in international power markets,” Dhital said.
Currently, private firms in Nepal can generate electricity but are not allowed to sell it directly to consumers or build their own transmission lines. The proposed directive will allow captive power plants with a minimum capacity of 1 MW and contract energy projects of 5 MW or more connected to 33 kV lines to sell electricity to commercial clients. For cross-border sales, a minimum of 10 MW must be supplied to foreign buyers, with NEA’s System Operation Department serving as the nodal agency for such transactions.
The move is in line with recent efforts to open up Nepal’s power sector. In December, the government signed public-private partnership (PPP) agreements to jointly develop transmission infrastructure. However, the private sector is still awaiting full authorization to independently build and operate transmission lines.
This reform comes as Nepal expands its electricity export potential. It has signed a 10-year deal with India to export 10,000 MW and has started supplying electricity to Bangladesh, with plans to reach 9,000 MW by 2040. Currently, 40 MW is already being exported to Bangladesh.
To meet its goal of generating 28,500 MW of electricity by 2035, the government is banking on private sector involvement, acknowledging that the NEA alone cannot meet the infrastructure and investment needs required for such large-scale development.
Nepal Opens Electricity Market to Private Producers, Ending NEA Monopoly
In a landmark policy shift, the government has decided to end the long-standing monopoly of the Nepal Electricity Authority (NEA) in the power trade, paving the way for private hydropower producers to sell electricity directly to consumers.
On Wednesday, the Electricity Regulatory Commission (ERC) released the draft of the Open Access Directive 2025, which outlines the framework for private sector participation in electricity sales. The directive, now open for public feedback for 30 days, is expected to transform Nepal’s power sector by introducing competition and encouraging investment.
Under the proposed rules, large industrial and commercial firms will be able to procure electricity directly from private producers, bypassing the NEA. To do so, private producers will be allowed to use NEA’s existing transmission and distribution infrastructure by paying wheeling charges, distribution fees, and deviation settlement costs.
ERC Chairperson Ram Prasad Dhital stated that the directive aims to create a competitive environment that boosts efficiency and supports Nepal’s growing role in regional energy trade. “This will attract more investment into Nepal’s power sector, promote competition, reduce risks for service providers, and open the door for the private sector to enter international power markets,” he said.
Currently, while private firms can produce electricity, they cannot sell it directly to customers or construct their own transmission lines. The new directive proposes to change that. Captive power plants with a minimum generation capacity of 1 MW and contract energy projects of at least 5 MW connected to the 33 kV grid will be allowed to sell electricity directly to large-scale users.
For international transactions, private producers will need to sell a minimum of 10 MW to buyers abroad. The directive identifies NEA’s System Operation Department as the nodal agency to regulate and oversee these transactions.
The draft directive is part of a broader liberalization effort. Last year, the Ministry of Energy signed a public-private partnership agreement to develop transmission lines jointly with private firms. However, private companies still await regulatory approval to independently build and operate transmission infrastructure.
The policy shift comes as Nepal strengthens its energy ties with regional partners. The country recently signed a deal with India to export 10,000 MW of electricity over the next decade, while Bangladesh plans to import 9,000 MW from Nepal by 2040 and has already begun importing 40 MW.
With a national goal of generating 28,500 MW of electricity by 2035, the government is increasingly relying on the private sector to expand generation and transmission capacity. The Open Access Directive 2025 represents a major step toward that goal, aiming to unlock Nepal’s full energy potential through greater private investment and regional cooperation.
