Caught in Transmission Issues

Evacuation of electricity has become a bigger problem than power generation in Nepal due to absence of transmission lines. Nepal Electricity Authority (NEA) has a practical monopoly over construction of transmission lines; but it has been constantly confronted with a number of problems, leading to its inability to complete the targeted transmission line projects. Among all, acquiring land is the major one. Several alignments namely Thankot-Bhaktapur, Khimti-Dhalkebar, Hetauda-Bharatpur-Bardhaghat, Kusum-Hapure, Singati-Lamosanghu, Dumre-Damauli have not been completed for many years and a large number of projects have not gone into construction due to uncertainty in transmission line construction. Infrastructure sector like roads have alternatives such as railways, waterways, airways, but transmission lines have no substitutes. Therefore, if we want to see an end to the electricity problem in Nepal, we have no option but developing transmission system urgently.

RIGHT OF WAY

Acquiring land for Right of Way (RoW), constructing towers, and delay in securing timely clearance from forest department as well as security agencies, are some of the major challenges for developing transmission system. There is a field-level difficulty in acquiring private land for developing transmission system as people tend to feel that they are being unfairly treated by being forced to bear the cost for the benefit of other people. This perception of unfairness is the major source of dissatisfaction and social disruption. It is difficult for people to give up land for constructing any infrastructure because it separates them from their ancestral ties. Furthermore, the presence of a transmission line reduces the commercial value of the land to almost nil as it can’t be put for any alternative commercial use. As a result, people opt for not cooperating when it comes to this specific infrastructural development.

LOCAL INVOLVEMENT

The level of non-cooperation of local residents can be minimized by involving them in planning of transmission line projects from the very beginning. Authorized personnel do not involve the locals in the planning process in order to reduce the possibility of political opposition and cost of land acquisition. However, if the locals are involved from the very beginning of the planning process, they can support such development initiatives by suggesting workable alternatives. In a democratic society like ours, decisions should be taken after adequate discussion and interaction among the individuals and groups. A collaborative effort among all stakeholders can solve this issue. Furthermore, landowners, developers and technical people associated with planning and design could discuss in greater detail for creating better and more aesthetically pleasing communities which adds additional value to society in the end.

PROFITEERING PROBLEMS

During the development of transmission line in Nepal, while locals are not involved in the planning process, some informed people/insiders buy the land on low cost and later on, bargain with NEA and other responsible utilities for higher compensation. Such transactions are observed in many strategic locations where transmission line projects are being executed. Similar infiltration is suspected in Sinduli where the transmission system, consisting of only six towers, is incomplete. This sort of activities can be avoided if information is shared with the locals more effectively. Moreover, when participatory approach is followed, local residents will not feel ignored. It causes delay in planning process that often lead to increase in cost in the development stage, however, return will be far more than expenditures.

MARKET PRICES

Additionally, for the smooth construction of transmission related infrastructure, NEA should think of different ways to minimize the degree to which people feel unfairly treated. A market price based monetary compensation of land might reduce the feeling of having suffered a net loss from an unfair practice. The land owners, whose properties have to be acquired for building transmission system, are ready to provide their land if they get market value of their fixed assets. Similarly, if the affected people get some benefits from the project under benefit sharing mechanism, their dissatisfaction will be further reduced and may even turn out to be supportive of the development activities.

POWER DEVELOPMENT

Agriculture and Water Resource Committee (AWRC), the Parliamentary committee has identified that construction of transmission systems is a real bottleneck in development of power sector in Nepal. Therefore, the members of the committee have formed a subcommittee to conduct the detailed study on it and solve the critical constraints of energy sector. Acquiring land from the private owner for Right of Way (RoW) and constructing transmission towers are the major challenges and these cannot be resolved without providing marked based compensation to the affected land owners and including them in the planning process from the initial phase. Without such serious and timely reforms in the transmission system, the country’s problem in power sector cannot be solved and the shortage of power will lead to a greater loss of production of goods and services which also has serious implications on the country’s socio-economic stability. Therefore, reforms in transmission sector are essential not only for attaining a fast pace of economic growth by bringing efficiency in our economy but also for protecting our socio-political rights.

(This article was originally published in The Himalayan Times on 7th December, 2014.)

Wired in Problems

Transmission Lines

Transmission lines play a major role in the development of electricity. It is also largely considered as an area of natural monopoly all over the world. Like in most countries around the world, the right to construct transmission lines lie practically within the monopoly domains of Nepal Electricity Authority (NEA), which is a public utility company. After having been formed in 1984 post the merger of Electricity Department, Electricity Development Board and Nepal Electricity Corporation, NEA had complete monopoly over all three areas of electricity, namely, generation, transmission and distribution up until 1992. The Electricity Act 1992 opened up the sector for private players in generation. That led to the generation of more than 230 MW of electricity. Additionally, hydropower projects undertaken by independent power producers with the capacity of more than 1586 MW are in different stages of development. Most of the construction, however, has been halted due to transmission related problems, project infeasibility, and social or environmental issues. It is difficult to close those projects financially until there is certainty of transmission lines. 

Power Obstacles 

Lack of timely construction of transmission infrastructure has created hindrances in hydropower development. Construction of Khimti-Dhalkebar Corridor was supposed to be completed by 2010 but construction is incomplete till date. 

The people of Sindhulimadi agreed to give land to the project if they were given 100 per cent compensation. Thankot-Chapagaun Corridor has been under construction for more than a decade. Similarly, Mai Khola Hydropower and Sipring Khola Hydropower, two power projects backed by independent power developers are about to start generation but construction of transmission infrastructure has fallen behind schedule putting these projects’ future operation in quandary. It is believed that electricity which will be generated from Upper Tamakoshi but the ability to bring the produced electricity to the capital city is questionable due to delays in construction of transmission lines that run from Bhaktapur to Matatirtha via Harisiddhi. The electricity generated from sister organisations of Chilime will face the same fate in the future. 

The congestion in the existing grids add further woe to the situation as available power cannot be transmitted due to the problem of tripping. There is congestion in various transmission systems namely Bardaghat-Bharatpur, Marsyangdi-Siuchatar, Khimti-Bhaktapur, and Marsyangdi-Kathmandu. The congestion may lead to a system collapse in any of the transmission lines. 

In Bhairahawa, expensive machines used for industrial production were damaged due to the tripping problem. The same problem has been experienced in certain areas of the Kathmandu valley repeatedly due to excessive load hardly supported by distribution network. It is further aggravated by use of older transmission lines that are in poor condition and no longer reliable. 

Unclear Policies 

Despite this serious urgency, NEA has been unable to construct transmission lines due to problems in land acquisition. It takes a long time to get clearances from the Ministry of Forest for the construction of transmission lines in forest, national parks and conservation areas. As a compensatory measure, for every single tree that is cut down, the project has to plant 25 trees in case of protected species, and for common species only two trees need to be planted. Likewise, the process of land acquisition is very cumbersome because affected people demand 100 per cent compensation with ownership right to land. 

However, the Land Acquisition Act ensures only 10 per cent as compensation. Additionally, Rule 88 of Electricity Regulation, 1993 made a provision for the formation of a Compensation Fixation Committee to provide compensation in lump sum to people whose land was used for construction of transmission lines, but the provision does not mention the percentage of compensation. Such ambiguity gives spaces to local people to make their own demands in terms of compensation and in most cases it ends up in the form of obstruction to the construction of transmission lines. 

Such disturbances increase the gap between project identification and project construction time. As a result, new human settlement, housing plots and additional structures develop in the area which lead into remapping of transmission route. It leads to further delays in implementation of a transmission project. Having faced all these hurdles, India has promulgated a new Act that gives compensation of upto four times the real market value of land giving people a sense of not being cheated.

In addition to this, Public Procurement Act, 2007 was promulgated with the intention of making procedures, processes and decisions relating to public procurement open, transparent, and reliable to promote competition, fairness and accountability in public procurement process. However, the tendency to follow the law to the letter rather than the spirit has handicapped decision-making in public institutions. The Act allows discretionary decision-making to chiefs of public enterprises only up or equal to Rs 100,000. Any decision involving higher amounts have to go through a lengthy process as described in the Act. In addition to this, according to the Public Procurement Act, construction of transmission lines should be awarded to the party with the lowest bid.

However, there have been many instances where parties have bid an amount too low to get the project contract. After winning the contract, they have been found to raise their claims later resulting in higher costs and thus delays in construction of transmission lines. Therefore, contracts should be given to those parties whose cost is 10 per cent above or below the estimated cost under Engineering, Procurement and construction (EPC) system. Only then, will a new ray of hope be ushered in the development of transmission lines. 

(This article was published in The Himalayan Times on March 16, 2014 and can be seen in the following link

http://www.thehimalayantimes.com/perspectives/fullnews.php?newsid=MjczNw==)

Unbundling of Nepal Electricity Authority

Nepal Electricity Authority

The vertically integrated state-owned Nepal Electricity Authority (NEA) has been responsible for generation, transmission and distribution of electricity in the country for more than two decades. NEA was established in 1985 after three independent government bodies, namely: the Electricity Department, Electricity Board and Nepal Electricity Corporation merged. This intervention was necessary at that time because the generation capacity of the country was small and less human resources was employed in these organisations. In add-ition to this, it was very difficult to find a single responsible body for the development of hydropower in Nepal and the donor communities often faced inconvenience and confusion while working with these different bodies.

There was an implicit belief behind the merger that a utility service body like NEA would enjoy economies of scale, and that it was in the larger public interest that production and gene-ration of electricity remained a government monopoly and the profit did not go to individual pockets. 

Sadly, as is often the case, services provided by government monopolies lead to losses due to inefficient management, overstaffing, institutional corruption, and politicisation with presence of strong unions and misuse of resources. The financial haemorrhage of NEA in the last three decades of its establishment has compelled the government to look for alternative ways of reducing these losses. One of the ways of doing that is unbundling infrastructure services vertically, so that services are provided efficiently and in a competitive manner. 

Poor Policies

After promulgation of Electricity Act 1992, hydropower sector was opened up for national and intern-ational private investments in electricity generation. However, the government retained transmission and distribution services with the state-owned utility. Though there are few explanations about the construction of transmission and distribution lines by private parties in the Act, it is unable to transform them into actions in the absence of effective regulations and guidelines. 

Despite high transmission and distribution losses, rising labour costs and low tariffs hitting the financial viability of NEA, government has persisted with the semi-autonomous body. NEA has an operating loss of more than Rs eight billion annually, while the cumulative loss has reached Rs 27 billion. But all of that was written off by the government to show a healthy financial status of the utility and attract foreign direct investment.

The current structure of NEA is not just unsustainable; it has also created entry barriers for independent power producers (IPPs) with a discriminatory network access. There are more than 13 hydropower projects such as Maya Khola Hydroelectric Project (14.9 MW), Solu Hydroelectric Project (23.5 MW), Tallo Solu Hydroelectric Project (82 MW), and Mewa Khola Hydroelectric Project (50 MW), which have been waiting for construction of transmission lines for several years. Such poor policy has discouraged new entries in the field, which is regarded as a major hurdle in meeting growing demand of energy. 

Lessons to Learn

Realising this, the government came up with a functional unbundling of NEA in three different segments — generation, transmission and distribution. However, it has existed only on paper, and there is a need to have a separate accounting system in all segments, along with functional unbundling to encourage competition for quality services at minimum costs. 

The example of Andhra Pradesh State Electricity Board (APSEB) in southern India, which has unbundled the units into generation, transmission and distribution can suitably be cited here. The Andhra government reduced transmission and distribution losses from about 38 per cent in 1999 to 26 per cent in 2003, and less than 20 per cent in 2008, mainly by controlling power theft. This volume of loss in transmission and distribution sector is taken as normal because of use of less efficient equipments in the region. Similarly, according to report produced by the World Bank in 2009, various countries of European Union have also successfully reduced losses to around 10 per cent after privatising distribution companies. 

Nepal’s non-technical loss of electricity is about 14 per cent, caused mostly due to theft. If it is reduced to around five per cent, millions of rupees can be saved and used for construction of transmission lines or generation of hydro-electricity, according to the need of time. Furthermore, many hydropower projects in Lamjung, Nuwakot and Dolakha are in limbo due to lack of transmission lines. Had the unbundling of NEA been done on time and with serious attention, these bottlenecks would not have existed and losses could 

be reduced.

Challenges and Opportunities

Media has reported that senior officials at NEA are against such reforms because it compromises their position in the changing scenario. Despite strong opposition from its own staff, the government plans to form a new transmission company to resolve problems related to transmission and distribution for efficient evacuation of power. But, the process is hopelessly slow.

If unbundling of NEA is done on time, it will be easier for the government to manage resources and resolve acute problems that exist in hydropower sector of Nepal. The domestic and inter-national private sectors’ trust in these bodies will grow and Nepal’s hydropower development will take a meaningful stride forward. 

(This article was published in The Himalayan Times on 28th July, 2013 and can be seen in the following link

http://www.thehimalayantimes.com/perspectives/fullnews.php?headline=Unbundling+of+Nepal+Electricity+Authority&newsid=MjM0MA==) 

Transmission Failure

The current trends of supply and demand of electricity could mean that Nepal’s energy crisis will continue for at least five more years, even if all the committed projects are constructed without hitch. By 2016, with the completion of Upper Tamakoshi, Nepal’s estimated supply of electricity will be 1,205 MW in dry season — still a deficit of 305 MW. However, during rainy seasons, there will be ample surplus electricity that the country could export to the energy hungry neighboring states of Uttar Pradesh (UP) and Bihar, which are among fastest growing economies in India.

Defused Infusion

Lack of adequate transmission lines and insufficient capacity of existing and planned cross-border transmission lines will be major drawbacks in the future. Presently, the electricity generated from Kaligandaki has not been well utilised during the rainy season in absence of high voltage transmission lines, which has resulted in revenue loss for the nation and commercial loss for producers.

New cross-border transmission lines are essential for commercial viability of mega hydropower projects such as Arun III, Upper Karnali, Upper Tamakoshi and others. They are important as there is a complementary relationship between power demand and supply potential between Nepal and India. In addition to this, if the government prioritises the construction of cross-border transmission lines to link major hydro projects, it will also help reduce the load-shedding to some extent.

Procurement Potential

Nepal’s electricity import is limited to 145 MW during the dry season due to low capacity transmission lines. If high capacity cross-border transmission lines were built, Nepal’s power procurement would increase to 250 MW. The Muzaffarpur to Dhalkebar corridor project was planned to realise this potential but has not started due to incomplete financial closure in Nepal. Unlike other bilateral projects, this has been planned on commercial basis. 

The two sides have established separate companies with participation of various agencies such as Nepal Electricity Authority (NEA), Power Trading Corporation, Infrastructure Leasing and Financial Services and Power Grid Cooperation of India Ltd. The governments of Nepal and India and the World Bank have played facilitating roles in the process.

There are simultaneous plans to construct three more cross-border transmission lines from Butwal to Gorakhpur, Duhabi to Purniya and Anarmani to Siliguri. Timely completion of these projects will be pivotal in development of hydropower in Nepal and will open new frontiers in power trade between the two countries. Also, adequate transmission lines will encourage additional investments in new hydropower projects in Nepal as the demand for power in India’s two most populous and energy hungry states — UP and Bihar — will only grow in the future.

Problematic Policies

With the restoration of multi-party system in 1990, several policies were formulated to promote hydropower development in Nepal, with some already in effect. The recently revised Hydro-power Policy, 2001 allows greater private part-icipation in power sector to facilitate improved access in rural areas. However, there are various hefty environmental and forest guidelines that hinder construction of transmission lines. For every tree that is cut down, the project has to plant 25 more and for clearing one hectare of land for transmission lines, the project has to compensate the forest department with 16 hectares. Similarly, the process of land acquisition for the project is very complicated as people demand full compensation with ownership of land.

Due to such logistical problems and lack of capital, six projects have been in limbo for years. The government has recently decided to start constructing transmission lines for Khare Khola Hydro Electric Project (HEP) (24.1 MW) and Singati Khola HEP (16 MW). But the remaining four projects, namely Maya Khola HEP (14.9 MW), Solu HEP (23.5 MW), Tallow Solu HEP (82 MW) and Mewa Khola HEP (50 MW) have still not started their construction works due to lack of trans-mission lines.

Sensible System

According to a NEA source, it costs Rs 11.5 million to construct one kilometer of transmission line with 133 kV capacity. But the budget allocation for the development of this sector is much less than what is required. Similarly, NEA has been in financial crisis due to its inability to adjust tariff rates. There are also other challenges like selection and implementation of projects with low financial and system feasibility, and low productivity of human resource.

To address these issues, NEA should start making appropriate arrangements to introduce wheeling charge system in transmission lines, so that various industries such as cement, iron, steel, et cetera, which consume higher amount of electricity can directly buy electricity from the power producers at higher prices. This will 

encourage power producers to develop new hydropower projects while industries will get regular supply of electricity. This will not only reduce the overall cost of production as they will not need to depend on costly and imported fossil fuel but also make transmission system more efficient and sustainable. This system ensures reliable supply of electricity, which could resolve energy-related problems of the industries and lead the nation towards a path of economic prosperity. 

(This article was published in The Himalayan Times and can be seen in the following link

http://www.thehimalayantimes.com/perspectives/fullnews.php?headline=Transmission+failure&newsid=MTQ1NA==)