Nepal Electricity Authority Scraps Hydrology Penalty for Power Producers

The Nepal Electricity Authority (NEA) has decided to scrap the hydrology penalty imposed on power generation companies that fail to supply electricity as per their agreements.

The decision was made during an NEA board meeting held on February 16 and was made public on April 8.

The hydrology penalty is a financial fine levied by the NEA — the power purchaser — on hydropower developers when they are unable to supply electricity as stipulated in the Power Purchase Agreement (PPA). Such failures often occur when a project is shut down due to floods, landslides, or other natural causes.

In recent years, there have been numerous instances where floods and landslides have affected hydropower projects, disrupting electricity generation. The NEA stated that the decision to abolish the hydrology penalty was made in the context where uncertainty in river flow caused by floods and landslides has been impacting the generation capacity of hydropower projects.