NEA restructuring into three companies reaches final stage

Kathmandu, October 19

The government’s plan to restructure the Nepal Electricity Authority (NEA) into three separate companies has reached its final stage, with the Ministry of Energy, Water Resources and Irrigation working to finalise a roadmap for the process.

Under the proposed restructuring, the NEA will be divided into three companies responsible for electricity generation, transmission, and distribution and trade.

The government announced in the budget for the current fiscal year 2083/84 that it would complete the long-discussed restructuring of the authority within the fiscal year.

A committee coordinated by the head of the ministry’s Energy Division has been preparing the restructuring framework. According to the ministry’s latest progress report, the committee is studying international models and practices before finalising the roadmap.

The restructuring aims to separate the authority’s existing functions into distinct institutional structures, clarifying responsibilities, operations and management.

At present, the NEA handles electricity generation, operates the national transmission system, distributes electricity to consumers, and manages electricity purchase, sales and trade.

Separating these functions is expected to allow the performance, financial position and responsibilities of each sector to be assessed independently.

However, the proposed companies’ ownership structures, jurisdictions, and the division of assets and liabilities have yet to be finalised. The ministry says these details will be addressed in the roadmap.

Restructuring process dates back to 2017

The Ministry of Energy began the unbundling process in 2017. As part of the effort, the government has already established entities including the Electricity Generation Company, the National Transmission Grid Company Limited and the Electricity Trading Company.

Despite these steps, the complete restructuring of the NEA has remained pending. The government has now set a target of completing the process within the current fiscal year, with preparations for the roadmap nearing completion.

Energy sector experts, however, have warned that restructuring without a clear framework for legal arrangements, asset management and employee adjustment could create new complications.

Budget also opens the door to private-sector electricity trade

The government’s budget for fiscal year 2083/84 identifies the restructuring as a key step in reforming the energy sector.

The budget also includes plans to allow private companies to trade electricity in international markets and establish a legal framework enabling electricity trading through transmission lines in exchange for wheeling charges.

The proposed unbundling could affect the structure of Nepal’s electricity market, private-sector participation and the management of electricity trade.

However, implementation will require decisions on the organisational structure of the three companies, legal and administrative arrangements, and transitional management.

Roadmap to determine implementation

The ministry’s committee is expected to outline the companies’ responsibilities, organisational structures, asset and liability distribution, employee management, financial arrangements and implementation schedule.

Although the restructuring plan is not new, the government’s commitment to completing it within the current fiscal year has advanced preparations for implementation.

The ministry says the restructuring process will move forward once the roadmap is finalised. The roadmap is also expected to clarify the timeline for establishing the three companies and arrangements for managing the NEA’s existing assets, debts, employees and ongoing projects.

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