USAID-Funded Nepal Hydropower Development Project (NHDP) Training Session for Electricity Regulatory Commission

The project focuses on enhancing the regulatory framework and capacity of the ERC to effectively monitor and control utility performance. The ERC is responsible for protecting the interests of consumers by ensuring they receive adequate service and that utilities do not abuse their dominant market position. The ERC's role in regulating utility performance is critical, as it sets performance norms and standards for utilities. These norms are linked to tariff determination and cost recovery, so that if a utility's performance falls below the expected level, its revenue or cost recovery is also affected. The ERC uses various tools to regulate utility performance, including performance norms for tariff and cost recovery, standards of performance, and special orders or directives. Standards of Performance (SoP) are determined and notified by the ERC, usually after consultation with utilities, consumers, and other key stakeholders. Utilities are required to regularly file reports on compliance or non-compliance with SoP and associated penalties. Penalties under SoP are typically nominal amounts that serve as indicators of utility performance and as deterrents against future violations. Utilities are not allowed to pass on the cost of penalties under SoP to consumers through tariff. The ERC also specifies reliability indicators, such as System Average Interruption Frequency Index (SAIFI) and System Average Interruption Duration Index (SAIDI). SAIFI measures the average number of interruptions per customer per year, while SAIDI measures the average duration of interruptions per customer per year. These indicators provide a basis for evaluating utility performance and identifying areas for improvement. The ERC's regulatory framework and capacity-building efforts are essential for ensuring that utilities in Nepal provide reliable and efficient service to consumers. By setting performance standards and monitoring utility performance, the ERC can promote a competitive and customer-focused market, ultimately benefiting consumers and the economy as a whole.