procedures for license application for hydropower ... · procedures for license application for...

Department of Electricity Development, HMG, Nepal,

in Collaboration with

United States Agency for International Development and

International Resources Group

June 2005

Procedures for LicenseApplication for Hydropower

Development in NepalA GUIDEBOOK

Table of Contents

Background

Acronyms

I. Application Process for Hydropower 1

Projects with Installed Capacity less

than 100 kW

II. Application Process for Hydropower 2

Projects with Installed Capacity from

100 kW up to 1000 kW

III. License Application Process for 5

Hydropower Projects with Installed

Capacity more than 1000 kW

TablesTable 1 License Application Fees 6

Table 2 Royalty Schedule 20

FiguresFigure 1 4

Application Process for Hydropower Projects with

Installed Capacity from 100 kW up to 1000 kW

Figure 2 9

Application Process for Production/Transmission/

Distribution Survey License

Figure 3 12

Process for Screening for IEE/EIA

Figure 4 13

Process for Conducting IEE

Figure 5 14

Process for Conducting EIA

Figure 6 19

Application Process for Production/Transmission/

Distribution License

BackgroundThis guidebook on Procedures for License Application for

Hydropower Development in Nepal is based on the Electricity Act

2049, Electricity Regulation 2050, Environment Protection Act

2053, Environment Protection Rules 2054, Water Resources

Act 2049 and Water Resources Regulation 2050. The purpose of

this guidebook is to present the license application processes in

a simplified and stepwise manner to assist hydropower developers.

For projects with installed capacity less than 1,000 kW, no

licenses are required. However, certain approvals/acceptance

of project details are necessary. For projects with installed

capacity greater than 1,000 kW, a survey license is required

to study the project. For such projects, separate licenses are

required for construction and operation of production,

transmission and distribution facilities.

Applications may be submitted in Nepali or English.

This guidebook presents a step-wise procedure of licensing

processes and includes the following:

� Application processes for hydropower projects with

installed capacities less than 100 kW, 100 kW to 1000

kW and greater than 1000 kW

� Process for screening for Initial Environmental Examination

(IEE)/Environmental Impact Assessment (EIA)

� Process for conducting IEE and EIA

While the guidebook has been prepared for hydropower

developers, we expect it to be useful to other stakeholders

in the hydropower sector as well.

If this guidebook contradicts the prevailing laws, the

provisions of the law shall prevail.

i ii

AcronymsAcronymsAcronymsAcronymsAcronymsDOED Department of Electricity Development

DWRC District Water Resources Committee

EIA Environmental Impact Assessment

HMG/N His Majesty's Government of Nepal

IEE Initial Environmental Examination

kV kilovolt

kW kiloWatt

kWh kiloWatt hour

MW MegaWatt

MOEST Ministry of Environment Science and

Technology

MOFSC Ministry of Forests and Soil Conservation

MOWR Ministry of Water Resources

PAN Permanent Account Number

PPA Power Purchase Agreement

TOR Terms of Reference

T/L Transmission Line

VDC Village Development Committee

iii

I. Application Process forHydropower Projects with InstalledCapacity less than 100 kW1.1.1.1.1. A project proponent (who may be a citizen or corporate

body) does not require a license for survey, construction,

and/or operation of production/transmission/distribution

of a hydropower project with installed capacity less than

100 kiloWatt (kW) (Section 3 of Electricity Act, 2049).

However, the proponent will have to obtain a permit from

the District Water Resources Committee (DWRC) prior to

the commencement of survey, construction and operation

of production/transmission/distribution facility (Water

Resources Act, 2049).

2. The proponent independently fixes the selling price of

electricity generated from the project in consultation with

the buyer(s).

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1

Procedures for License Application for Hydropower Development in Nepal A Guidebook

I. Application Process forHydropower Projects with InstalledCapacity less than 100 kW1. A project proponent (who may be a citizen or corporate

body) does not require a license for survey, construction,

and/or operation of production/transmission/distribution

of a hydropower project with installed capacity less than

100 kiloWatt (kW) (Section 3 of Electricity Act, 2049).

However, the proponent will have to obtain a permit from

the District Water Resources Committee (DWRC) prior to

the commencement of survey, construction and operation

of production/transmission/distribution facility (Water

Resources Act, 2049).

2. The proponent independently fixes the selling price of

electricity generated from the project in consultation with

the buyer(s).

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2


submit the following to the DOED in addition to the

information listed in (1) above:

a. Schedule for completion of Feasibility Study Report

b. Construction work schedule

c. Cost of development

d. Letter of intent regarding Power Purchase

Agreement (PPA) if sold in bulk to utility and/or a

letter of intent regarding Power Sales Arrangement

if sold to consumers isolated from the National Grid,

providing information on types and number of such

consumers.

e. Financial evidence to support construction of

the project.

Figure 1 summarizes the application process for hydropower

projects with installed capacity from 100 kW upto 1000 kW.

Steps to be taken by the proponent after obtaining

an approval letter from the DOED:

a. If the approval letter from the DOED is for survey only,

then the proponent starts surveying, and submits six

monthly progress report and Feasibility Study Report

(Rule 3 of Electricity Regulation, 2050) to DOED

b. If the approval letter from DOED is for survey, production,

transmission and distribution, the proponent:

� Completes survey, submits Feasibility Study to

DOED and starts construction

� Submits six monthly progress reports to the DOED

until construction is complete

II. Application Process forHydropower Projects with InstalledCapacity from 100 kW up to1000 kWA project proponent does not require a license for survey,

construction and operation of production/ transmission/

distribution of a hydropower project with installed capacity

from 100 kW up to 1000 kW (Section 3 of Electricity Act,

2049). However, the proponent shall submit the following

information before commencing the work of the project, in

the format as prescribed in Schedule 1 of Rule 3 of Electricity

Regulation, 2050. Submittal shall be made to the Secretary

of Ministry of Water Resources (MOWR) through the

Department of Electricity Development (DOED).

1. If the proponent's application is for survey of the project

only, the proponent shall submit the following

information to the DOED:

a. Desk study of the proposed project which includes

salient features (e.g., name of the water body),

scope of work and work schedule

b. Topographical map showing all the major

components of the project (in scale of 1:25000 or

1:50000)

c. Electricity distribution area and estimated number

of customers to benefit, if any

d. Information regarding other water uses in the area

e. Letter of recommendation addressed to DOED for

project development (survey, production,

transmission and distribution) from concerned

Village Development Committee (VDC)/Municipality

with a copy addressed to DWRC

f. Boundaries of the survey area with latitudes and

longitudes including VDC/Municipalities

2. If the proponent's application is for survey, production,

transmission and distribution, the proponent shall

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III. License Application Process forHydropower Projects with InstalledCapacity more than 1,000 kWFour types of licenses may be required to develop a hydropower

project with installed capacity more than 1,000 kW:

A. Survey License (to study a project)

B. Production License (for construction and operation of

a production facility)

C. Transmission License (for construction and operation

of a transmission facility)

D. Distribution License (for construction and operation of

a distribution facility)

Licenses for construction and operation of the facilities

are only needed after the studies are completed under a

Survey License. A proponent requires a license for each

type of facility that is part of the proposed project.

A. Survey License

A survey license is required to conduct investigation at a

project site to assess its feasibility and preparation of an

IEE/EIA. A survey license provides the survey licensee

exclusive right to study the site for the term of the license

and provides a right-of-first-refusal to develop the project as

provided in the Electricity Act, 2049. Survey licenses are

needed to study production, transmission, and distribution

facilities and are termed Production Survey License,

Transmission Survey License, and Distribution Survey

License respectively. The maximum term of a Survey License

is 5 years.

The proponent shall submit three copies of application to

the Secretary of MOWR through the DOED in the format as

prescribed in Schedules 2,3,4 of Rules 4,5,6 of the

Electricity Regulation, 2050 respectively for Production

Survey License, Transmission Survey License, and

Distribution Survey License. The proponent shall also submit

an application fee of an amount equal to fifteen percent of

the license fee to the DOED as shown in Table 1 (Schedule

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� Authorization letter appointing a contact person in

the company for DOED to correspond with regarding

the application.

� Contact address of applicant

� Details of other water uses in the requested survey

area like water supply, irrigation, water mill, etc or

details of licenses issued by DWRC regarding such

uses

� Details of in-house technical capability of applicant

to conduct survey or details of technical capability

of consultant in case consultant is to be hired.

2. Transmission Survey License

Proponent shall submit the following additional supporting

documents along with the application:

a. Preliminary route-map of electricity transmission line

(proposed main transmission line and alternative lines

in scale of 1:25000 or 1:50000)

b. Survey area including related VDCs/Municipalities

c. Need and purpose of the project

d. Total length of the transmission line

e. Transmission voltage and capacity

f. Maximum transmission load and types of consumers

g. Estimated cost of the project and cost break-down

of survey

h. Other requirements:

� In case of company - Certificate of registration,

Memorandum of Association, Memorandum of

Articles, PAN

� In case of individual - copy of applicant's

citizenship certificate

� Desk study report including detailed scope of work

� Work schedule

� Financial evidence to support survey activities



the application.


11 of Rule 24 of the Electricity Regulation, 2050).

A Survey License is issued within 30 days of receiving

complete and adequate application package.

Figure 2 shows the application process for production/

transmission/distribution survey license.

1. Production Survey License

Proponent shall submit the following supporting documents

along with the application:

a. Topographical map showing all the major components

of the project (in scale of 1:25000 or 1:50000)

b. Survey area in longitude and latitude including

related VDCs

c. Estimated cost of the project and cost break-down

of the survey

d. Other requirements

� In case of a company - Certificate of registration,


Articles, Permanent Account Number (PAN)

� In case of an individual - copy of applicant's



according to HMGN Guidelines for Study of

Hydropower Projects, 2003.

� Work schedule


Table 1: License Application Fees

Installed Capacity (kW) License Fees (Rs)

1,000 - 5,000 1,000

5,001 - 25,000 5,000

25,001 - 1,00,000 25,000

1,00,001 - 4,00,000 1,00,000

4,00,001 - 10,00,000 4,00,000

10,00,001 - above 10,00,000

Based on: Schedule 11 relating to Rule 24 of Electricity Regulation, 2050

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3. Distribution Survey License

Proponent shall submit the following additional supporting


a. Map of the distribution area (geographical description,

present distribution system and preliminary sketch of

proposed distribution system in scale of 1:25000

or 1:50000).

b. Need and purpose of the project.

c. Estimated number and types of consumers to benefit

from the distribution system.

d. Location of purchase or acquired point.

e. Particulars relating to purchase and sale.

f. Estimated cost of the project and cost break-down

of survey

g. Other requirements:

� In case of a company - Certificate of registration,


Articles, PAN

� In case of an individual - copy of applicant's



� Work schedule


� Boundaries of the survey area including

VDCs/Municipalities

� Information of concerned VDCs/Municipalities

within distribution line



the application.





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� Route Survey with alternative route

� Geotechnical Survey

� Design of Structure

� Project Optimization

� Financial and Economical Analysis

c. If found feasible, applies for Transmission License

3. Distribution Survey License

a. Submits quarterly progress reports to the DOED

(Environment Protection Rules, 2054)

b. Completes survey; submits Feasibility Study

Report including:

� IEE (If the distributing capacity of the project is

between 1-6 MVA or if the project falls under the

categories mentioned in Schedule 1 of Environment

Protection Rules, 2054)

� EIA (If the distributing capacity of the project is

greater than 6 MVA or if the project falls under the



� Route Survey with alternate route




c. If found feasible, applies for Distribution License

The screening process determining which power projects

(production, transmission, and distribution) require an

EIA or IEE study is shown in Figure 3, and processes for

conducting IEE and EIA are shown in f igures

4 and 5 respectively.


Survey License from the DOED:

1. Production Survey License

a. Starts actual physical work within three months.

b. Submits six monthly progress reports to the DOED [Rule

21(2) of Environment Protection Rules, 2054]

c. Completes survey; submits Feasibility Study Report

including:

� IEE (If the generating capacity of the project is

between 1-5 MegaWatt (MW) or if the project falls

under the categories mentioned in Schedule 1 of

Environment Protection Rules, 2054)

� EIA (If the generating capacity of the project is 5

MW or if the project falls under the categories

mentioned in Schedule 2 of Environment Protection

Rules, 2054)

� Topographical Survey

� Hydrological Survey

� Geotechnical Survey




d. If found feasible, applies for Production License

2. Transmission Survey License

a. Submits six monthly progress report [Rule 21(2) of

Electricity Regulation, 2050]

b. Completes the survey; submits Feasibility Study Report

including:

� IEE (If transmission voltage level of the project is

between 33-66 kilovolt (kV) or if the project falls

under the categories mentioned in Schedule 1 of

Environment Protection Rules, 2054)

� EIA (If transmission voltage level of the project is

greater than 66 kV or if the project falls under the



13


12


13

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14


Survey License Renewal

Renewal of a survey license is possible if the original license

term was less than five years. The proponent may request

for renewal of a survey license prior to its expiry. The

proponent shall submit copies of all progress reports, a

complete description of the status of the remaining

activities, or a list of pending activities and a schedule for

completion of the activities. The proponent shall pay renewal

fee of an amount equal to ten percent of the license fee

prescribed in Schedule 11 of the Electricity Act, 2049.

B. Production License

A Production License is required to construct and operate

a production facility after completion of the survey. The

proponent shall submit three copies of the production

license applications to the Secretary of MOWR through the

DOED in the format as prescribed in Schedule 6 of Rule 12

of Electricity Regulation, 2050, and an application fee of

an amount equal to 33.33 percent of the license fee as

prescribed in Schedule 11 of Rule 24 of Electricity

Regulation, 2050 to the DOED. The maximum term of a

Production License is 50 years (Electricity Act, 2049).

The Production License is issued within 120 days of

receiving complete and adequate application package.

The proponent shall submit the following supporting


a. Feasibility Study Report including:

� Detailed description of the project

� Description of related transmission line to

evacuate power

� Approved IEE/EIA Report from concerned ministry

b. Names of partners in the project and type of their

association, full name and address of the person or

corporate body and its directors with whom the

ownership of the project shall be vested at last.

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The proponent shall submit the following supporting




� Transmission voltage and capacity






c. Mode of Finance (Detail Financing Plan)

� Estimated cost of the project

� Financial capability of the investors of the project

� Commitment of the financial institutions to be

involved directly in the project

� Percentage of liability of investor

� Equity and debt ratio

d. Agreement regarding sale and purchase of the power

(i.e., PPA)

e. Other requirements:

� Certificate of registration, Company's license,

Industrial Registration Certificate

� PAN


to implement construction works or the technical

capability of contractor/construction company in

case contractor/construction company is to be hired

for construction works.

Figure 6 shows the application process for the

transmission license.

D. Distribution License

A Distribution License is required to construct and

operate a distribution facility after completion of the

survey. The proponent shall submit three copies of the

distribution license applications to the Secretary of MOWR




� Commitment of the financial institutions to be

involved directly in the project

� Percentage of liability of investors


d. Agreement regarding sale and purchase of the power

(i.e., PPA)


� Certificate of registration, Memorandum of

Association, Memorandum of Articles, Industrial

Registration Certificate

� PAN


to implement construction works or the technical

capability of contractor/construction company in

case contractor/construction company is to be hired

for construction works.


production license.

C. Transmission License

A Transmission License is required to construct and operate a

transmission facility after completion of the survey. The

proponent shall submit three copies of the transmission

license applications to the Secretary of MOWR through the

DOED in the format as prescribed in Schedule 7 of Rule 13 of

Electricity Regulation, 2050, and an application fee of an

amount equal to 33.33 percent of the license fee to the DOED

along with the application as prescribed in Schedule 11 of

Rule 24 of Electricity Regulation, 2050. The maximum term

of a Transmission License is 50 years (Electricity Act, 2049).

The Transmission License is issued within 120 days of

receiving complete and adequate application package.

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through the DOED in the format as prescribed in Schedule 8 of

Rule 14 of Electricity Regulation, 2050, and an application fee

of an amount equal to 33.33 percent of the license fee to the

DOED along with the application as prescribed in Schedule 11

of Rule 24 of Electricity Regulation, 2050. The maximum term

of a Distribution License is 50 years (Electricity Act, 2049).

The Distribution License is issued within 120 days of receiving

complete and adequate application package.

The proponent shall submit the following supporting documents

along with the application:



� Map of distribution area

� Distribution voltage and capacity









� Commitment of the financial institutions to be involved

directly in the project

� Percentage of liability of investors


d. Agreement regarding sale and purchase of the power (i.e.,

PPA)


� Certificate of registration, Company's license,

Industrial Registration Certificate

� PAN

� Details of in-house technical capability of applicant to

implement construction works or the technical

capability of contractor/construction company in case

contractor/construction company is to be hired for

construction works.


distribution license.

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Production/Transmission/Distribution License from

the DOED:

1. Production License

a. Starts construction work within 1 year

b. Completes financial closure within 1 year of license

issued date

c. Submits bi-annual progress report until construction

is completed

d. Testing and commissioning

e. Starts commercial operation

f. Pays Royalty

2. Transmission License



issued date


is completed


e. Starts commercial transmission

3. Distribution License



issued date


is completed


e. Starts commercial distribution

Table 2: Royalty Schedule

Royalty Up to 15 years After 15 years

Annual Capacity Rs. 100/kW Rs. 1000/kW

Royalty

Annual Energy 2 % of average 10 % of average

Royalty tariff/kWh tariff/kWh

generated generated

Based on: Schedule 11 relating to Electricity Act, 2049

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For further details, please contact:

Department of Electricity Development

� Director General

� Deputy Director General (Privatization Division)

� Senior Divisional Engineer (Project Promotion Section)

� Senior Divisional Engineer (License Section)

Anamnagar, Thapagaon

Kathmandu, Nepal

Tel: +977 1 449-6800

Fax: +977 1 448-0257

Email: [email protected]

Website: www.doed.gov.np

Front Cover : BhoteKoshi Hydropower Project, Sindhupalchowk District, Nepal.

Back Cover : Kulekhani Hydropower Project, Makawanpur District, Nepal.

Photo Courtesy : BhoteKoshi Power Company Pvt. Ltd. and Department of Electricity Development.

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