Despite this commitment, according to the Oxford Poverty Index, 43.4 percent of Nepalis on average are deprived of electricity (compared to 14 percent for drinking water) and the average is closer to 50 percent of those living in rural areas.
However, from a human rights perspective, electricity is a key component of the right to housing and while a lot of attention has been given to developing Nepal´s hydropower potential, not much has been said about the need to protect access to electricity as a human right.
Recently in a local newspaper, it was announced that the regulatory authority, the Nepal Electricity Commission, was set to hike tariffs after Tihar. If it does, it will be the first time in almost ten years. Despite applications by the Nepal Electricity Authority for increases – they are looking for 30 percent currently - the electricity tariff is the same as it was 10 years ago – a break for consumers given a current annual inflation rate of around 13 percent.
Who really benefits from this freeze on electricity tariff increases? Do low rates help the poor of Nepal get access to electricity? To answer these questions, we must start with this vital statistic: 60 percent of Nepalis have no access to the NEA electricity grid, and most of them live outside cities and towns. It seems, therefore, that low rates aren´t there for the poor, but for the growing urbanized middle class with their rice cookers and blowdryers. Keeping rates low has done nothing in terms of increasing accessibility for rural Nepalis because the service simply doesn´t exist in most places.
For those who have access, the current tariff, in place since 2001, has three parts: Low usage, under 20 units per month is rewarded with a lower tariff, while middle and high usage pay more, in theory. But do they? The picture is complicated by customers who pay the minimum rate, but actually consume additional power they don´t pay for, resulting in ´non technical losses´ equivalent to 10-14 percent of the electricity produced. In dozens of communities, the amount of electricity supplied, but not paid for, amounts to over 50 percent.
However, the NEA continues to equate low usage with low income, and in its application for a rate increase, has committed to maintaining the freeze on the current rate for those consuming less than 20 units per month. The current graduated rate, which equates low usage with low income, is seen as essential in protecting affordability for the poor.
In addition to the ´domestic tariff´, governed by legislation and regulated by the Nepal Electricity Commission, there is a second tariff, for ´temporary´ customers, including those who are unable to supply a land ownership certificate with their application – typically poorer consumers. These customers are required to pay a security deposit, plus at least 6 months of the basic electricity charge in advance, in order to be eligible for electricity service. Typically those with fewer assets and financial resources, ´temporary´ consumers not only must come up with extra start-up charges but also find themselves saddled, ironically, with a rate more than twice that of the regular, regulated rate. Once again, it seems, the poor pay more in Nepal.
As we have seen, the reality is that urban areas have access to the grid but the majority of rural communities do not. The NEA´s ´Rural Electrification Project´ was designed to make it possible for smaller settlements throughout Nepal to connect to the grid – but progress has been slow. A separate community tariff allows villages to finance line installation and maintenance. A government program subsidizes 80 percent of the cost – leaving the rural community to finance the remaining 20 percent. Thus, unlike urban areas, rural households must meet a much higher cost of getting on the grid, while city dwellers benefit from existing infrastructure and cheaper costs. Again, the poor, in this case, the rural poor, pay more to access electricity.
To increase access to electricity it seems clear that in Nepal we need to expand service – especially in rural areas. What about expanding access to poor communities through independent ´micro hydro´ projects? Despite the hype around hydropower potential in Nepal, only a small proportion of communities are in a position to rely on their own sources of electricity. This is because ´run of the river´ plants require year round water supplies to maintain a constant flow of electricity, and generally lack any or sufficient storage capacity to enable everyone to get power when they need it (generally all at the same time) even during monsoon. So even if low-cost loans were available to meet capital costs, most poor communities simply don´t have the year round water supplies they would need to develop this kind of alternative.
Rate freezes haven´t helped expand access to electricity to the poor and in fact, insofar as the NEA claims that unrealistically low rates have undermined their ability to develop new power sources, or maintain the existing system, rate freezes may have actually worked against increasing supply and service. They certainly haven´t increased access to electricity to those who can afford it least.
So, where do we go from here? Two years ago the Nepal government tabled legislation to restructure the electricity industry in a project funded and supported by the Asian Development Bank (ADB). But to date, the process has been stuck as the government has failed to proclaim its planned reforms into law. In addition to chopping up the NEA (´unbundling´) the legislation contemplates a new regulatory system. In North America similar trends 10 years ago had mixed results – and people still recall with horror the spiraling prices and blackouts in places like California.
While the planned restructuring of the electricity sector may be controversial, nobody is arguing for deregulation in Nepal – but for new and improved regulation – and this is something that residential consumers, the NEA, the ADB and others can agree on. But the key under any new regulatory system, to fight energy poverty, will be statutory protection – in the form of a consumer advocate who will protect the interests of low-income consumers.
Writer is a human rights lawyer with experience in consumer issues and electricity regulation
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