The Druk Green Power Corporation (DGPC) has proposed a domestic tariff for electricity from Nikachhu Hydropower project at Nu 6.54 per KWh for the period of January to June 2025.

The tariff proposal has been submitted to the Electricity Regulatory Authority (ERA).

The project is set to be commissioned by December 2023 with power evacuation set to commence on January this year.

Around 80 percent of the total energy generated will be exported to India through a Power Purchase Agreement (PPA) signed with the Power Trading Corporation (PTC), India, on November 20, 2014. This agreement spans 15 years and covers the entire year.

During the surplus months of May to October, the remaining 20 percent of saleable energy and royalty energy will be sold through the Indian Power Exchange. Conversely, during the lean season from November to April, this 20 percent of generation will be allocated for domestic sales to address energy deficits within the country.

The total project cost considered for the tariff is Nu 14.9 billion, excluding transmission line costs, with a debt-equity ratio of 55:45.

According to the tariff proposal report of DGPC, the proposed domestic generation tariff of Nu 6.54 per kWh for Nikachhu has been arrived at by using the total project cost of Nu 14.9B, a cost of equity as 13.72 percent, cost of debt of 10.07 percent, gearing ratio of 55 percent and energy volume of 427 GWh.

It also states that the other cost parameters such as inventory and operation and maintenance (O&M) cost have been considered in reference to the cost of similar hydropower plants.

The project has the designed annual generation of 491 GWh and a royalty energy of 12 percent.

It also states that the domestic tariff proposal is prepared in accordance with the tariff determination regulation 2016 and the domestic electricity tariff policy 2016 reflecting the actual cost of efficient business operation of Nikachhu Hydropower Plant.

The proposed domestic generation tariff has considered a net average annual energy of 427GWh for 2024- 2026.

“The proposal for generation tariff of Nikachhu is based on the recovery of the cost of generation reflecting the cost of efficient business operation,” the report states.

The report states that the proposed tariff has been worked out based on the provisions of the tariff policy to enable the recovery of permissible costs as per the regulatory framework.

Tangsibji Hydro Energy Limited (THyE) is a 100 percent subsidiary company of DGPC which was incorporated on April 25, 2014 as a Special Purpose Vehicle (SPV) for the implementation of the 118MW Nikachhu Hydropower Project.

The officials from DGPC said the tariff proposal is currently under review.