Reforming Small Power Systems under Political Volatility: The Case of Nepal

This paper assesses the electricity sector reforms across small power systems while citing Nepal as an example. The on-going political instability and increasing electricity demand make power sector reform in Nepal and similar small systems a more complex process. As international reform experiences provide plenty of lessons to learn; raising electricity tariffs and adjusting subsidies in the presence of an effective regulation body are important in the short and medium term. The creation of an effective regulatory commission is also more urgent than unbundling the sector in smaller systems though accounting separation may sometimes be desirable as in the present context in Nepal. In the long run as the system grows, vertical separation and competitive privatisation may be pursued together with the creation of a functioning wholesale market by horizontally splitting the generation segments.