Electricity Consumer Protection: Current Issues and Way Forward

Electricity has become indispensable for daily life in the modern world, and it’s hard to imagine sustaining life without it. However, as Nepali citizens, we must recall the acute electricity shortages the country faced just five years ago. During that time, the entire nation endured over 18 hours of load shedding, while certain large industrial and commercial consumers received uninterrupted electricity through the trunk and dedicated lines in a preferential manner from the sole utility provider. This practice contradicts the spirit of the Constitution of Nepal, which aimed to establish a fair and equitable society. At that time, Electricity consumers valiantly fought through the years of darkness like a soldier in battle².

The post-global liberalization era initiated more than two decades ago had a considerable impact on the electricity market globally. Before the global liberalization era, most of the power utility companies were organized as vertically integrated monopolies. Generally, this form of organization meant that the electricity generation, management of transmission and distribution infrastructures, and supply of electricity were done through a single entity, which was often a state-owned entity. With the global liberalization movement, this vertically integrated monopolies were disintegrated into separate utilities. Electricity supply was treated as a common social benefit that should be provided to every citizen as a public service for maximum economic and social benefit. On the other hand, such an idea has been changed in line with the change in global order. Monopolies have been disintegrated and private participation has been encouraged, which has led to an environment of competition amongst the service providers.

Similarly, Nepal’s largest electricity distribution utility, Nepal Electricity Authority (NEA), was established in 1984 A.D. via enactment of the Nepal Electricity Authority Act, 1984, which entered into force on 2042.05.01 B.S. (August 17, 1985, A.D.) by a notification published in Nepal Gazette. The act, for the first time, defined the term Customer as a person who consumes electricity. Furthermore, it granted the power to the Authority to collect electricity fees and service charges from customers. NEA is responsible for providing affordable and reliable electricity services to its consumers. It is also still the vertically integrated pure “natural” monopoly. Before the enactment of the Electricity Regulatory Commission (ERC), the act granted the power to charge a monopoly price.³ Thus, there always remains a situation where a monopoly can limit output, charge higher power than in a competitive environment, reduce consumer welfare and reduce the choice of consumer consequently restricting consumer sovereignty as well.

Thereby, it became imperative and necessary for the state (regulator) toformulate a legal instrument relating to the protection of consumer rights and interests in a way that shall cover the nature of the service being delivered by these utilities. As a result, the Electricity Act 1992 A.D. envisioned forming a separate electricity tariff fixation commission to determine electricity tariff and related charges. After that, the Electricity Tariff Fixation Commission Rules established the Electricity Tariff Fixation Commission, which functioned as an ad hoc commission. Similarly, the Hydropower Policy 2001 went a step ahead in envisioning a regulatory body that would not only fix the tariff but also regulate the entire electricity sector. Almost after two decades, the Government of Nepal via the enactment of the Electricity Regulatory Commission Act, 2017 and Electricity Regulatory Commission Rules, 2018 established a fully functional commission on May 6, 2019, with a legal mandate to develop standards for consumer protection and regulation of overall electricity sector.

Categories of Electricity Distribution Utilities in Nepal

Electricity Regulatory Commission Act, 2017 defines utilities as a licensee refers to a person or corporate body licensed under prevalent law so as to generate, transmit, distribute, or trade electricity. In the context of Nepal, we can observe that currently there are three types of electricity distribution utilities, which are required to be regulated by the state. One of them is NEA (vertically integrated state-owned monopoly) which has been providing its service to around 5.13 million, an increase of 7.76 percent against 4.77 million in the previous year⁴.

Secondly, there is Butwal Power Company (BPC), which is itself a generation, transmission and distributing investor-owned (both public and private) entity, providing its services to about 60,000 consumers in western Nepal. Thirdly, Community Rural Electrification Associations owned by cooperatives located in their respective districts, which provide distribution services to about 0.51 million consumers⁵.

Thus, with an increasing number of consumers, rapid industrialization, and the entry of new players in the electricity markets, there is a need to protect the rights and interests of the most vulnerable. Protection of those, who are less oriented to the market focused economy such as domestic (household), small consumers, or households with low income should be the focus of the regulator and government as well.

Lack of Safety Centric Approach of the Distribution Utilities

It may not be premature to assert that the NEA’s negligence in ensuring the safety of electricity consumers could significantly tarnish its success and reputation. Although some may argue that the NEA’s role as the electricity provider in Nepal is paramount and should not be compared with consumer safety. But, having said so, the significance of consumer safety must not be overlooked. However, the present achievements of the NEA would not have been possible without the support of the public, as the NEA operates on a very foundation funded by taxpayer money.

Accidents caused by electrical-related instruments have been one of the major concerns in the post loadshedding era. According to a recent report of the National Disaster Risk Reduction and Management Authority, a total of 18,772 fire incidents took place in Nepal from 2014 to mid-March 2023, in which a total of 769 people lost their lives. 

Case Study-1:

One such incident unfolded in the heart of Kathmandu, where a humble abode turned into a blazing inferno overnight. Sunita Shrestha, a 42-year-old mother of two, recounts the harrowing experience, “I woke up to the sound of crackling flames and the acrid smell of smoke. My children and I barely managed to escape with our lives. Everything we owned; all our memories were reduced to ashes.”

An employee working at Juddha Barun Yantra Office in Kathmandu said that they had to rush their fire engines for 250 to 255 days in a year and their record showed that about 70 percent of those fire incidents were caused by short circuits6 and old connections.

Case Study-2:

On Friday evening, six members of a wedding party traveling from Dhanusha to Sindhuli were electrocuted when the bus they were traveling in touched a low-hanging high-voltage electric cable. The bus (Na 5 Kha 1752) touched the 11,000-volt transmission line at Baltiya of Sabaila Municipality-4 of Dhanusha along the East-West Highway when it was en route to Baltiya-Kothiya of Dhanusha from Jitpur, Dudhauli Municipality, Sindhuli.⁷

Similarly, data maintained by Nepal Police show that from mid-April 2018 to January 2019, a total of 518 cases of electrical accidents were reported of which 289 lost their life and 297 people were critically injured. Likewise, between mid-April 2017 to mid-April 2018, out of 520 cases of electrocution resulted in 321 deaths and 260 severe injuries. But when enquired with NEA, the blame usually is shifted to the negligence of people, electricity theft, lack of skilled manpower, lack of protective equipment and lack of awareness in public for electricity-related safety.⁸ Nevertheless, it is the NEA which has been mandated to ensure safer, reliable, and resilient distribution networks as per prevailing Electricity Act and Rules.

Prevailing laws related to electrical safety of electricity consumer

Currently, there is a noticeable absence of rules and regulations specifically addressing consumer safety related to electrical hazards. As a result, the NEA is exempt from liabilities concerning consumer losses or injuries due to electrical hazards. The existing regulations underscore the limitations of a robust energy regulatory authority and a significant oversight in protecting consumer interests. These deficiencies could impede the government’s efforts to boost electricity consumption, particularly within the residential sector9. However, following the adoption of federalism, the Government of Nepal has enacted and implemented the Uniform Criminal and Civil Code to address the criminal liabilities of a person or a corporate body. This includes the National Penal (Code) Act, 2017, and the National Civil Code Act, 2017.

(a) The National Penal (Code) Act, 2017

Section-178 (1) of the National Penal (Code) Act 2017 provisions that “No person shall do any act, with the knowledge that, or having reason to believe that such act is, in an ordinary course, likely to cause the death of another person. Similarly, section 182 (1) of the same act provisions that “no person shall cause the death of anyone by doing a negligent act.” Such offenses are liable to a sentence of imprisonment for a term not exceeding Three (3) years and a fine of up to 30 Thousand NPR.

Additionally, Section-30 of the Penal Code, 2017 also provisions that if any firm or corporate body commits or causes to commit the crime, a person responsible for committing the crime shall be liable to punishment. However, if a person who committed such a crime cannot be identified, the concerned owners and partners, the director or managing director, the general manager and even the chief executive of such body shall bear the criminal liability.

Thus, it is evident from the aforementioned provisions that any negligence by NEA (or any distribution licensee) personnel or employees resulting in death or grievous injury can be classified as a criminal offense under this clause. Furthermore, the act stipulates that any firm or corporate body can also be held liable for such crimes.

(b) Electricity Act, 1992

Section-26 of the act provisions that the security measures to be adopted in the process of generation, transmission or distribution of electricity shall be as prescribed. As such no consumer protection guarantee was realized during enactment of this legislation.

(c) Electricity Rules, 1993

Chapter-3 of Electricity Rules 1993 has provisions about the matters to be followed by distributors and consumers of electricity. Rule 38 (1) specifies that the licensee shall assign the technician to remove any danger. Further, Rule 38(2) also provides that whether or not information is received from consumers, the licensee shall timely conduct inspection and maintenance of the service line to ensure the safety of the distribution line.

Although the rules mandate that distribution licensees (such as NEA, BPC, etc.) periodically inspect and maintain distribution lines to identify and mitigate potential hazards, they lack any form of punishment or sanctions for non-compliance by the licensees.

(d) Electricity Regulatory Commission Act, 2017

Consumer protection is one of the key responsibilities of the ERC as mandated by the Electricity Regulatory Commission Act 2017. However, there is a lack of substantive provisions specifically addressing consumer rights against negligence of NEA regarding electrical safety issues.

(e) Directive related to electricity consumer rights, 2023

Recently, the ERC enacted a legal instrument to ensure the protection of electricity consumer rights and interest in the monopolized electricity distribution sector. Directive Relating to Electricity Consumer Rights, 2023 for the first time established the right of electricity consumers against any kind of exploitation from distribution licensees. Not only that, but it also further vaguely guaranteed the right to receive compensation from utilities for hazards or damages due to the fault of the licensee.

The directive obligated the distribution licensees to ensure the “Quality and Reliability” of electricity supply¹⁰. Clause (7) of the same directive seeks the basic infrastructural requirement for establishment of Distribution and Consumer Service (DCS) office. Similarly, clause (13) of the directive further provisions the stepwise procedure for dispute settlement of any electricity-related conflict between the distribution utility and consumer.However, the directive lacks substantive provisions to punish or sanction distribution licensees if they fail to comply with this regulatory instrument. Clause (11) of the directive outlines penalties¹¹and compensation¹² to be imposed on distribution licensees for noncompliance, but it does not specify any procedures, methodologies, or amounts.

(f) NEA Electricity Distribution Bylaw, 2021

The bylaw describes processes and methodology for the distribution or supply of electricity from NEA. However, bylaw (41) of the NEA Electricity Distribution Bylaw 2021 provisions “Every consumer shall receive an uninterrupted supply of electricity. But any damage or loss caused due to disruption of supply, NEA shall not be held liable”. Similarly, bylaw 41 (2) provisions that “NEA shall inspect the wiring as distribution licensee only and if any loss or damage is incurred after such check or inspections, it shall not be held liable”.

The aforementioned clauses are highly contentious and effectively exempt the NEA from any liability for damages or losses resulting from their inefficiencies. Globally, distribution licensees are held accountable to their consumers, but this is not the case with the NEA. Consequently, Clause (41) of the bylaw contradicts the spirit of the prevailing Electricity Act and Rules and should be amended immediately.

Conclusion

As Nepal’s electricity market evolves, the imperative of protecting electricity consumers grows more pronounced. In this dynamic environment, the ERC needs to assume a robust role in safeguarding the rights of vulnerable consumers within the energy sector. The current scenario highlights concern about anti-consumer regulatory frameworks and a lack of consumer awareness in the electricity sector, making consumers vulnerable to exploitation. If the consumer is unaware of the rights, he/she may not be able to assert or claim his/her right. Consumer awareness reduces the chances of consumer exploitation in the marketplace. Being aware of their rights immensely helps in their protection. In developing countries like Nepal, it is often observed that consumers are unaware of their rights, consumer protection agencies, and existing redress mechanisms.

To address this, regulators like ERC, distribution utilities, and consumer advocates must prioritize consumer education about their rights. Periodic reviews of anti-consumer rules and bylaws are essential to ensure consumer protection. Negligence and reckless activities by utilities should be liable to legal consequences under the Rule of Law. By taking these steps, regulators like the Electricity Regulatory Commission can strengthen their presence and empower consumers with knowledge about their rights and responsibilities.

1 Adv. Santosh Parajuli specializes in Energy and Corporate Law. 
2 https://kathmandupost.com/columns/2024/02/08/discarded-heroes
3 Nepal Electricity Authority Act 1984, section 19 (d) provisions the power of determination 
of electricity fees and charges as a function and duty of the NEA.
4 Annual Report of NEA for FY 2022/23 A.D.
5 Ibid
6 https://thehimalayantimes.com/kathmandu/surge-in-electrical-short-circuit-fires-wreaking-havoc
7 https://myrepublica.nagariknetwork.com/news/electrocutions-killed-289-people-in-six-months/
8 Ibid
9 https://english.onlinekhabar.com/electricity-consumption-saftey-issue.html
10 Directive relating to Electricity Consumer Protection, 2023, Chapter-2, Clause-3 to 6. 
11 Clause 11 of Directive relating to Electricity Consumer Protection, 2023 states that ERC may levy penalty on distribution licensee if they fail to 
comply with the conditions as mentioned.
12 Clause 12 of Directive relating to Electricity Consumer Protection, 2023 states that Distribution Licensee shall make public the information 
incase if any compensation is required to be provided due to non-compliance of the directive.

This article is taken from the 6th issue of Urja Khabar, a bi-annual magazine. Which was Published on 15 June, 2024.