What are Wheeling Charges in Electricity Bills?

Wheeling charges in electricity bill refer to the fees imposed by the utility company for the
transportation of electricity through its transmission and distribution infrastructure. This charge is
applicable when electricity is generated at one location but consumed at another, requiring the
electricity to be ‘wheeled’ or transported through the grid to reach its destination.
The concept of wheeling charges is typically common in deregulated electricity markets where
multiple generators and consumers operate within the same grid. In such systems, electricity can be
generated at various locations, including power plants, renewable energy facilities, as well as
individual households equipped with solar panels.

When electricity is generated at a location different from where it is consumed, the service provider
incurs additional costs associated with transmitting the electricity over long distances and
maintaining the transmission infrastructure. Wheeling charges are designed to recover these costs
and ensure that the service provider can sustainably operate and maintain the grid.
Expenses Covered Under Wheeling Charges

Now that you know what are wheeling charges in electricity bill, let’s take a look at the expenses
they cover:
 Transmission Costs: These include the expenses incurred in transmitting electricity over high-
voltage transmission lines, which often span long distances to connect different regions.
 Distribution Costs: These charges relate to the distribution network, including substations,
transformers, and distribution lines, which carry electricity from the transmission grid to
individual consumers.
 Maintenance and Upkeep: Wheeling charges also contribute to the ongoing maintenance and
upkeep of the transmission and distribution infrastructure, ensuring its reliability and efficiency.
 Grid Management: The costs associated with managing the grid, ensuring stability, and
balancing electricity supply and demand are also part of wheeling charges.
The calculation of wheeling charges can vary depending on factors like the distance between the
generation and consumption points, the capacity of the transmission and distribution infrastructure
involved, and any regulatory policies governing electricity transmission.

Need for Regulation of Transmission Tariffs

The electric utility industry throughout the world has been undergoing significant changes due to
the process of deregulation. Under the deregulation scheme, electricity businesses have unbundled
into three components: generation, transmission and distribution. It is easier to bring Competition
in the generation and distribution sector but difficult to introduce competition in the transmission
sector due to its monopolistic nature. In the transmission sector, it is not possible to construct
separate transmission lines for every power generation facility hence market operator needs to
implement appropriate pricing methodologies to introduce fair competition in the electricity sector
and provide an efficient economic signal to market participants.
A proper transmission pricing could meet revenue expectations, promote an efficient operation of
electricity markets, encourage investment in optimal generation and transmission line locations and
adequately reimburse (बेहोरिदिन) transmission assets owners.

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Methodology for Wheeling Charge Determination
Different methods for wheeling charge determination can be applied some of them are as follows:
1. Postage Stamp Method
This is the simplest transmission pricing mechanism, in which users in the same region pay the
same charges irrespective of their locations. This method does not require power flow calculations
and is independent of the transmission distance and network configuration. Key advantages of the
postage-stamp method are that this method is simple and transparent that market participants can
easily understand also for regulators this method is easy to implement. In addition to that, it ensures
a return on the embedded cost of transmission services. However, this method does not take into
account the utilization of the network which leads to discrimination among the user and the Market
that is employing this method alone for wheeling charge allocation have low efficiency.
2. MW-Mile Method
This method allocates the transmission charges based on the magnitude of transacted Power and the
geographical distance between the delivery point and the receipt point. This method is an improved
version of the postage stamp
method and can be done in two ways:
 Distance-Based MW-Mile Method
 Flow-Based MW-Mile Method

Distance-Based MW-Mile Method

Distance traveled by energy in a specific transaction is considered for wheeling charge computation
without accessing the quantum of energy flow in that transaction. This method is simple, which
makes it easy for the users to understand the system of transmission prices fairly and transparently
and for the system operator it will be easier to implement this method. In addition to this, from the
perspective of an investor in transmission infrastructure, this method is superior as it allows
investors to fully recover their costs, providing efficient investment incentives. But the distance-
based method due to not being based on the actual operation of the system does not provide the
correct economic signals to users, leading to discrimination between users and a reduction in the
allocative and dynamic efficiency of the market.

Fow-based MW-Mile method

The power flow model is used to calculate the flow caused by the transaction on each circuit of the
transmission system. The ratio of the power flow due to the transaction and the circuit capacity is
determined and this ratio is multiplied by the circuit cost to obtain a cost for the transaction on each
circuit.
Cost of Transaction= [(power flow due to the transaction)/(circuit capacity)]*( circuit cost)
(source: Bidhyut-2079,NEA,Page No. 110)
Unlike distance-based MW-Mile method where transmission charges are allocated based on the
quantum of capacity booked without accessing the actual flow of the line, this method allocates
prices to users based on the actual use of the transmission facility, resulting in decreased
discrimination between users and increased allocative efficiency. However, generally total power
flows in the circuit are less than the circuit capacity which may cause the risk of covering the capital
cost, resulting in this method doesn’t provide an economic signal to investors of transmission
infrastructure from the perspective of capital cost recovery.

3. Nodal Pricing Method

In nodal pricing method, there is a variation in the price according to changes in geographical
location. Hence this method of pricing is also termed locational marginal pricing (LMP). Under this
methodology, market clearing prices are calculated for several locations categorized as nodes. Each

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node represents a physical location where energy is injected by generators or withdrawn by loads.
These methods have been popularly used in complicated networks with possible loops like Chile,
New Zealand, and PJM (US).
After employing this method, managing congestion becomes effective as congestion costs are
reflected while calculating locational marginal pricing. Although nodal pricing methodology leads
to maximum efficiency, there are number of reasons that makes its implementation a challenge for
market operator.
Issues:
 Nodal pricing alone can’t guarantee the full recovery of investment cost
 Implementing nodal pricing approach system operator needs continuous real time information
about the whole market on a timely basis. To access this all, every market operator must have
advanced information technology and communication system itself.

4. Zonal Pricing Method

Zonal pricing aggregates nodes into a zone where all zone nodes are priced identically. The zonal
method of transmission pricing is a simplification of nodal method of pricing. This type of pricing
methodology is easy to implement in comparison to the nodal pricing method and it helps to cater to
the congestion of intra-zonal transmission networks in a better way. However, it is difficult to
categorize different market participants based on their similarity in generation and consumption
patterns that may cause market inefficiency like residents of predominantly industrious zones are
forced to pay higher electric bills due to congestion charges involve. This method has been
successfully implemented in WEPEX (US).

5. Power Tracing-Based Method

Bialek’s tracing method is based on the proportional sharing principle as shown in figure 2, which
implies that nodal inflows are shared proportionally among nodal outflows. This algorithm works
only on lossless flows. To obtain lossless flows from lossy one, line flow is an average over sending
and receiving end flows and by adding half of the line loss to power injection at each terminal node
of the line. This method determines the contribution of individual generators to every line flow
based on the calculation of topological generalized distribution factors. This tracing method can use
either the upstream looking algorithm or the downstream Looking algorithm. Upstream tracing
gives information about the contribution of each generator to each transmission line and the load
while the downstream looking algorithm provides information about the amount of load power
shared by the transmission line and the generator. This approach allocates the charges of each
transmission facility to a wheeling transaction based on the extent of use of that facility by the
transaction.
Considering four lines are connected to a node as shown in figure 2, the outflow f1 can be
represented in terms of the inflows (fa and fb ) as given by equation-1 and the same applies to f2,
too.

Much research has been carried out to find the efficacy of the power flow tracing based wheeling
charge allocation and it has been found that this method is superior to having market efficiency
without nondiscrimination among market participants as the loads and generator's shares price based
on the usage of the particular line.
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Provision of Wheeling Charge in Nepal
Though the methodology that should be implemented has not been finalized through ERC, there has
been the provision of wheeling charge mentioned in Power Purchase Agreement signed with IPPs
which is as follows: “NEA, if necessary, as per instructions of the load dispatch center, can purchase
additional energy which is within the installed capacity mentioned in the generation license of a
project at a rate of contract energy purchase rate. If the developer wants to sell the energy to entities
other than the NEA, after obtaining the prior approval of NEA (if technically possible), NEA can
allow the use of the transmission structure by charging the Wheeling charge specified by NEA”. As
per Clause (e), Sub-Section (1) of Section 13 of the ERC Act, 2017 it is stated that transmission
charge (wheeling charge) determination is to be done by ERC.

Also, as per Section 13 of ERC Rules, 2018, regarding electricity transmission charges, following
has been provisioned:
1. The Commission may, while fixing electricity transmission charges pursuant to Clause (e) of
Sub Section (1) of Section 13 of the Act, take all or any of the following matters as the base in
addition to the criteria to be followed for fixation of purchase/sales rate as referred to in Rule 10:
 Consumption capacity of the users or amount and distance,
 Point of Connection,
 Zonal Transmission Charges,
 Investment to be made for the construction or extension of transmission line.
2. While fixing electricity transmission charges pursuant to Sub-Rule (1), separate charges may be
fixed for National Transmission Grid and other transmission line sections.
3. Other criteria relating to fixation of electricity transmission charges shall be as determined by
the Commission.

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Agreement between NEA and RPGCL
Transmission Interconnection Agreement has been signed on may 9,2022 between the Nepal
Electricity Authority and Rastriya Prasaran Grid Company Limited which help to establish the
smooth operation of two different transmission networks to be interconnected at the designated
locations and facilitate evacuating power from different IPPs through RPGCL’s transmission system
to NEA’s transmission network. This is done by envisaging(परिकलपनन गि् ) open access in
transmission as such this agreement acts as an umbrella agreement covering all incoming IPPs that
will be connected to and using RPGCL’s transmission network for wheeling their power to NEA’s
transmission network. To facilitate open access in transmission as envisaged through this agreement,
there is of utmost importance for us to implement an appropriate methodology that could allocate
the transmission charge among the users fairly and equitably.

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In Nepali:
बिजुलीको बिलमा व्ीीलिं चाज््ह के ्ुन ्?
बबजुलीको बबलमन वहीीलिग शुलकले युदिीलिी कमपननले आफनो प्निा ि वितिा पूिनवानि मनरवत बबजुलीको
ढुिनननकन लनगग लगनएको शुलकलना जननउँ छ। यो शुलक लनगू हुनछ जब बबजुली एक स्ननमन उतपनिन गरिनछ ति
अक्मन खपत हुनछ, बबजुलीलना 'हिनीलि' िन ग्र मनरवत गनतवयमन पुगन आिशयक पिव छ।
हिनीलि शुलकको अिानिान ्नमननयतयन ननयननतत बबजुली बजनिहरमन ्नमननय छ जहनँ ाेिै जेनेिेििहर ि
उपभोकतनहरले एउिै ग्र ीभत कनम गछव न न। तयसतन पानलीहरमन, पनिि पलननिहर, निनकिानय ऊजनव ्ुविानहर,
्न्ै ्ोलनि पयननलहर जरनन गरिएकन वयनकतगत घिहर लगनयत विीभनन स्ननहरमन बबजुली उतपनिन गनव
्ककनछ।
खपत भएको ठनउँ भनिन रिक स्ननमन बबजुली उतपनिन गिनव ्ेिन पिनयकले लनमो ििु ीमन विदयुत न पिनह गनव ि
प्निा पूिनवानिको ममवत ्मभनिमन ्प खरव वयहोनप
ुव नप हुनछ। वहीीलिग शुलकहर यन लनगतहर पुनःपनपत गनव ि ्ेिन
पिनयकले दिगो रपमन ग्र ्ञरनलन ि ममवत गनव ्कने ्ुनननशरत गनव डरजनइन गरिएको हो।

व्ीीलिं शुलक अन्ं्् कभर ंररएको खच्

 प्निा लनगत: य्मन उचर-भोलिे ज प्निा लनइनहरमन बबजुली प्निा गिनव लनगने खरवहर ्मनिेश छन न, जुन
पनय: विीभनन केतहर जरनन गनव लनमो ििू ीमन रैीलनछ।
 वितिा लनगत: यन शुलकहर वितिा नेििकव्ँग ्मबननात छन न, ज्मन ्बसिे शनहर, टनन्रमविहर, ि
वितिा लनइनहर छन न, ज्ले प्निा ग्रबनि वयनकतगत उपभोकतनहरमन बबजुली पुि‍य
न नउँ छ।
 ममवत्मभनि लनगत: वहीीलिग शुलकले प्निा ि वितिा पूिनवानिको ननिनति ममवत ि ममवतमन पनन योगिनन
पुि‍य
न नउँ छ, य्को विशि्ननयतन ि िकतन ्ुनननशरत गिव छ
 ग्र वयिस्नपन: ग्र वयिस्नपन, नस्ितन ्ुनननशरत गनव, ि विदयुत आपूनतव ि मनग ्नतुलन ्िग ्मबननात
लनगत पनन हिनीलि शुलक को एक भनग हो।

उतपनिन ि उपभोग बबनिह

ु र बनरको ििू ी, प्निा ि वितिा पि
ू नवानिको कमतन, ि बबजल
ु ी प्निालना ननयननतत गनप
कुनै पनन ननयनमक नननतहर जसतन कनिकहरको आानिमन वहीीलिग शल
ु कहरको गानन रिक हुन ्कछ।

प्ारा शुलक ननयमन ंन् आवशयक

विशिभि विदयुतनय उपयोगगतन उदयोगमन ननयननतत पकरयनकन कनिा महतिपूाव परिितवनहर भइिहे कन छन न।
डरिे गुले्न योजनन अनतगवत, बबजुली वयि्नयहरलना उतपनिन, प्निा ि वितिा गिी तनन भनगमन बनँडरएको छ।
उतपनिन ि वितिा केतमन पनतसपानव लयनउन ्नजलो छ ति एकनगाकनििनिी पकरनतकन कनिा प्निा केतमन
पनतसपानव गनव गनहो छ । प्निा केतमन, पतयेक विदयुत उतपनिन ्ुविानकन लनगग छुटिै प्निा लनइनहर ननमनवा
गनव ्मभि छै न, तय्ैले बजनि ्ञरनलकहरले विदयुत केतमन ननषपक पनतसपानव ्ुर गनव ि बजनि ्हभनगनहरलना
पभनिकनिी आग्वक ्िकेत पिनन गनव उपयुकत मूलय ननानविा विगाहर लनगू गनव आिशयक छ।
एक उगरत प्निा मूलय ननानविाले िनजसि अपेकनहर पूिन गनव ्कछ, विदयुत बजनिको कुशल ्ञरनलनलना बढनिन
दिन ्कछ, इषितम उतपनिन ि प्निा लनइन स्ननहरमन लगनननलना पोत्नदहत गनव ्कछ ि पयनवपत रपमन
(बेहोरिदिन) प्निा ्मपवत मनीलकहरलना पनतपूनतव गनव ्कछ।