Unbundling NEA with Its People at Heart

The Nepal Electricity Authority (NEA), a monolithic entity responsible for generation, transmission, distribution, and planning of the nation’s electricity supply, has long been a symbol of both pride and frustration. With over 10,000 employees, annual revenues exceeding NPR 100 billion, and a mandate that spans nearly every aspect of the power sector, the NEA is a behemoth. Discussions surrounding the unbundling of this utility have surfaced repeatedly, driven by the objectives of enhanced efficiency, transparency, and accountability. Landmark documents such as the Concept Paper on Energy Crisis Elimination and Electricity Development Decade (2013) and the more recent Energy Development Roadmap (2024) have identified unbundling as a pivotal reform. From a leadership perspective, managing such a vast institution presents formidable challenges, suggesting that unbundling could indeed streamline operations and improve manageability. Thus, unbundling is not just important, it’s inevitable. However, for this reform to succeed, NEA must place the human resources, at the heart of the transition.

The proposed unbundling would establish specialized entities, including the already-operational Rastriya Prasaran Grid Company for transmission and Vidyut Utpadan Company for generation. Distribution would be decentralized to provincial entities, while independent organizations would assume responsibility for system operation and potentially system planning functions. This shift would allow NEA to shed its conflicting roles and focus on core functions, while the newly established Electricity Regulatory Commission (ERC) ensures fair tariffs, competition, and consumer welfare.

Laws aren’t enough

The Electricity Bill, 2080 provides a legal framework, but laws alone cannot guarantee success. Nepal’s history is littered with well-intentioned policies derailed by poor implementation. Institutions, once established, develop a self-preserving inertia with employees fearing job losses or diminished influence often resist change. In a country like Nepal, where well-paying, secure jobs are scarce, such resistance reflects genuine anxieties that must be addressed through inclusive dialogue. Unbundling will fail if seen as a top-down decree; it must be a negotiated transition.

For four decades, NEA has driven Nepal’s electricity development. Its workforce, including some of the nation’s finest engineers, planners, and technicians, has maintained service despite chronic underinvestment and political interference. These employees are not just managers of billions worth of assets but custodians of institutional knowledge critical to the sector’s operation. Any reform endeavor will surely fail without the wholehearted participation and agreement of NEA's workforce. The reform experiences of various Indian states, including Himanchal Pradesh and Maharashtra, offer valuable insights on how swiftly unbundling efforts can go awry without adequate dialogue with employees and their representative organizations. With each Indian states having their own unique experience in the power sector reform process, India present Nepal with a significant case study for learning best practices in both human resource management and overall unbundling strategy to achieve greater success.

Perception Mapping

As a crucial initial step, NEA's management must first thoroughly assess employee perspectives on the proposed unbundling and its potential ramifications for Nepal's energy future and their individual lives. While top-level managers and engineers may readily understand the rationale, technicians who have dedicated their careers to maintaining uninterrupted power supply in challenging conditions, often far from urban centers, may harbor concerns about the impact of such disintegration on their retirement and other benefits. Proactively understanding these anxieties is fundamental to fostering a positive attitude towards the upcoming changes among all employees.

Human Resource Roadmap

Employees should be assigned to new entities based on their skills and expertise, ensuring successor organizations are well-equipped while fostering engagement and motivation through roles that align with their strengths. Engineers specializing in hydropower generation, for instance, could transition to VUCL, while distribution experts join future distribution companies. People should be given a choice to the point it is justified by their expertise and performance. A transparent evaluation and appellate system will be critical to ensure fairness. Recognizing that urban or revenue-generating roles (e.g., in distribution or generation) may be more desirable, NEA must standardize future pay scales to reflect effort, risks, and opportunity costs. A voluntary severance package should be offered to those opting out.

Clear Communications

Unbundling will generate new leadership opportunities, empowering mid-level and senior-level staff with greater responsibilities that could enhance job engagement and ownership. However, without careful handling, it will risks resistance from technicians, field workers, and unions, particularly if perceived as a threat to job security or benefits. To ensure smooth implementation, NEA must transparently communicate the reform’s advantages while guaranteeing protections for long-term obligations like pensions and healthcare. By proactively addressing these concerns, NEA can prevent potential politicization and turn skepticism into cooperation.

Trainings and Capacity Building

Comprehensive training is vital before and after unbundling. Pre-unbundling programs should educate staff on the new organizational structure, regulatory changes and operational processes for generation, transmission, distribution and others. Technical training will prepare employees for specialized roles, while leadership workshops will enhance strategic decision-making. Post-unbundling, ongoing capacity building will address operational challenges, promote harmonized efforts and ensure compliance with market regulations.

Regulatory and Policy Support

Proactivity in regulatory and policy level is key in ensuring success any reform process, including unbundling of a vertically integrated electricity utility. A stable regulatory and political environment is crucial, as shifting priorities of successive governments could disrupt the unbundling process and undermine its outcomes. The Ministry of Energy, Water Resources and Irrigation must render necessary policy and financial support for the reform process while the ERC establishes robust regulatory framework to facilitate a smooth transition. Both must encourage NEA to develop a dynamic human resource plan tailored to unbundling.

Staff will understandably resist any reduction in salaries or benefits, which would also violate Nepal’s labor laws’ norms. So, ERC must ensure that tariffs for successor entities account for immediate obligation such as salary and benefits and long-term obligations like pensions and healthcare. Employees may gravitate toward generation and distribution companies due to their predictable revenue streams, while transmission utilities, which may not always break even, could face diminished attraction. Bihar’s unbundling experience suggests that government guarantees for funding human resource obligations can boost staff willingness to transition to NEA’s successor organization, even when the successor organization may potentially struggles financially.

Leadership transitions also pose challenges in unbundling. While unbundling creates new leadership opportunities, alleged political interference and power play in appointing chief executives for government-backed entities raises concerns. Establishing transparent, merit-based appointment processes is critical to maintaining credibility and morale.

Unbundling NEA into specialized entities promises greater responsiveness to market demands, faster adoption of new technologies, and improved services. Unbundling will enable regulators and government institutions to bypass NEA’s massive bureaucratic setup, enhancing the effectiveness of policy and regulatory interventions. However, this vision hinges on the people within NEA, who power the sector. By prioritizing clear communication, merit-based placements, sustained incentives, and employee stakes in outcomes, NEA can ensure a low-resistance transition. This process must not be rushed as cutting corners could jeopardize Nepal’s power sector reform altogether. Is there’s a price of this reform? Yes. Some efficiency gains must trickle down to staff. But that’s a small cost for a smooth transition.

Saroj Koirala is a consultant specializing in electricity policy, markets, and regulation.