15th December 2017
Mollah Amzad Hossain

Bangladesh Energy Regulatory Commission (BERC) has increased the power tariff by an average of 5.3%, effective from December 1, without considering the argument to reduce the tariff by the Consumers’ Association of Bangladesh (CAB) in the public hearing. It was for the eighth time the tariff increased in past eight years. The tariff was last increased in September 2015. After conducting public hearing on the proposals by the utility companies, the BERC announced the new tariff on the last week of November 2017. It, however, did not accept the proposal to increase the price for the bulk category. It was also told that the power tariff would require increasing further if the bulk tariff proposal is entertained. But the commission advised the government to continue providing subsidy for the bulk category.

One English daily reported, “Much to the chagrin of consumers, rights groups and businesses, the Bangladesh Energy Regulatory Commission (BERC) yesterday (Nov 23, 2017) raised the power tariff by 5.3 percent or Tk 0.35 per kilowatt-hour unit on an average.” The tariff was hiked to meet the revenue requirement of power distributors.

BERC said while fixing the new rate, the commission has taken into consideration the interests of all consumers, including companies, industries and people of low-income groups.

But the commission did not raise bulk power tariff demanded by Bangladesh Power Development Board (BPDB) because of a government promise to provide Tk 3,600 crore as subsidies. 

Meanwhile, left-leaning political parties observed a half-day hartal across the country on November 30, protesting the hike.

The commission, however, withdrew the minimum charge for the use of power, giving some comfort to poor households who consume very low amount of electricity.

The marginal power consumers are charged Tk 90 a month by Bangladesh Rural Electrification Board and Tk 100 a month by the BPDB even if they consume electricity worth less than that amount.

As a result, the monthly bill for 30 lakh consumers, who use less than 50 units and account for 13 percent of all consumers in the country, will go down from next month, said the commission in a statement. It also said the tariff hike would not affect 38 percent of consumers. 

The retail rate for households using 0-50 unit has been fixed at Tk 3.50 per unit; 0-75 unit at Tk 4 per unit; 76-200 unit at Tk 5.45 per unit; 201-300 unit at Tk 5.70 per unit; 301-400 unit at Tk 6.02 per unit; 401-600 unit at Tk 9.30 per unit and above 600 units at Tk 10.72 per unit. Per unit power cost for irrigation pumps will be Tk 4.

Small industries will have to pay Tk 8.20 to Tk 9.84 a unit, depending on the period of the day. Educational and religious institutions, charities and hospitals will have to spend Tk 5.73 for using every unit of power, while per unit power cost for street lamps, water pumps and battery charging will be Tk 7.70.

Depending on the day, commercial users and offices will have to pay Tk 10.30 to Tk 12.36 per unit.

In February this year, the Bangladesh Power Development Board submitted a proposal to increase the bulk power tariff to Tk 5.59 a unit from Tk 4.87, which is a 14.78 percent hike. The BPDB had sought a 14.78 percent hike while other power distributors demanded up to 22 percent increase at retail level.

The BERC held a series of public hearings on the proposals of state-owned power distributors from September 25 to October 5. It also held a special public hearing on power tariff reduction proposal placed by the CAB to reduce the bulk power tariff.

The CAB had proposed reducing the bulk tariff price by Tk 1.32 per unit by taking different measures and implementing the previous BERC order to ensure the purchase of lowest-cost electricity by the BPDB.

Engr Mizanur Rahman, member BERC, dismissed the claims of consumer rights groups as appeared in the media that their pleas were ignored in BERC determination. He said that in our analysis and agreeing with pleas of CAB Tk 1,500 crore of expenditure has not been passed through while determining the tariff. But at the same time, one must remember that it is not possible for the Commission to do much about the inefficiencies and irregularities of the utilities. The Commission has accepted their audited accounts while determining the tariff. The power tariff has been fixed after reviewing all relevant aspects. On the other hand not agreeing with bulk tariff increase proposal, BERC has advised the government for continuing providing Tk 3,600 crore in subsidy. At the same time, utilities have been instructed for reducing cost of manpower and working on increasing efficiency of existing manpower instead of going for new recruitment.

When the attention of FBCCI President Shafiul Islam Mohiuddin was drawn on the latest power price increase, he said, “We do not want subsidy. But eight times power tariff increases over the past eight years have already created huge challenge for the industrial sector. The fresh increase now will adversely impact on competitiveness. Our industries will be exposed to challenges in global market.”

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said the tariff of electricity has reached a level that is going to make Bangladesh uncompetitive in the export market.

“Bangladesh used to enjoy an advantage in the export market because of cheap electricity price. That advantage has already eroded. Now we are getting into an area where we already have costly electricity. The trend is that it would go up further.”

He said that unfortunately the government was not focusing on how to make electricity more affordable and did not pay enough attention to setting up medium to large power plants and coal-based power plants and accelerating power imports from India.

“Electricity in India is quite cheap and available on the trading floor. All you need is regulatory framework and permission so the private sector, as well as BPDB, can import electricity by taking part in the auction. Indian producers would also like to export power to Bangladesh because they have overinvested in the sector.”

Prof Shamsul Alam, energy adviser to the Consumers Association of Bangladesh (CAB), said the proposals to increase the power tariff were not logical. “During the hearings, the proposals could not be justified. Still, the tariff was hiked.”

Measures like producing less power burning diesel and rationalizing capacity payment (payments for being available to produce power) for rental and quick rental power plants could have saved at least Tk 7,843 crore in 2015-16 fiscal year or Tk 1.56 per unit, according to the CAB.

On the other hand terming the power tariff hike negligible, Prime Minister's Energy Adviser Tawfiq-e-Elahi Chowdhury said the new tariff would not hurt people. He made the remark while talking to journalists after attending a program at Bidyut Bhaban in the capital. The BERC raised the retail power tariff on its own consideration, he said.

Replying to a question, State Minister for Power, Energy and Mineral Resources Nasrul Hamid said consumers using 200 units of power would have to pay Tk 20-25 more per month and its effect on customers is tolerable.

The BERC determination evidences that monthly power bill of users consuming 100 units would increase by Tk 22, 150 units Tk 48, 250 units Tk 90, 350 units Tk 137, 450 units Tk 196 and 1,000 units Tk 194.

Special fellow of the Centre for Policy Dialogue Dr Mustafizur Rahman mentioned in press statements about power tariff increase that: “Repeated increase of power tariff is depriving both the users and generators of power from getting it at cheaper price. This would increase cost of production and cost of doing business. It would also adversely impact on competitiveness of export oriented industries. Consumers at different level will have to bear the burnt of increased cost of production.”

If we look back in 2009, power tariff of Bangladesh was the lowest in the region. Power price increase was initiated at that time for reducing subsidy. Since then power tariff has been increased eight times at consumer level. Even after the last round of increase effective from December 1, power tariff of Bangladesh is the lowest in the SAARC region other than Bhutan. Engr Alamgir Kabir, former Chairman of BPDB in 2009 said that power generation cost would keep increasing over the subsequent three years for higher cost of liquid fuel based rental and quick rental plants. The increased cost would be covered through increasing tariff at consumers’ level. Power tariff would gradually reduced after 2012 when liquid fuel based power plants would be gradually phased out as traditional fuel coal and gas based base load power plants come into commercial operation. But that expectation did not come true even at end 2017. The draft PSMP 2016 has given indication of average generation cost in 2021 as Tk 8.  If the prescribed fuel mix can be achieved, the generation cost in 2041 would be Tk 12. But special advisor of former caretaker government Prof Dr M Tamim observed that the anticipated generation cost may not be achieved.

Till 2009, domestic natural gas exclusively dominated the fuel mix. It contributed about 88% to total generation. In 2016-17, the total energy generation is 57,276 Giga Watt Hour (Gwh). Of this, 38,082 Gwh (66.44%) is gas based, 9,950 Gwh (17.37%) furnace oil based, 2,627 Gwh (4.59%) is diesel based, 1,099 Gwh (1.76%) coal based, 982 Gwh (1.71%) hydropower and 4,656 Gwh (8.13%) came through import from India.

Lowering trend of oil price in global market created some comfort to Bangladesh for increasing liquid fuel based generation. The generation cost which was Tk 6 in 2014-15 came down to Tk 5.18 in 2015-16. It increased marginally in 2016-17 to Tk 5.34. But over the first six months of 2017-18, it has increased to Tk 5.99. The experts have observed that the present increasing trend of oil in global market may increase the generation cost by the end of the financial year.

Dr M Tamim said the power tariff increase would not have been required if the government adjusted price of liquid fuel matching with global price decline. The government has enough justification for reducing price of diesel by Tk 10/liter. BPC could easily bring price of furnace oil within Tk 25-30.

Energy analysts estimated the present contribution of liquid fuel to power generation capacity as 37%. Of this capacity, liquid fuel contributed about 22% to actual generation during the last fiscal year. Fresh initiative has been taken for increasing capacity of liquid fuel based generation. By next year, it may exceed 50%. This would significantly increase use of liquid fuel. The increasing trend of liquid fuel in global market would increase the generation cost. Of course, 1,000 MMCFD-equivalent LNG is expected to be added to gas grid by end 2018. LNG based power generation would also increase. But LNG being much costlier than local gas would also increase the generation cost.

Generation cost could come down if planned coal based large power plants could start operation within schedule. But the reality suggests that none of such plants may start commercial operation before 2020. There are possibilities of importing more power from neighboring country. This may have positive impact on cost of generation.

BPDB owns generation companies and also the sole buyer in Bangladesh. Though the generation cost was Tk 5.34/unit, it had to sale bulk power at Tk 4.90 last year. Even this time, BERC did not accept proposal for bulk price increase. Rather the commission has advised the government for providing subsidy. But in recent times, BPDB did not receive any subsidy. All that was given is loan from the government. The present loan burden of BPDB is over Tk 40,000 crore. They informed BERC that for paying the interest of the loan, they need Tk 0.21 per unit of power.

Prof M Tamim said during the last caretaker government, all loan obligations of BPDB were exempted in 2008. He has recommended relieving BPDB of all its loan obligations in the same manner. FBCCI President Shafiul Islam Mohiuddin also provided same opinion. He observed that such action would lead BPDB to launch fresh commercial operation. This would also relieve government from repeated   increase of power tariff.

Dr Shamsul Alam voicing consumers concerns observed that inefficiency and irregularities of the utilities and poor government planning are the prime causes of tariff increase. According to him, the manpower of new distribution company NESCO is 143% excess of the requirement. But BERC accepted the expenditure of excess manpower in passing it through for tariff determination. The government is compelling BREB to expanding its coverage area for achieving its political vision of power to all, ignoring feasibility. They are selling power at lower price than what it purchases. Consequently, BREB accounted for Tk 3,500 crore in losses. BERC should have asked the government for providing subsidy instead of passing it through in tariff determination. He questioned why should consumers pay for poor planning of the government?

Dr Alam also argued that the generation cost also remains high for not operating efficient plant according to merit order. That additional cost is being passed through during tariff determination. BERC member Engr Mizanur Rahman responding to such allegation said BERC did not pass through Tk 1,000 crore caused for not running power plants as per merit order. He said the allegation of CAB is not true as such.

In summary, Bangladesh has completely failed in planning and implementing exploitation of own fuel resources. Nothing has been practically done for using own coal and very little could be done for expediting gas exploration. Consequently, dependence on imported liquid fuel is increasing. The government is still stating that contribution of liquid fuel would gradually reduce with the commencement of LNG and coal import. Power import and nuclear power generation would also make major contribution.

But implementation of the present programs would make Bangladesh 90% dependent on imported fuel by 2030. That would reduce capacity of regulating prices at that stage. Sound planning, efficient manpower power management and efficient use of power and fuel at all stages would become essential. Bangladesh is lagging far behind in all these areas. It is really uncertain now when the present trend of price increase can be controlled. Many observe that it may not be possible restricting increase of cost of generation from Tk 8 to 12 as forecasted between 2021 and 2041. Hopes may end in despair. The anticipation time is over. Bangladesh has to combat the price increase through enhancing efficiency. 


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