15th December 2017
Dr. Prof Shamsul Alam

The plan of imported liquid fuel-based power generation for meeting future demand is suicidal for Bangladesh. The present generation capacity of liquid fuel is 37%. The implementation of new plan would take it beyond 50%. About 22% of the present generation comes from furnace oil and diesel-based power plants. It will be significantly increased soon. If the recent rising trend of liquid fuel price in the global market continues, it would trigger major crisis.

Dr. Prof Shamsul Alam of Daffodils University and Energy Advisor of Consumers Association of Bangladesh (CAB) said this in an exclusive interview with Energy & Power Editor Mollah Amzad Hossain.

What are your views about regulatory aspects of the power and energy sector?

Not only this sector, Bangladesh is not yet ready for free market economy. The enabling environment for competition could not be created at all yet. It is more pronounced in this sector. The case of LPG can be taken as example. Although the main business is in the private sector, users are not getting it at affordable price. The government is also anxious about it. But the price could not be reasonably regulated yet.

A competent independent regulatory commission is required for this. But Bangladesh could not develop it yet.

Bangladesh Energy Regulatory Commission (BERC) is mandated to do these works. Do you think they are not performing their tasks efficiently?

The BERC is mainly an upstream operator. It is not possible for them doing most of the works. They have to oblige the government instructions on many occasions. Their works harm consumers’ interests too often. It cannot also be told that they are competent in working as per the legal mandate.

Some instances merits discussion. The BERC has no control over tariff of IPPs. There is nothing wrong in it. Because, the IPP tariff usually determined through competition. But now tariff of IPPs, SPPs and rental plants are fixed based on unsolicited negotiated offers. Consequently, the BERC has no control over passing through this additional tariff on end users’ price.

On the other hand, there are issues also with fuel supply and price. The BERC has nothing doing there. Like the price of bulk gas, imported liquid fuel of BPC is determined by the government. The duty-free import of liquid fuel by private sector has significantly reduced their generation cost. But public sector producers’ cost could not be reduced as they have to get fuel from BPC. The burden of higher generation cost is transferred to users through increased price. The BERC was mandated for creating a level-playing ground for public and private sectors. It’s needless to mention that BERC has so far failed to do that.

Power generation cost could be reduced through ensuring gas supply consistently to the efficient gas-based power generators. The BERC has failed to create a situation for that. The government is authorizing gas connections on political considerations. The BERC could prepare a guideline for this and advise the government to follow it. It has not done that.

The BERC is legally mandated to protect and preserve the rights of consumers. Rationalization of tariff is essential for that. It has failed in doing that. The government’s interceptions and BERC’s own limitations are responsible for this failure. BERC is not yet competent for the task.

An example would amplify this observation. In public hearing of BERC and technical analysis of BERC in 2015, it appeared that wheeling charge of Power Grid Company of Bangladesh (PGCB) could be increased by 1.1%. But it was actually increased by 21% under influence of the government.

Some public limited companies like Summit Group is generating diesel-based power and BPDB is purchasing it at higher price. This is making windfall profit for the private sector plants. But BPDB is not getting fuel for much fuel-efficient generation units. The BERC has no legal control over this. But how much of the additional cost would be passed through is the absolute authority of the BERC to determine. But the BERC is not doing that or otherwise the government is influencing the BERC not to do that.

It is being told that the basis of power tariff increase is flawed. You were physically present in all the public hearings. What are your views?

Depreciation is an important element in the power tariff increase proposal. The depreciation of BREB is higher than other utilities. Other utilities have mentioned it as Tk 0.15-0.20 while for BREB it was Tk 0.61. The BERC has accepted this without considering its impact on consumers. Ignoring strong reservations of consumers, BERC has accepted such irrational costs in tariff determination.

Another matter merits discussion here. The manpower expenditure of NESCO, the new power distribution company of BPDB for Rajshahi and Rangpur regions, is much higher. The increase of expenditure is 143%. The new companies are usually formed for better customer services with lesser efficient manpower. The manpower structure can be changed after company grows into a profitable concern. NESCO did not fulfill these conditions. Yet 2,500 officials have been assigned to this company from BPDB with higher salaries. This has increased the cost. The BERC must not accept such irrational costs. But by ignoring our pleas, the BERC accepted it in the determination of tariff.

I have mentioned earlier that the expenditure due to higher operational costs of BREB is on the rise. The government as part of its political and economic vision has adopted program for providing power to all. For this, distribution networks are being expanded though not commercially viable. Again for government decision, power is supplied for agriculture and irrigation at lower prices despite buying the power at higher tariff. BREB is accounting for an annual loss of Tk 3,500 crore. BPDB is also losing for supplying power at lower prices than the generation cost. The government has given Tk 3,600 crore as loan to BPDB. The BERC is mentioning this as subsidy.

These costs must not be passed through in tariff determination. But the BERC has done this.

Why BERC is failing?

I have no answer as to why the BERC is miserably failing. They are bypassing all observations and pleas of public hearings. The generation cost now is Tk 5.34/kwh. Tk 1.50 is added for transmission and distribution. But highest end-users’ price is set at Tk 10.70/kwh. There is no reason for making such windfall profit from major users. Failure in controlling costs of generation, transmission and distribution has consequence for effecting subsidies and cross-subsidies.

How do you react to latest power price revision?

The latest revision of power price has not done according to the BERC mandate. It failed in its assigned task of protecting the rights and interests of the consumers. No explanation was also there as to why the bulk price has not been increased.

We have voiced that consumers are not incapable of purchasing power at its economic cost. But the consequence of inefficiency and corruption must not be transferred to the consumers. The consumers won’t bear the burden of wrong policies of the government.

You from CAB gave a proposal for reducing power tariff. There was hearing on that. But the BERC did not accept your proposal. Why?

There exists various crisis, imbalances and inconsistencies in generation, transmission and distribution. For these, Tk 8,000-10,000 crore has been passed through in tariff determination. We proposed for not increasing tariff over the next two years. The deficits so caused could be covered through enhancing efficiencies and reducing non technical loses.

But BERC announcement has no reflection of our proposal. We are waiting to see full version of BERC determination. There must be some observations.

Why BERC cannot work independently? Why they are not being made competent?

The EMRD is the employer of the BERC. Till that situation prevails, the BERC cannot work independently. The BERC must have different employer or otherwise it cannot grow as an independent authority.

The government has adopted fuel mix diversification plan. What are your views about it?

The manner in which fuel mix is being implemented now evidences that the government is significantly departing from Power System Master Plan (PSMP) and the five-year plan. Present mix is tending towards exclusive dependence on imported LNG. The government is appearing confused about own fuel with no effective plan for gas exploration. More and more liquid fuel based plants are given approvals. These are not acceptable at all. No one can predict what will be the cost of fuel and cost of generation in the present mode. But it can be said that these won’t remain within affordable limits.

PSMP 2010 prescribed for 50% contribution from coal for limiting cost of generation. You were against the coal power. What are your views now?

We had no objection for generating power from coal. Our movement was against a foreign company proposing open pit mining from a coal mine. We also want mining of own coal and using it for power generation. But now it appears the government suffers from indecision about mining and using own coal.

The government is proceeding with a plan for achieving mid income economy by 2021 and developed economy by 2041. What are your views on government plans for energy supply in its vision?

Let me give two quotations here. “Necessity is the mother of invention.”  The second one is “Necessity knows no law“. I want to see our future in the two quotations. Fuel demand will keep increasing for development and we must ensure smooth supply of it. But the way we are advancing on political considerations only may cause long term multimodal adverse impacts.

We must come out of the conflicts of interest for greater national interest. The government must get free from the influence of energy traders and take the best economic decisions.


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