The BERC Act embodies everything to create a fair ambiance of competition for all parties and protect the rights of the consumers. The Bangladesh Energy Regulatory Commission (BERC) could not yet formulate all rules and procedures for enforcement and compliance. Actions have been launched now for doing these. It is expected that BERC will soon be able to determine prices of all primary fuel fairly and transparently. BERC will also conduct a mobile court to ensure compliance. No unreasonable expenditure will be considered while fixing the prices. The profit margin will be determined based on equity and justice.
Jalal Ahmed, newly appointed Chairman, BERC said this in an exclusive interview with Mollah Amzad Hossain, Editor of Energy & Power.
BERC has already passed 20 years of its existence. How much could it justify its creation during this period?
It achieved partial success. BERC started operation in 2004 though the BERC Act was passed in the parliament in 2003. It started making small steps later during the tenure of former secretary Golam Rahman as Chairman of BERC. It started developing into a competent institution through its actions for determining prices of electricity, LPG, and Natural Gas. It started developing consumers’ confidence by determining tariffs and prices through public hearings. However, its journey towards a functional authority was severely impacted by the actions of the previous government that amended the BERC act to curtail its sole authority of determining prices. The interim government has already reinstated the authority of BERC by rescinding the amendment of the BERC Act. At the same time, BERC has been given the authority to fix the price of furnace oil and jet fuel. We hope that alongside protecting the rights of the consumers and ensuring transparency in determining fairly the power tariff and fuel prices, the BERC would work for a healthy competitive ambiance for investment in the energy sector.
Do you think the BERC Act has required provisions for operating as an independent organization like other countries of the world? Do you think some amendments are required for this?
BERC Act has the required provisions for its operation as an independent authority. However, all regulations and procedures need formulation, and competent human capital needs to be engaged to ensure enforcement and compliance by the licensees. The absence of required regulations for determining the prices of petroleum products impedes fixing the prices of petroleum through conducting public hearings. BERC sent the draft act to EMRD in 2012 and 2023. Unfortunately, those files cannot be traced there now. Three draft regulations have now been sent to EMRD after my joining BERC. These regulations will be let into the public domain after vetting by the Ministry of Law. There will be no issues for BERC in determining the prices of petroleum products after that. The work on engagement of members of BERC is in progress. Hopefully, these will be done within October 2024. That will enable BERC to start working as a fully independent organization at full strength.
BERC is supposed to protect the interest of consumers alongside ensuring transparent business operation of the licensees and creating a level playground for the public and private sector companies. Do you think BERC could establish its image as a consumer-friendly organization within two decades of its operation?
Please note that there are some administrative roadblocks in enforcing the BERC Act to make it consumer-friendly. To become consumer-friendly, BERC needs to determine the breach of acts by the licensees and award of punishment. BERC is required to conduct mobile courts for this. The provisions of the BERC Act need to be included and attached to the schedule of mobile courts of the Ministry of Home. We will soon take that initiative. That will create enabling opportunities for the BERC to enforce the directives given by BERC to the licensees for compliance during the determination of tariffs and prices. Mobile courts can monitor and administer.
On the other hand, transparency and accountability of the licensees can be established through taking on board the views and opinions of the representatives of consumers and consumer rights protection organizations. We have started preparing for that.
BERC is determining power tariffs and prices of LPG and natural gas through public hearings. EMRD is still not fixing the price of other petroleum products. The authority to determine prices of all fuel must be vested in BERC. Is there any scope for limiting high expenditures? Power tariffs and the price of gas have increased manifold over the past two decades. Consumer rights organizations and civil society allege that irregularities and corruption are mainly responsible for the repeated price increase. Will BERC take note of these?
Limiting power tariffs and the price of gas to affordable limits is a huge challenge. IMF officials at a meeting with us suggested the withdrawal of subsidies completely from the electricity and fuel sector. BERC will investigate the reasons why power tariffs and fuel prices are increasing repeatedly. For example, the present average power demand is 15,000 MW. But grid-connected power generation capacity is 28,000 MW. Consequently, the idle generation capacity is contributing to the increased cost of generation. The cost of Barapukuria coal is higher than imported coal. However, the power price of Adani Group, Payra Power Plant, and Bashkhali Power Plant of S Alam Group is higher than Barapukuria. We will investigate these. There is a crisis in fuel supply. Greater benefits could be derived if gas available now could preferably be supplied to fuel-efficient gas-based power plants. While determining power tariffs, BERC will consider all of the above.
Due to flawed planning, the supply of local gas is progressively reducing. Exploration for own gas was not done even after completing seismic surveys and identifying structures. Required FDI could not be attracted. After 1998 no large gas discovery could be made. BAPEX alone policy also failed to deliver. Financial obligations have been created at the Khulna power hub for the gas supply crisis. Required actions must be taken on a top priority basis for transmission of Bhola gas to Khulna.
All-out endeavors must continue to attract FDI for offshore exploration. The present government does not want to increase the prices of electricity and gas. But if the licensees come to us for a price adjustment, we will review that by conducting a public hearing. However, BERC will examine how subsidies can be reduced and how costs and expenditures can be minimized to a reasonable level.
There is a demand from the Consumer Association of Bangladesh (CAB) for operating the business of public sector power and energy companies at no loss no profit basis. Their demand does not consider the profit margins of these companies by BERC during price determination. What are your views about such demand?
There are two dimensions of this demand. How tariff will be adjusted if public sector companies run their business on a no-profit basis? There is nothing wrong with public sector companies operating their commercial business and earning reasonable profits. A crisis is created when companies earn windfall profits in non-transparent and illegal ways making consumers hostages. BERC through intensive monitoring will try to ensure that this does not happen. I was present as Chairman Petrobangla in 2007-09 in the BERC-conducted public hearing when the price adjustment proposal for gas was being reviewed. With the increase in the contribution of imported LNG to negate the impact of depleting gas production from domestic gas fields, there was no option but to adjust gas prices when required.
It requires you to bear in mind that the profit the companies earn is preserved in the government treasury. The state uses this for other development activities. But we need to be careful in ensuring that company officials do not take illegal benefits from the company-earned profits. The Ministry of Power, Energy and Mineral Resources has taken an appropriate decision reviewing all pros and cons of the matter.
BERC will be proactive now. We will thoroughly examine the justification for investment and expenditure while considering and determining price adjustments. We will scrutinize whether the cost increase emanated from flawed planning.
BERC created the Gas Development Fund (GDF) and Maintenance Fund for power plants. There are credible allegations that these funds have been used for other purposes. CAB has termed this as a bluff to the consumers. What is your opinion?
I will not term it a bluff or jugglery. These are tough allegations. It was justified in using these funds appropriately solely for the causes it was created. The delays in developing policies by BERC for utilizing the fund led to EMRD using the fund for other purposes. EMRD should have used it more appropriately. We should more carefully examine whether investments made for LNG import, unnecessary expansion of gas transmission network, and power plant construction were at all justified. This time we will develop a clear guideline about utilization of the fund in a justified manner.
What are the present and future challenges of BERC? How are you preparing to meet those challenges?
We have quite a few challenges. The power tariff cannot be adjusted soon. There is a huge difference between the cost of generation and the selling price. BERC, after preparing a strategy for minimizing the difference will move forward to EMRD. There are many challenges in making the liquid fuel price market-based. Diesel is the main fuel used widely used in Bangladesh. Can the users absorb the price shock if it is made market-based? We must bear in mind smuggling across porous borders if our price is cheaper than that of India. These are major challenges. EMRD, after taking over the responsibility of setting prices of gas through the amendment of BERC ACT has significantly increased the price of gas for industries and captive power. Stakeholders did not have any opportunity to share their views about the logic for the increase. In the changed circumstances, it will be a huge challenge for BERC to take on board the views and opinions of different stakeholders during price determination.
BERC could not engage the required human capital essential for covering all activities under its scope. What type of actions you are planning for engaging the required manpower?
The present organogram of BERC does not have scope for the engagement of required manpower. We are working with 82 people only. We are preparing an updated organogram proposing the engagement of another 62 additional manpower. We need to recruit qualified manpower and enhance their competence through appropriate human resource development initiatives. We need to ensure that, we do not run short of the required numbers of competent human resources for managing our assigned responsibilities in the energy, power, and LPG sectors. We will also develop networks with regulatory commissions of other countries doing like-for-like similar works. We can learn from the experience of other countries how to deal with challenging circumstances.
Regulatory commissions in other countries are working for the expansion of renewable energy and enhancing energy efficiency. Has BERC started doing that? What are your views about assisting the energy transition?
Energy transition is a priority of BERC in the changed world order. SREDA is working on this. But we will take the initiative for the efficient use of primary fuel. We will encourage the initiative for priority use of gas in higher fuel efficiency power plants. We will try auditing the energy conservation and energy efficiency of all licensees.
But we must bear in mind that all actions so far in Bangladesh for expanding RE are single-dimensional - solar only. There are a few challenges. It is extremely difficult to achieve a 40% contribution of RE or even clean energy by 2041 overcoming all challenges.