With the country unlikely to face any severe power demands in the coming months, the government has recently extended the contracts for five rental power plants with a combined capacity of 370megawatt (MW) by five more years - and all at an exorbitant rate.
The Cabinet Committee on Public Purchase on November 14 approved contract extensions and revised tariffs, after the power division sent a summary to the cabinet committee arguing to extend the tenure of these plants, saying it would take at least nine months to install new ones.
A PDB official seeking anonymity, however, said the country’s power generation capacity has reached 10,000MW, of which 1,500 to 2,000MW was left sitting idle due to a lack of maintenance and fuel shortages. Thus, there was currently no necessity to purchase power from rental plants.
The plants that received the extension were the 110MW Bheramara diesel-fired plant of Quantum Power Ltd, the 100MW Siddhirganj diesel-fired plant of Desh Energy Ltd, the 55MW Ashuganj gas-fired plant of Precision Energy Ltd, the 55MW Sikalbaha HFO-fired plant of Energies Power Corporation Ltd, and the 50MW Thakurgaon diesel-fired power of RZ Power Ltd.
The tenure of all five power plants under the original contract was three years and contract dates for two of them were yet to expire; the three-year contracts with Desh Energy will expire on February 18, 2014 and with Quantum Power on December 31, 2013.
Meanwhile, two of the power stations have so far faced monetary penalties for excessive fuel use, failing to ensure timely supply of electricity, or delayed commissioning.
Desh Energy was facing penalties of Tk1.5bn for using excessive fuel and excessive shutdowns of their plants.
Quantum Power was faced with a Tk2.5bn penalty for a massive failure in its rental power plant. The company operates an 110MW diesel-fired power plant, which currently produces around 11MW only.
It requested changing the fuel type of its plant from diesel to cheaper heavy fuel oil (HFO), which has now been approved by the cabinet committee.
The government had earlier scrapped a deal with the 55MW Sikalbaha rental power plant in Chittagong for discharging ash that caused damages to a PDB power plant near the site.
In the meantime, the PDB has continued to purchase electricity from RZ Power and Precision Energy Ltd, although their contract period expired on August 2 and April 7 respectively.
“Ultimately, PDB will face the deal’s financial consequences. In 2011-12 fiscal year PDB bought a total of 320bn unit (KWh) worth Tk208bn, of which Tk85bn – more than 40% of the total - was paid to rental plants,” a PDB official said.
An audit report by the Office of Comptroller and Auditor General (CAG) in 2010-2011 and 2011-2012 said due to the inefficiency in using quick rentals, PDB faced losses of over Tk23bn.
According to a cabinet committee summary, the five rental power plants have not reduced their rates during the renewal. The contract, variable operations and maintenance price were unchanged, while the present negotiated tariff also saw little alteration.
The expensive rental and quick rental plants were set up during the regimes of caretaker government and the present government on an emergency basis to overcome the country’s nagging power outages.
Professor Shamsul Alam, energy advisor of Consumer Association of Bangladesh, told the Dhaka Tribune the production cost of oil-based power plants was very high and the extension of these rental power plants would be “suicidal.”
“Not a single country in the world has succeeded in solving their electricity crisis through rental power plants,” he said.
He said the government could solve the power problem by repairing the existing power plants and solving the gas crisis instead of opting for rental power plants.
Chairman of Desh Energy Limited, Annisul Huq, however, told the Dhaka Tribune: “The government was more interested than us to renew the contract. We have paid a Tk500m fine as our power plant could not start production in time.”
About the efficiency of their plants, he claimed: “The machines we use are brand new. There is no doubt about their quality.”
“We owe PDB Tk1.5bn, we have already given undertakings over it,” he said.