Bulk electricity rates and transmission charges are likely to increase but consumer-level tariffs will probably not be raised, sources with knowledge of the matter told the Dhaka Tribune yesterday.
The Bangladesh Energy Regulatory Commission (BERC) is holding four days of public hearings over proposals to raise electricity tariffs at several levels of costing including at the bulk, transmission and consumer levels.
A BERC official, requesting not to be named, said the government had verbally requested the commission not to raise retail power prices.
He said the government cited falling international oil prices and threats from the BNP-led 20-party alliance and left-leaning parties, including the Communist Party of Bangladesh (CPB), as reasons not to raise retail electricity prices.
Electricity costs are rising because the government has taken the short-term measure of installing high-cost furnace oil and diesel-based rental power plants to ease the country’s mounting electricity crisis.
An announcement of fresh bulk electricity tariff hikes will likely be made at the end of next month, sources said.
During the hearing, members of left-leaning parties, including the CPB, requested the commission not to increase tariffs.
Protesters under the banner of Ganatantrik Bam Morcha staged a mass sit-in outside the BERC building in Karwan Bazar.
The price of oil, the primary energy for power plants, has slumped by over 50% in the international market.
But the government has not yet decided on a downward adjustment of domestic petroleum prices.
The technical evaluation committee of BERC has recommended raising bulk power tariffs. It recommended increasing the average per unit (per kilowatt-hour) tariff of the PDB by 5.16%.
The recommendation came yesterday after a public hearing on a proposal by the Power Development Board (PDB) to hike tariffs at bulk level by 18.12% or Tk0.81 per unit.
The hike, if approved, would take the bulk price of electricity to Tk5.51 per unit from the existing Tk4.70.
The production cost of each unit of power is around Tk6.54, therefore the PDB is losing Tk1.84 per unit at present.
BERC chairman AR Khan, members Salim Mahmud, Delwar Hossain, Md Maksudul Haque and Rahman Murshed, along with other stakeholders attended the public hearing at TCB Bhaban in the capital. AR Khan said there was some corruption and misuse in the sector.
“We have been giving some directives about this and will bring it to a stop,” he said.
“PDB buys electricity as a single buyer from public and private power producers. They have to come out of this,” he said.
The announcement of fresh electricity tariff hikes may be made by the end of next month but the tariff hike will have effect from March 1, 2015, a member of BERC told the Dhaka Tribune on condition of anonymity.
Consumers weigh in
Md Shamsul Alam, energy adviser of the Consumer Association of Bangladesh (CAB), opposed the BERC move to raise power tariffs at yesterday’s hearing.
In an abrupt move breaking with the tradition of holding an open meeting on such issues, BERC quickly declared the schedule of the bulk tariffs hearing.
Complaints against Summit Group
“The government signed an agreement with Summit Group on May 12, 2011 to build the dual-fuel 335MW Meghnaghat power plant. The agreement was amended on August 3 that year. In the amended agreement, diesel was decided to be used instead of furnace oil.
“If PDB could purchase electricity from a furnace oil generated power plant, the cost could be Tk14 per unit. Because of using diesel, the cost is now Tk35,” Shamsul Alam said at the hearing.
“This is an ill-conceived agreement and an invisible hand was present behind the signing of the amendment,” he said.
He urged BERC to place the complaint at their tribunal to find out the cause behind the amended deal.
Presentation of PDB Proposal
PDB Chief Engineer Mizanur Rahman presented their proposal before the commission.
He said: “The increased use of fuel oil products for power generation and the higher purchase cost of electricity from two state-run power generation companies has pushed up the supply cost of bulk electricity.
“This has imposed additional financial burdens on the PDB. If the government gave a subsidy of around Tk6,000cr this fiscal year, we would not need to hike electricity prices.”
He said the government wanted to spend Tk4,000cr in subsidies for FY2014-15.
Recommendation of BERC committee
“Our technical committee found their [the PDB’s] proposal to hike power tariffs to be justified,” Mostaque Ahmed, chief of the evaluation committee and BERC director (power), said during the hearing.
“For the sustainability of the state-owned organisation, BERC can allow power tariffs to be increased by 5.16% to help the PDB,” Mostaque said.
According to the committee’s recommendations, PDB’s operating revenue in FY2014-15 will be Tk255,179.14 million for 44,345.16 units at a production cost of Tk5.75 per unit.
If the government pumps in Tk4,000cr, the operating revenue will be reduced to Tk210,918.29 million and the production cost will fall to Tk4.89 per unit which is by more than 5.16%.
Stakeholders statement
“I do not think that at this moment there is any need to hike the price of electricity. It will negatively impact consumers,” Md Yasin Ali, member of parliament belonging to the Workers Party of Bangladesh, said.
CPB leader and economist MM Akash demanded the suspension of any government move on electricity prices until the completion of the public hearing.
He said the government is making a profit because the price of oil had decreased in the international market.
“This money can be used for subsidies,” he said.
“The process of hiking power prices is illegal. There is no justification and that is why we are protesting it,” Chief Coordinator of Gonosanghati Andolon Zonayed Saki said.
“The PDB proposal to increase bulk tariff rates by 18% may not be accepted at a time when current oil prices have come down to less than $60 per barrel from $115 in July, 2014,” Md Hossain Ali, Executive Director of Dhaka Chamber of Commerce and Industry Business Institute, said.
“In view of the drastic reduction of oil prices in the international market, this is a golden opportunity to boost the economy and fulfil the expectations of consumers and the business community by reducing tariff rates rather than increasing them,” he said.
“Increases in power prices would badly affect the competitiveness of Bangladeshi industries, particularly SMEs. This must be carefully considered,” he added.
Schedule of next hearing
As per the BERC schedule, the public hearing of the state-run Power Grid Company of Bangladesh to raise the existing electricity transmission charges and that of West Zone Power Distribution Company will be held today.