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Power tariff hike in the offing?

  • Published at 12:11 am October 31st, 2019
Web_Power-Generation
File photo of Power transmission line Mehedi Hasan/Dhaka Tribune

BERC in June had increased the new gas prices under eight categories

Bangladesh Power Development Board (BPDB) and six state-run power distribution companies are pushing for increasing the retail power tariffs from 2020, less than four months after the gas prices were hiked.

BPDB also wants the bulk tariff to be hiked, while a leading power distribution company has proposed to raise the wheeling charge from next year.

Bulk tariff is the rate at which BPDB procures power from various power plants. Purchase rates  are  calculated  for  each  power  plant  and  details  of  the  rates  are  given  in  the  respective Power Purchase Agreement.

A wheeling charge is a currency per megawatt-hour amount that a transmission entity receives for the use of its system.

In separate letters sent to the Bangladesh Energy Regulatory Commission (BERC) between October 15 and 23, most of these companies said an “income deficit” has prompted them to submit the proposals to hike the power tariffs.

The deficits that the companies are facing will increase or profit margin will fall, if power prices are not revised according to the rising gas and fluctuating oil prices, the letters read.

Taking the proposals into account, BERC has decided to hold hearings between November 28 and December 3 at its office in Karwan Bazar, Dhaka.

In its letter, BPDB said it will have to spend Tk8738.1 crore for power supply, and in return, it will make Tk8685.5 crore in 2020 — showing a potential deficit of Tk85.6 crore.

The amount in the case of bulk consumers will be Tk9552.8 crore, feared BPDB.

BPDB and six distribution companies have written to BERC
Companies say income deficit led to price hike proposal
BERC to hold hearings between Nov 28 and Dec 3
Last power tariff hike was on Nov 23, 2017
Current installed power generation capacity is 19,290MW

Bangladesh Rural Electrification Board, which claimed to have 10 million new consumers in the last three years, however, hoped that its income and expenditure will not exceed each other in 2020.

Dhaka Electric Supply Company Limited (Desco) wants a weighted average increase of 5.06% at the retail level, with Dhaka Power Distribution Company Limited (DPDC) predicting a Tk184.83 crore deficit.

In the last fiscal year, the West Zone Power Distribution Company Limited (WZPDCL) registered Tk75.977 crore in profits. But a similar margin will be hard to make in the ongoing FY2019-20 and calendar year 2020, if the current retail tariffs prevail, it said.

Defending its proposal, Northern Electricity Supply Company Limited (Nesco) said it is likely to fail continuing its economic sustainability as its distribution charge is higher than retail tariffs.

It also fears that the distribution rate will shoot up by 13.91% in 2020 and impact the retail prices.

Power tariffs were last hiked on November 23, 2017. At that time, BERC on an average had raised the tariff by 5.3% or Tk0.35 per unit at the retail level, after hearing proposals of different state-owned companies between September 25 and October 5.

Bulk power consumers were exempted then. BERC last raised the power tariff for bulk consumers on September 01, 2015, by Tk0.23 per unit.

The wheeling or transmission charges were last raised on August 27, 2015, to Tk0.2744/kWh at 230kV lines, Tk0.2768/kWh at 130kV lines, and Tk0.2791/kWh at 30kV lines.

However, the country's leading transmission company — Power Grid Company of Bangladesh Limited — has proposed nearly 52% hike of the charges from 2020.

Contradictions

After announcing the new gas prices under eight categories on June 30, BERC Chairman Monowar Islam had claimed that there was no possibility of power tariffs spiralling.

“We may not need to increase power prices, if BPDB adjusts the production cost… But if BPDB makes any proposal, we’ll consider that,” he then said.

It is natural that if prices of fuel items used for electricity generation go up, power tariff will increase accordingly.

But the BERC chief’s comments contradicted the fact.

Even on October 12, BPDB officials at a day-long workshop claimed that there was no need to increase the power tariffs since the average production cost has decreased.

Terming the latest hike proposals illogical, Consumers' Association of Bangladesh’s (CAB) Energy Adviser Prof Dr M Shamsul Alam alleged that the rising expenditure in the power sector was not under the government’s control.

Hinting towards idle power plants, he said: “The subsidies are also on an upward trend. Gradual increase of the spending in the power sector has turned into a culture."

Mass hearings, the energy expert said, are just eyewash because they hardly benefit the people.

“We've long been boldly protesting any proposal to increase the prices of power and gas, but in vain,” he observed.

Extravagant plan to blame?

According to BPDB, the country’s current total installed power generation capacity is 19,290 megawatt (MW), excluding captive power and renewable energy — against the peak day and evening demands of 9,175.90MW and 11,586MW, respectively, recorded recently.

During summer, the average peak load hovers between 12,000MW and 14,000MW.

But in the winter, the demand stays around 7,000-7,500MW, clearly depicting that a massive amount of the installed capacity remain unused during that season, from mid-November to early February.

On May 29 this year, BPDB had registered a whopping 12,893MW production, the highest ever in the country’s history.

The government also plans to take the installed power generation capacity to 24,000MW by 2021.

However, it is yet to be figured out where the additional power will go, as the current highest consumer demand is around 12,000MW.

Subsidy in power sector

In the last 12 fiscal years, the government subsidised Tk53,696 crore in the power sector.

In FY2006-07, subsidies had amounted to Tk300 crore. But the amount went up over 26-fold to Tk7,970 crore as of the last fiscal year.

The sum of subsidies in the current fiscal year has been estimated at Tk9,000 crore — exactly 30-fold of what was paid in subsidies in FY2006-07.

Though a comprehensive account of the power plants, mostly private, sitting idle is not available at BPDB, it generally spends roughly 40% of the annual expenditure in the sector as capacity payment.

In FY2018-19, over Tk8,000 crore out of BPDB’s Tk21,000 crore annual spending was meant for capacity payment.

Capacity payment is the amount of money that the government pays to the power plants that are sitting idle due to no electricity demand.