66pc hike in power tariff proposed following move to double gas price

Originally posted in The Financial Express on 26 January 2022

Now power board seeks to raise bulk electricity tariffs around 66 per cent, hot on the heels of proposed doubling of gas rates at this trying time, sources say.

The state-run Bangladesh Power Development Board (BPDB) has submitted its proposal to Bangladesh Energy Regulatory Commission (BERC) for hike, or upward adjustment, of the tariffs with retrospective effect from January 1, 2022.

State-run electricity-marketing and distribution companies would have to purchase bulk electricity at higher rates if the tariffs are raised.

In a knock-on effect, they might also seek to increase retail-level electricity rates to earn additional revenues from the end-users to make up for the purchase of electricity from the BPDB at the increased bulk rates, they say.

BPDB, the lone buyer of electricity from power plants, argues that its weighted average electricity supply cost would be Tk 8.58 per unit (1 kilowatt-hour) in 2022 compared to Tk 5.64 of 2021 due to increased cost in electricity purchase from power plants coupled with spike in fuel costs, including petroleum products, coal and liquefied natural gas (LNG).

“Withdrawal of tax waiver on the import of furnace oil since June 2020 and the slapping of 5.0-per cent value-added tax (VAT) on coal imports since July 2019 have also pushed up the overall electricity-supply cost,” it points out in placing the hike plea.

It wants further hike by Tk 0.56 per unit to Tk 9.14 per unit if the natural gas tariff is hiked by 100 per cent and Tk 0.69 per unit to Tk 9.27 per unit if the gas price is hiked by 125 per cent.

The gas companies last week sought to more than double the natural gas tariffs for all sorts of consumers citing the import of expensive LNG from the international market.

They have submitted proposals separately to the BERC to raise the weighted average natural gas price by 117.41 per cent to Tk 20.35 per cubic metre from existing Tk 9.36 per cubic metre.

BPDB’s existing average wholesale electricity sale price is Tk 5.17 per unit, which was raised to the current level following an 8.40-per cent, or Tk 0.40, hike in February 2020.

It has argued that it will have revenue shortfall of around Tk 325 billion in 2022 if the rates were not raised.

The state-run power board will have revenue requirement of around Tk 745 billion on account of electricity purchase and generation in total in the current calendar year, the BPDB argues.

The commission previously hiked the bulk tariffs of electricity by 118.14 per cent to 5.17 per unit from Tk 2.37 per unit in eight phases, between March 2011 and February 2020, citing rising electricity- generation costs.

The BERC raised retail-level electricity tariffs in February 2020 in the latest by 5.3 per cent, or Tk 0.36 to Tk 7.13 per unit from previous Tk 6.77 per unit.

With the latest hike two years back, the commission raised retail-level electricity tariffs by 89.62 per cent from Tk 3.76 per unit, in nine phases, between March 2010 and February 2020.

Currently, residential consumers who consume electricity within the range of 0-50 units pay Tk 3.75 per unit, while consumers of up to 75 units pay Tk 4.19 per unit, consumers of 76-200 units pay at Tk 5.72 per unit, 201-300 units users pay Tk 6.00 per unit, 301-400 units users pay Tk 6.34 per unit, 401-600 unit users pay Tk 9.94 per unit, and users above 600 units pay Tk 11.46 per unit.