Originally posted in The Financial Express on 22 May 2022
Though the country’s power generation capacity has swelled over 25,000 MW – more than 40 per cent it actually can use – the state-run power agency has continued to purchase six per cent of electricity from the pricier rental and quick rental plants.
This has been revealed in documents state-run Bangladesh Power Development Board (BPDB) has placed to the Bangladesh Energy Regulatory Commission (BERC) during the recent public hearing on its proposal to hike the power rates despite protests from businesspeople who call the move suicidal to the economy, reports UNB.
According to the documents the government has to buy about 1,200 MW of electricity from rental and quick rental power plants spending Tk 45.64 billion in the current fiscal year, while BPDB’s revenue deficit is Tk 302.52 billion.
To offset the revenue deficit, the BPDB moved a proposal to the energy watchdog body to raise electricity tariff to Tk 8.58 per unit at bulk level from the existing Tk 5.17.
The BPDB official data shows the country’s total generation capacity is 25,235 MW of which grid-connected generation is 22,348 MW upto April this year while the remaining 2,887 is captive generation, mainly produced by industry owners, exclusively for running their own industries.
The country’s highest generation was recorded at 14,782 MW on April 16 meaning that the surplus capacity is 10,453 MW (about 41 per cent).
Of the 22,348 MW, some 50.3 per cent (11,240 MW) is being generated by public sector entities while the remaining 49.7 per cent (11,108) MW is coming from the private sector.
The BPDB documents reveal the government has to spend a total of Tk 718.78 billion in the FY22 for total power production, of which Tk 444.34 billion will be spent for purchasing electricity from the private sector.
Of this amount, Tk 379.63 billion will be required to purchase electricity from the independent power producer (IPP) and small IPP plants in the private sector which produce 38 per cent (8,807 MW) of the total generation.
The documents show the government has to spend Tk 19.08 billion for buying power from rental and quick rental power plants which are 6.0 per cent (6,013 MW) of the total generation.
The data also shows the government will need to spend Tk 45.64 billion to import about 10 per cent of electricity (1160 MW) from India.
As per the BPDB documents, currently there are three types of rental power plants-15 years rental (169 MW), 3/5 years rental (255 MW) and No Electricity, No Payment rental power plants.
It is mentionable that despite surplus electricity generation over demand, the government in the last four to five months extended the contracts of a total of 10 rental power plants.
Of these, some five rental power plants got extension on March 23 in the Cabinet Committee on Public Purchase while four rental power plants got the approval on January 5 this year and one got approval on December 29 last year.
Although the deals were extended on a “No Electricity, No Payment” basis, an allocation of Tk 65.64 billion was approved by the CCPP to pay the owners of the rental power plants for their operations.
State Minister for Power, Energy and Mineral Resources Nasrul Hamid, however, defended the extension of the rental power plants’ contracts saying that the deals were made for “emergency necessity” to tackle the current situation.
“As there is a gas shortage, we have to run liquid-fuel based rental and quick rental power plants on full capacity to meet the demands,” he told UNB.
He also said these plants don’t oblige the government to make ‘capacity payment’ – i.e. payment for unused electricity that was the case with some earlier contracts. “As a result, the cost of electricity from these extended rental power plants came down by 30-40 per cent from the original cost,” Nasrul said.
The government documents show that of the approved five plants in March this year, three belong to Summit Group, one belongs to Dutch-Bangla Group and one to Orion Group.
It was learnt that the government has to purchase electricity from the plants at Tk 16.40 per unit under the extended deals.
Advisor of the Consumers Association of Bangladesh (CAB) and energy expert Dr M Shamsul Alam expressed resentment about the repeated approval of the rental power plants saying that there is no logical basis for the extension.
He said the government should have taken consumers’ opinions through public hearing at Bangladesh Energy Regulatory Commission before the approval.
He also said, “No approval is made for the interest of the consumers. Rather, all the approvals were given only to serve the interest of certain vested quarters.”
At a press conference on Saturday the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) said raising power and gas prices will be suicidal to economy recovering from pandemic shocks.