Five oil-fired quick rental power plants may be given extension of tenure again

The government is considering again extension of the tenure of five oil-fired quick rental power plants, having a total generation capacity of around 457 megawatts (MW).

This time the tenure of these quick rental power plants is set to be extended by two years under the 'no electricity, no payment' mechanism, said sources.

These quick rental power plants came into operation in mid-2011, and got an initial extension by five years in 2016 under the original contract terms, they added.

The Power Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) has already endorsed a proposal, sent by the state-run Bangladesh Power Development Board (BPDB) for tenure extension of these power plants, a senior ministry official told the FE on Thursday.

The proposal has been sent to the Bangladesh Energy Regulatory Commission (BERC), the power plant license provider, for scrutiny.

After attaining the commission's approval, a final nod from the Prime Minister's Office (PMO) will be required before signing fresh deals, extending the tenure of the power plants.

The power plants under the consideration of extension include Summit Power's Madanganj 102 MW quick rental power plant, Orion's Meghnaghat 100 MW quick rental power plant, Dutch Bangla Power's Siddhirganj 100 MW quick rental power plant, and Khulna Power's Khulna 115 MW quick rental power plant and Noapara 40 MW quick rental power plant.

The power plants are directly listed companies or subsidiaries of companies listed with the country's two bourses - the Dhaka Stock Exchange and the Chattogram Stock Exchange.

Owners of these power plants along with many tenure-expired and to be expired ones have long been lobbying with the government to get the tenure of their power plants extended.

They lately won endorsement from the Bangladesh Securities and Exchange Commission (BSEC) to lobby with the government high-ups for extension of the plants, said sources.

The BPDB will purchase electricity from such plants under the 'no electricity, no payment' system, only when necessary, to meet the domestic demand.

The BPDB will not have to pay capacity payment to the power plant owners if it fails to buy electricity readily available to them.

Currently, only renewable energy-based power plants, especially solar-fired ones, are operational under 'no electricity, no payment' basis.

These five power plants were awarded based on unsolicited offers under the Speedy Supply of Power and Energy (Special Provision) Act 2010 when the country was reeling under an acute electricity crisis.

The law has a provision of providing immunity to those involved with the quick-fix solution.

The government also allowed entrepreneurs of these power plants duty-free import of furnace oil to run their plants with a 9.0 per cent service charge along with import costs as an incentive, said a senior official.

Energy experts and consumer rights groups gave mixed reactions over the move. They opined that the government should continue efforts to generate electricity from low-cost power plants to reduce overall electricity generation costs.

"I don't see anything bad with the new model, as the government will not have to spend additional cost other than the electricity charge," said Imran Karim, president of the Bangladesh Independent Power Producers' Association (BIPPA).

Rather, the BPDB's expenditure will significantly reduce for buying electricity from these plants compared to other oil-fired power plants, he added.

Currently, a total of 58 furnace oil-fired plants are operational in the country, having a cumulative electricity generation capacity of 5,712 MW, whereas the country's overall electricity generation capacity is 21,395 MW.

The number of total operational power plants is, however, 143 as of February 9, according to the BPDB statistics.

"The new model of 'no electricity, no payment' is good," said Professor Ijaz Hossain of the Bangladesh University of Engineering and Technology (BUET).

But the government should remain alert to check any manipulation by the vested group in the load dispatch centre.

Low-cost electricity should always be given preference. The government will be able to save a significant amount of money if it does not have to pay capacity payment to the plant owners, he added.

Oil-fired power plants should not be in priority of the government to generate electricity, said Ghulam Rahman, president of the Consumers' Association of Bangladesh (CAB).

The government should rely more on less expensive, large base-load power plants.

The oil-fired power plants can be operational, only if other sources of low-cost electricity do not prevail, he noted.

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