BERC’s no to term extension of five oil-fired quick rental power plants

The country's energy regulator has turned down a proposal to extend the tenures of five oil-fired quick rental power plants (QRPPs) in line with its order issued last year, officials said.

"We have conveyed our position to the plant authorities in line with the regulatory order," a senior official at the Bangladesh Energy Regulatory Commission (BERC) told the FE on Sunday.

In its electricity tariff hike order in March 2020, the BERC had decided not to extend the tenures of oil-fired rental and quick rental power plants.

The order was issued aiming to reduce the overall electricity generation cost as most of such plants charge higher electricity tariffs, said the official.

The Power Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) had endorsed the proposal sent recently by the state-run Bangladesh Power Development Board (BPDB) for extension of the tenures of these plants having a total generation capacity of around 457 megawatts (MW).

The proposal was sent subsequently to the BERC, the power plant licence provider, for its scrutiny.

Following appeals from the QRPPs, the BPDB had proposed to extend the tenures of these power plants by two years under the 'no electricity, no payment' mechanism.

These QRPPs came into operation in mid-2011, and got an initial extension by five years in 2016 under the original contract terms.

The power plants 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.

Some of these power plants are the entities of 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, were lobbying with the government to get the tenure of their power plants extended.

They later 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 purchases electricity from such plants under the 'no electricity, no payment' system, only when necessary, to meet the domestic demand.

The BPDB was not required to pay capacity payment to the power plant owners if it failed to buy electricity readily available to them.

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

Capacity payment is a sort of penalty for BPDB that pays to plant owners if the government fails to buy a certain portion of power readily available with them.

According to the BPDB, the board had to pay around Tk 86.09 billion to privately-owned power-plant sponsors during fiscal year (FY) 2019-20 alone.

Sources said, 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 had 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.

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.

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