Bulk power tariff hike by next week

| Updated: October 03, 2022 10:07:49

Bulk power tariff hike by next week

The country’s energy regulator is set to raise bulk electricity tariff by next week as it has almost completed all necessary works to make the announcement.

“We are working to announce the new bulk electricity tariff by October 13-14,” chairman of Bangladesh Energy Regulatory Commission (BERC) Md Abdul Jalil said Sunday.

The BERC arranged a public hearing over the bulk tariff hike proposal of the state-run Bangladesh Power Development Board (BPDB) in May.

The commission chairman, however, wouldn't tell the extent of the hike to be announced during the verdict.

State-run Bangladesh Power Development Board (BPDB) sought around a 66-per cent hike in bulk electricity tariffs on the pretext of BERC's raising of natural gas tariffs and hike in oil prices on the international market.

The BERC hiked natural gas tariffs by 22.78 per cent on average with effect from June 2022 following public hearings.

The new weighted average natural gas tariff is now Tk 11.91 per cubic metre a rise from the previous Tk 9.70.

The government raised oil prices by up to 52 per cent on August 5 and following widespread opposition it later slashed the price of diesel, kerosene, octane and petrol by Tk 5 per litre on August 30.

Bangladesh's apex trade body and rights groups, however, had opposed the power tariff-hike proposal of the BPDB and demanded keeping the current prices unchanged.

"It will be suicidal for the government if the bulk tariff is raised now," senior vice president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Mostofa Azad Chowdhury Babu said at the public hearing.

Consumers Association of Bangladesh (CAB) demanded the import of all sorts of petroleum products by the state-run Bangladesh Petroleum Corporation (BPC) discontinuing oil-import permission to the private sector as a cost-cutting measure.

CAB energy adviser Prof M Shamsul Alam also demanded running state-run combined-cycled power plants with around 67 per cent plant factor instead of the current 53 per cent to reduce electricity-generation costs.

The BPDB in its proposal had sought to hike bulk tariffs by around 66 per cent to Tk 8.58 per unit (1 kilowatt-hour) from Tk 5.17 per unit in the event of unavailability of subsidy from the government.

BERC's technical evaluation committee had suggested the hike by 57.83 per cent without any provision of government subsidy.

Speaking in the public-hearing session the FBCCI leader argued that the tariff-hike proposal by the BPDB was faulty as it did not maintain the BERC rules properly.

Natural gas supplies to privately-owned captive power plants were maintained limiting or ceasing gas supplies to gas-guzzling commercially run power plants, which has increased overall electricity-generation costs, he had said while presenting the FBCCI's stance over the tariff hike proposal.

Imposition of import duties and taxes on furnace oil since June 2020 and 5.0-percent value-added tax (VAT) on coal increased overall electricity-generation costs, said Mr Azad.

Several issues like excess electricity-generation capacity, oil-fired power plants, delay in commissioning coal-fired power plants, and wrong planning over liquefied natural gas (LNG) supply chain are also among the bottlenecks in the power sector, he added.

The CAB leader demanded proper utilisation of the power development fund (PDF) and streamlining of investment from the fund in BPDB's gas-based and renewable energy projects.

The BPDB in its proposal to the BERC argued that it would have a deficit of around Tk 302.51 billion in 2022 if the bulk electricity tariffs were not hiked, stating that its electricity-purchase cost of around 88.99 billion units of electricity would soar to around Tk 741.89 billion and sale price would be around Tk 439.37 billion.

It claimed that the imposition of import duties and tax on furnace oil since June 2020 increased tax-related costs for electricity generation by around 34 per cent.

The imposition of 5.0-per cent VAT on coal and soaring prices of coal on the international market have increased electricity-generation costs in coal-fired power plants, the BPDB stated in its proposal.

Per-unit (1-kilowatt-hour) energy cost to generate electricity soared by 48.35 per cent to Tk 3.16 in fiscal year (FY) 2020-2021 from Tk 2.13 unit of FY'20, the country's lone buyer of electricity from power producers - BPDB - argued.

Electricity-generation costs per unit might escalate further to around Tk 4.48 per unit in FY '22 with soaring global oil, coal and LNG prices, it feared.

The country's achieving cent-per cent electrification increased electricity-generation costs by Tk 0.05 per unit as the number of low-cost electricity consumers soared as a consequence, the BPDB argued.

Meanwhile, the government is executing austerity measures like electricity load-shedding and squeezing imports and restricting foreign tours in a bid to mitigate pressures on the country's forex reserves in the wake of a global crunch.

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