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Power tariff set to go up again

BERC gets revised proposals from distribution entities

FE Report | September 01, 2017 00:00:00

Electricity tariff is set to go up again as the energy regulator has accepted revised proposals of state-run power distribution entities to raise tariffs despite a significant fall in government's subsidy for this sector, officials said.

The Bangladesh Energy Regulatory Commission (BERC) has decided to hold a seven-day public hearing on the proposals starting from September 25.

Officials said the government's subsidy for the power sector was slashed by 68.87 per cent to Tk 27.94 billion in the fiscal year (FY) 2015-16, which was Tk 89.78 billion in the previous FY 2014-15, according to statistics of state-run BPDB.

Government's subsidy for the power sector was Tk 61 billion in the FY 2013-14, Tk 55 billion in the FY 2012-13, Tk 63.57 billion in the FY 2011-12 and Tk 40 billion in the FY 2010-11, the statistics showed.

The average electricity generation cost fell by 11. 48 per cent to Tk 5.55 per unit (1 kilowatt-hour) in the FY 2015-16 compared to Tk 6.27 per unit in the FY 2014-15 due to sharp fall in oil prices in the international market, they said.

Currently state-run Bangladesh Power Development Board (BPDB), the country's sole buyer of electricity from power plants, pays to privately-owned power plants the power tariff, oil import costs and 9.0 per cent service charge against the purchase of electricity.

The sharp fall in oil price in the international market helped reduce the BPDB's electricity purchase costs despite paying service charge against oil import costs, a senior BPDB official said.

Import cost of furnace oil by private sector is currently around Tk 24 per litre whereas the government-fixed rate of furnace oil in local market is almost double at Tk 42 per litre.

The private sector also enjoys duty and tax waiver on import of furnace oil.

The official said if the government waives duties on import of furnace oil by state-run Bangladesh Petroleum Corporation (BPC), electricity generation costs in state-run oil-fired power plants would fell drastically.

A 9.0 per cent service charge to BPC on its oil imports, like that of private sector, would reduce the electricity generation costs further, he added.

Currently, the BPDB pays BPC the oil price in line with the government-fixed rate, which is much higher than the price in the international market, against its service of importing fuel for electricity generation.

The country began expanding its oil-based power generation capacity in 2010 amid a natural gas deficit caused by depleting upstream reserves and rapid industrialisation.

Some 50 oil-fired power plants, mostly from the private sector, are currently running in the country with generating around 3,500 megawatt (MW) of electricity.

The BERC already raised average retail level electricity by 69.25 per cent to Tk 6.33 per unit from Tk 3.76 per unit, in eight phases between March 2010 and September 2015, citing higher prices of imported oil and growing dependence on them to generate electricity, officials said.

The commission also increased the bulk price of electricity by 106.75 per cent to Tk 4.90 per unit from Tk 2.37 per unit in seven phases between March 2011 and September 2015.

Sources said BPDB proposed a hike in bulk electricity tariff by 14.78 per cent, citing high oil prices in power plants where BPC provides fuel.

Six power distribution entities argued in their proposals that they were incurring losses due to lower distribution prices than purchase prices set by the commission in September 2015.

The BERC's hearing would commence on September 25 with the BPDB's proposal for raising bulk price of electricity by 14.78 per cent.

The commission would also hold hearing on the BPDB's proposal for retail price hike by 3 per cent on September 26, Rural Electrification Board's proposal for 10.75 per cent hike on September 27, Dhaka Power Distribution Company's proposal for 6.24 per cent hike on September 28, Dhaka Electric Supply Company's proposal for 6.34 per cent hike on October 2, West-Zone Power Distribution Company's proposal for 10.36 per cent hike on October 3 and North-West Zone Power Distribution Company's proposal for 24 per cent hike on October 4.

The BERC last raised power tariffs by 2.93 per cent on an average for retail consumers with effective from September 01, 2015.


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