Reflections on power tariff increase

Saleh Akram | Published: March 24, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

While the power distribution companies BPDB and REB recommended rise in the wholesale and retail electricity tariff, deliberations at the public hearing at BERC on the issue indicated otherwise. On the basis of the information and statistics divulged by the participants and arguments advanced by them, one feels convinced that the ground situation actually calls for the reverse, that is, a reduction in price, not an increase.
Price of electricity was increased on MarchÂ 01, 2014. Proposal for increase in transmission cost after a gap of only eight or nine months should not be considered. It is found that the proposals contained unusual increase in costs. On analysing the information available it is found that system loss has decreased and supply of electricity increased in 2014-15, compared to 2013-14. In that case, distribution costs of all utilities are supposed to go down considerably. If the wholesale price remains unchanged, profit will be higher compared to last year. But the operating cost has been shown as rising, which is illogical and unrealistic. The responsibility of power transmission in some areas of Dhaka lies with transmission companies like DPDC and DESCO in stead of PGCB. Due to inconsistent development in these cases, cost of transmission went up abnormally. Manpower cost also was rather high.
BERC technical committee has proposed an increase of Tk.1.53 in PGCB transmission cost which will raise wheeling charge to Tk.23.26 from Tk.22.91. But unplanned development and underutilisation of transmission capacity have pushed the transmission cost up. But the increased cost should not be realised from customers. We continue to have power production growth of 9.0 per cent and supply growth of 10.0 per cent. It appears, in keeping with growth in production and supply, expansion or development of power transmission lines did not take place. Therefore these development programmes should be discouraged. And wheeling charge should not be changed. Consumers' representatives have drawn the attention of the commission to bring these costs under control.Â Â
The technical committee of BERC proposed wholesale tariff rise of 5.15 per cent along with subsidy of Tk.40 billions, although PDB proposed an increase of 18.12 per cent along with subsidy of equivalent amount. Due to under-mentioned reasons, supply cost of wholesale electricity will come down lowering the existing power tariff and therefore all parties concerned were against any kind of rise in tariff structure.
Due to drastic fall in fuel price in world market, BPC has been able to adjust its losses and is now in profit. This actually creates an opportunity for reduction in power tariff. It may be mentioned that the government earlier promised to reduce the power tariff also. Â
BERC raised retail power tariff to Tk.4.70 with a subsidy of Tk.8.5 billions on September 01, 2012 on condition that it will strike a growth rate of 20.0 per cent in production which actually was not achieved during last two years. Targeted production growth was not achieved because fuel and gas were not ensured as per condition. Had the terms been fulfilled, production growth could have been achieved. If the amount saved is adjusted against financial deficit of wholesale electricity, it would yield profit in stead of loss and electricity price can be reduced.Â Â Â
It was revealed in the public hearing that production falls short by 700 to 1500 megawatt in the public sector due to energy shortage. If production capacity is not calculated on the basis of energy availability, the capacity can not be achieved and consequently cost of production will rise. If production capacity of non-operational units is not considered in assessing revenue demand there could be no financial deficit and as such tariff rise will also not be necessary.
The private sector is allowed to import fuel for its 11 plants. If the real import value of the fuel was consistent with the value paid by PDB on the account, there could be no financial shortfall in electricity production and proposals would not have been necessary for a rise in power tariff. BPC supplies energy fuel at Tk.60.0 per litre including duty and 34VAT. But the price of this duty and VAT free imported fuel is Tk.49.0. Ironically price of this fuel has been under Tk.30.0 per litre for a long time.
There are complaints that more imports are being made from private sector than public sector. Besides, although 500 megawatt of power was supposed to be imported, actual import is much less. Had hundred per cent been imported and proportion of public and private sectors been equal, there could not have been any deficit and proposal for price increase would not have been required.Â Â Â
Commission's attention was drawn to the above-mentioned production strategy at minimum cost in keeping with imports. In reply BERC representative informed that while working out power supply strategy, system gets priority, not the cost issue of production.
An overall analysis will reveal that even if BERC orders are complied with, there arises profit instead of loss necessitating a reduction in existing tariff structure. Therefore, it will not be justified to ignore public feelings for a price cut.
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