Committee constituted to renegotiate tariffs to cut state debts

M AZIZUR RAHMAN | Published: January 21, 2025 23:01:44

A six-member expert panel to renegotiate tariff rates with the power-plant owners who bagged projects under the already-annulled special law in order to reduce power-purchase costs and state debt burdens.
Around a hundred power plants were awarded to private-sector entrepreneurs under the 'controversial' Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 (Amended 2021). The law of indemnity in energy sector has now been cancelled by the post-uprising interim government.
The unsolicited contracts with a provision for capacity payment sans any electricity buy indebted the state-run Bangladesh Power Development Board (BPDB).
"We have constituted the committee in line with the recommendation of the national committee on reviewing power-and energy-sector deals," Power and Energy Adviser Muhammad Fouzul Kabir Khan told The Financial Express Tuesday.
"The national committee had informed us about the exorbitant power tariffs in the power-purchase agreements inked with the power-plant owners," he said.
Bangladesh Independent Power Producers Association (BIPPA), the association of privately owned power plants, has agreed to cooperate with the government during re-negotiation and lowering the tariff rates, said Mr Khan.
As tenure of many power plants that were awarded under the special law already expired, he clarifies, the expiration of deals of such power plants will not affect the review process.
The new committee would pinpoint the irregularities based on which the government is eyeing initiating renegotiation of tariffs, said sources.
"We found exorbitant rates both in fixed costs and fuel costs in almost all the power-purchase agreements (PPAs) that were inked during the previous Awami League government," a member of the national committee told the FE, requesting anonymity.
After reviewing deals over the past several months, the national committee also found costs of most of the power plants--whether awarded through competitive tenders or unsolicited--exorbitantly high.
The newly formed panel, led by a retired professor of Bangladesh University of Engineering and Technology (BUET) and distinguished professor of Green University of Bangladesh Dr Md Kamrul Ahsan will review costs, identify discrepancies and renegotiate tariff structure of the power plants, including those of high-sulfur fuel oil (HSFO)-based ones, and make recommendations.
The government has formed a committee to address critical issues in the power sector and ensure the effective implementation of legislative frameworks. This committee will also assess challenges associated with HSFO-based power plants and propose solutions.
Toha Mohammad, a financial-modeling expert and consultant for the Power-Sector Reform Committee, is also a member of the newly formed six-member committee.
Md Manzur Alam, deputy attorney-general at the Bangladesh Supreme Court, member (finance) Anjana Khan Mojlish and director (purchase) Md Nannu Mia of the BPDB are the other members of the committee, while Mohammad Solaiman, deputy secretary (development-1) of the Power Division, will serve as member- secretary of the committee.
"The BIPPA has welcomed the decision to review and renegotiate the tariffs, which were high," BIPPA president David Hasanat told the FE on the day.
Not all the tariff rates in the PPAs inked during the previous government were high, he said.
"I think the power-plant owners who got 'excess' tariffs following deals with the BPDB will agree to lower down the costs," he said.
Contacted over the latest developments, energy adviser of the Consumers Association of Bangladesh (CAB) Dr M Shamsul Alam urged detecting the illogical higher costs inscribed in the PPAs first.
"After detection, it should be made public," he demanded.
Once higher costs are detected, the power-plant owners concerned should be asked to lower the tariff and adjust it, he said, adding that "failure in doing so should lead to project cancellation".
Azizjst@yahoo.com