Policy amendment proposed to raise tariff on captive power purchase
Friday, 6 July 2007
FE Report
The Power Division has placed a proposal to the Council of Advisers seeking an amendment to the existing Captive Power Policy (CPP) with enhancement of the electricity tariff by maximum five per cent.
As per the proposal containing the draft amendment, the government will purchase electricity at Tk 2.22 per kilowatt hour (per unit) instead of the existing rate of Tk 2.12 per unit from the captive power plant owners.
The captive power plant owners will have to sell their electricity to the government at least for three years, the draft amendment to the CPP spelled out.
The division, however, did not propose any change in the current gas tariff structure for the captive power plants.
Currently, Bangladesh Power Development Board (BPDB) and independent power producers (IPPs) are purchasing gas at Tk 2.61 per cubic metre, which is Tk 1.12 less than the gas purchasing rate of captive power plants.
The captive power plants are purchasing gas at Tk 3.73 per cubic metre from the government.
Sources said the Power Division placed the draft amendment to the Council of Advisers in line with the recommendations of a committee constituted by the division. The committee was formed to propose necessary changes in the existing provision to relax it so that more electricity can be purchased from the entrepreneurs and the loopholes are plugged.
The poor response from the captive power plant owners to sell electricity under the existing terms and conditions of the CPP has prompted the Power Division to review it.
Though the CPP was adopted in February last by the incumbent interim government with a target to make available around 50 megawatts (MW) of electricity from the captive power owners by June last, the government could arrange only 7 MW within the set timeframe.
Pointing to the proposed electricity tariff in the draft amendment, a private captive power plant owner expressed his reservation.
"It will not be cost-effective for the captive power plant owners to sell electricity at Tk 2.22 per unit as the captive power plants have to purchase gas at a much higher rate than those of the small power plants (SPPs)," he said.
The government should ensure a level-playing field between the SPPs and the captive power plants, he added.
The cabinet committee on government purchase has recently approved installation of a total of 10 SPPs having the generation capacity of 200MWs, from which the government will purchase electricity at Tk 2.50 per unit on an average.
As per the related terms and conditions, the government will get electricity from the SPPs for next 15 months.
On the contrary, the government can get electricity of over 200 MWs within the next six to nine months at a less price from the captive power plants, if a level-playing field is ensured between the SPPs and the captive power plants in terms of gas tariff, he observed.
For the SPPs the government will have to ensure sufficient infrastructure, like land and dedicated gas connection, on its own cost, but for the captive power plants the infrastructure is already in place, he added, preferring not to be quoted.
Besides, as captive power plants will require significant investments like for purchasing of gas generator and relevant equipment, the government should purchase electricity from them for a longer period, he said.
Currently, the captive power units generate over 1,300 MWs of electricity for their industrial purposes.
A favourable captive power policy can bring at least 300 MW power from the captive power units within six months as the necessary infrastructure like land and gas connections are already there, the sources mentioned.
The Power Division has placed a proposal to the Council of Advisers seeking an amendment to the existing Captive Power Policy (CPP) with enhancement of the electricity tariff by maximum five per cent.
As per the proposal containing the draft amendment, the government will purchase electricity at Tk 2.22 per kilowatt hour (per unit) instead of the existing rate of Tk 2.12 per unit from the captive power plant owners.
The captive power plant owners will have to sell their electricity to the government at least for three years, the draft amendment to the CPP spelled out.
The division, however, did not propose any change in the current gas tariff structure for the captive power plants.
Currently, Bangladesh Power Development Board (BPDB) and independent power producers (IPPs) are purchasing gas at Tk 2.61 per cubic metre, which is Tk 1.12 less than the gas purchasing rate of captive power plants.
The captive power plants are purchasing gas at Tk 3.73 per cubic metre from the government.
Sources said the Power Division placed the draft amendment to the Council of Advisers in line with the recommendations of a committee constituted by the division. The committee was formed to propose necessary changes in the existing provision to relax it so that more electricity can be purchased from the entrepreneurs and the loopholes are plugged.
The poor response from the captive power plant owners to sell electricity under the existing terms and conditions of the CPP has prompted the Power Division to review it.
Though the CPP was adopted in February last by the incumbent interim government with a target to make available around 50 megawatts (MW) of electricity from the captive power owners by June last, the government could arrange only 7 MW within the set timeframe.
Pointing to the proposed electricity tariff in the draft amendment, a private captive power plant owner expressed his reservation.
"It will not be cost-effective for the captive power plant owners to sell electricity at Tk 2.22 per unit as the captive power plants have to purchase gas at a much higher rate than those of the small power plants (SPPs)," he said.
The government should ensure a level-playing field between the SPPs and the captive power plants, he added.
The cabinet committee on government purchase has recently approved installation of a total of 10 SPPs having the generation capacity of 200MWs, from which the government will purchase electricity at Tk 2.50 per unit on an average.
As per the related terms and conditions, the government will get electricity from the SPPs for next 15 months.
On the contrary, the government can get electricity of over 200 MWs within the next six to nine months at a less price from the captive power plants, if a level-playing field is ensured between the SPPs and the captive power plants in terms of gas tariff, he observed.
For the SPPs the government will have to ensure sufficient infrastructure, like land and dedicated gas connection, on its own cost, but for the captive power plants the infrastructure is already in place, he added, preferring not to be quoted.
Besides, as captive power plants will require significant investments like for purchasing of gas generator and relevant equipment, the government should purchase electricity from them for a longer period, he said.
Currently, the captive power units generate over 1,300 MWs of electricity for their industrial purposes.
A favourable captive power policy can bring at least 300 MW power from the captive power units within six months as the necessary infrastructure like land and gas connections are already there, the sources mentioned.