Power to cost users, government more
Tuesday, 14 December 2010
Electricity is dubbed as the engine of growth for any country as it helps rapid industrialisation, accelerates the pace of socio-economic development and reduces poverty.
Like any other developing country around the globe electricity demand has been rising sharply in Bangladesh as the country's economy has been growing at an average rate of six per cent a year since 2003 outpacing the energy supply.
The country is now reeling under an acute electricity crisis coupled with low voltage and frequent disruptions resulting in slowing down business activity, fall of industrial output and ultimate sufferings of the people.
Country's overall electricity generation is now hovering around 3,700 megawatts against the demand for over 6,000 mw.
Inadequate steps from the government high-ups coupled with insufficient supplies of natural gas, the main fuel for the country's power generation, have been delaying installation of much-needed power plants for long.
Year's of apathy from the donor agencies in funding necessary power plants also aggravated the country's overall electricity crisis.
Nagging electrify crisis all over Bangladesh has recently become an issue of concern of the government as the power sector is deemed by critics as among the worst performing sector of the government in the past several years.
Demonstrations by people in front of state-run electricity offices in different areas protesting frequent electricity disruptions and load shedding has become rampant in the country especially in summer.
During the regime of the previous elected BNP government several demonstrators were killed in police firing when they were staging violent protests demanding regular supply of electricity at Kansat in Chapainawabganj district, some 300 kilometers northwest from the capital Dhaka, in April 2006.
Some demonstrators were also injured by police at Shanir Akhra under Jatrabari police station, some five kilometers away from the capital, when they were staging demonstration protesting frequent disruptions in electricity supply in May, 2006.
The protesters had assaulted the local Member of Parliament during the incident for, what the protesters said, his failure to ensure uninterrupted supply of electricity for the locals.
The incumbent Awami League led government, however, took the issue of augmenting electricity generation seriously and adopted short, term, medium and long term plans for electricity generation.
It has targeted to generate at least 5,000 mw of electricity by 2011 and 7000 mw by 2013.
The government has planned to add an additional 11,500 mw of electricity be 2015.
It has allowed building power plants by local and foreign firms on unsolicited proposals avoiding tendering process in an unprecedented move to face the country's worst-ever power crisis.
The government has also passed the Speedy Supply of Power and Energy (Special Provision) Bill -- 2010 offering blanket immunity to the personnel involved with electricity generation for two years.
The government has signed contracts for 32 electricity generation projects to add 2,791 mw of electricity to the national grid.
Out of 2,791 mw it has already implemented two projects commissioning 250 mw of electricity and the remaining 30 projects to generate 2,541 mw is under construction.
Besides, contracts for 24 more projects in public and private sectors to generate 3,840 mw of electricity would be signed within March 2011.
The government has resumed providing new electricity connections from November, after a halt for seven months, on priority basis putting solar panel installers on top of the precedence.
In its bid to quicken electricity generation the government has attached utmost priority to resolve power crisis on ad-hoc basis awarding high cost rental and quick rental power plants across the country.
The high-cost rental power plants is set to emerge as the country's single largest power plant category for electricity generation by 2011.
Expensive diesel and furnace-oil run rental power plant, which was nil until 2008, has already accounted for over one-third of the country's total power plants with the operation of 14 plants out of 40 operational plants.
A good number of gas-fired and oil-based power plants have been kept shut making room for operation high-cost private sector owned fuel-run power plants.
Some 15 more rental power plants will initiate electricity generation by 2011.
Currently the country has a total of 50 power plants but 40 of them are operational. Of the total plants 17 are owned by Power Development Board (PDB), 15 are rental power plants, nine are small independent power producers (SIPPs), six are independent power producers (IPPs) and two plants one owned by Electricity Generation Company of Bangladesh (EGCB) and another by Ashuganj Power Station Company Ltd (APSCL).
Electricity generation from the rental power plants is now hovering around 665 megawatts (mw), which is almost one-fifth of the country's overall electricity generation of around 3,500 mw.
Experts said the government's stance on allowing more rental power plants branding them as 'quick rentals' on the basis of negotiations with the sponsors bypassing competitive tendering process might impede the country's growing economy.
Although most of the rental power plants failed to generate electricity in time, the government's electricity generation augmentation drive riding on costly rental power plants might prove wrong in the long run, they feared.
Besides, the absence of any policy over rental power plants and their diversified tenure ranging from three years to 15 years might trouble the regulators in future, they added.
The multilateral donor agency, World Bank, has also expressed its concern over the government's higher expenditure to buy electricity from rental power plants and import necessary fuel.
The burden may restrict the country's economic growth in the range between 6.1 percent and 6.3 percent, said the Washington-based donor agency in its latest economic outlook.
Additional fiscal cost for fiscal year 2011 would be ranged between Tk 52 billion and Tk 56 billion, which is about 0.6 per cent or 0.7 per cent of the gross domestic product (GDP), the WB projected.
Average tariff rate for oil-fired rental power plants is around Tk 8.0 per unit (1 kilowatt hour), which is more than double than the tariff rate for gas-based power plants of Tk 3.0 per unit.
Although the government has awarded contracts to dozens of high-cost rental and quick rental power plants within months, it could not do much progress in awarding low-cost base-load power plants.
The government is at risk of providing hefty subsidy worth over Tk 150 billion by 2013 in power sector as it has focused electricity generation from high-cost diesel and furnace oil run power plants instead of conventional gas or coal.
The amount of subsidy will scale up further if the state-owned Power Development Board (PDB) fails to make an upward tariff adjustment by 12 per cent annually.
Currently, the government is giving PDB subsidy worth around Tk 10 billion annually.
But the government is ready to shoulder the huge financial burden, much higher than the present level, to implement a road-map to generate augmented electricity by 2015.
A senior PDB official said the board will have to count an additional subsidy of around Tk 15.60 billion in 2010, Tk 35.54 billion in 2011, Tk 65.78 billion in 2012 and Tk 39 billion in 2013 for operating these high cost oil-run power plants.
The subsidy amount has been calculated considering power tariff hike by 12 per cent every year.
If the government fails to raise the tariff every year the financial burden will romp up further, said the official.
The PDB currently incurs Tk 0.35 loss for every unit of power it sells to consumer against its average bulk power supply cost of Tk 2.80 per unit.
The PDB's average bulk power supply cost might double to over Tk 5.0 per unit (1 kilowatt-hour) by 2013 with the commissioning of new oil-fired power plants.
The board's average supply cost will soar to over Tk 4.0 per unit by 2010, Tk 4.92 by 2011-12 and Tk 5.0 by 2013 with the start of electricity generation from the high cost fuel-run plants.
Average power supply cost will fall again to Tk 4.5 per unit after 2013 when several gas and coal-fired power plants will start supplying and the life of some high-cost oil-fired power plants will expire.
The government, however, has moved afresh to hike the power tariff to contain mounting subsidy as the cost of electricity generation is skyrocketing with the installation of high-cost rental power plants to be generated diesel and furnace-oil run power plants.
The PDB has recently submitted a proposal to the power ministry for an upward power tariff adjustment.
The PDB would require an increase of 53 per cent in tariff from the current rate for 2011 alone to reduce the amount of subsidy.
In the year 2012 the power tariff requires to be hiked by 22 per cent compared to the previous year and in 2013 it should be 13 per cent higher, said the official.
Alternatively, the government can resort to making upward tariff adjustment by 12 per cent every year, the PDB proposed.
Power tariff was adjusted upward in March this year when Bangladesh Energy Regulatory Commission (BERC) hiked in electricity prices for all types of urban and commercial subscribers by six to seven per cent, on an average.
The BERC is now considering approving an upward power tariff adjustment further considering the issues electricity producers, suppliers and consumers.
Currently, the domestic consumers who consume electricity up to 100 units are paying Tk 2.60 per unit, subscribers using electricity between 101 and 400 units are paying Tk 3.30 per unit and those who consume over 400 units are paying Tk 5.65 per unit.
Flat rate for the consumers of small industries is Tk 4.35 per unit, while peak-hour electricity rate is Tk 5.86 per unit and off-peak rate is Tk 3.50 per unit.
Commercial consumers are now paying Tk 5.58 per unit as flat rate, Tk 4.05 per unit as off-peak rate and Tk 8.45 per unit as peak-hour rate.
Flat rate for the 11 kilo-volt (kV) consumers is Tk 4.17 per unit, while the off-peak-hour rate is Tk 3.43 per unit and the peak hour rate is Tk 7.12 per unit.
The flat electricity tariff for the consumers of 33 kV is now Tk 3.92 per unit, while the off-peak rate is Tk 3.33 per unit and peak hour rate is Tk 6.82 per unit.
Flat rate for 132 kV electricity consumers is now Tk 3.10 per unit. Meanwhile, electricity supply was inaugurated in Bangladesh in 1907.
During the period of partition of the Indian Sub Continent in 1947, the total generating capacity was 21 mw including 14 mw as captive generation in railway workshops, tea gardens etc.
Only 7 mw was available for public consumption distributed by 17 electricity companies that operated in seventeen districts of the then East Bengal.
By early 1950, all the power companies were gradually taken over by the government because they became bankrupt.
In 1958, the Water and Power Development Authority (WAPDA) was created to take over all the responsibilities for electricity generation and distribution.
After independence the Bangladesh government bifurcated the WAPDA.
The component related to generation, distribution and transmission of power was named Bangladesh Power Development Board in 1972 to operate as a vertically integrated public sector organisation.
The National Energy Policy of Bangladesh was adopted in 1995 for the overall development of the Energy Sector with special focus on public and private sector energy development, which is still in operation.
Like any other developing country around the globe electricity demand has been rising sharply in Bangladesh as the country's economy has been growing at an average rate of six per cent a year since 2003 outpacing the energy supply.
The country is now reeling under an acute electricity crisis coupled with low voltage and frequent disruptions resulting in slowing down business activity, fall of industrial output and ultimate sufferings of the people.
Country's overall electricity generation is now hovering around 3,700 megawatts against the demand for over 6,000 mw.
Inadequate steps from the government high-ups coupled with insufficient supplies of natural gas, the main fuel for the country's power generation, have been delaying installation of much-needed power plants for long.
Year's of apathy from the donor agencies in funding necessary power plants also aggravated the country's overall electricity crisis.
Nagging electrify crisis all over Bangladesh has recently become an issue of concern of the government as the power sector is deemed by critics as among the worst performing sector of the government in the past several years.
Demonstrations by people in front of state-run electricity offices in different areas protesting frequent electricity disruptions and load shedding has become rampant in the country especially in summer.
During the regime of the previous elected BNP government several demonstrators were killed in police firing when they were staging violent protests demanding regular supply of electricity at Kansat in Chapainawabganj district, some 300 kilometers northwest from the capital Dhaka, in April 2006.
Some demonstrators were also injured by police at Shanir Akhra under Jatrabari police station, some five kilometers away from the capital, when they were staging demonstration protesting frequent disruptions in electricity supply in May, 2006.
The protesters had assaulted the local Member of Parliament during the incident for, what the protesters said, his failure to ensure uninterrupted supply of electricity for the locals.
The incumbent Awami League led government, however, took the issue of augmenting electricity generation seriously and adopted short, term, medium and long term plans for electricity generation.
It has targeted to generate at least 5,000 mw of electricity by 2011 and 7000 mw by 2013.
The government has planned to add an additional 11,500 mw of electricity be 2015.
It has allowed building power plants by local and foreign firms on unsolicited proposals avoiding tendering process in an unprecedented move to face the country's worst-ever power crisis.
The government has also passed the Speedy Supply of Power and Energy (Special Provision) Bill -- 2010 offering blanket immunity to the personnel involved with electricity generation for two years.
The government has signed contracts for 32 electricity generation projects to add 2,791 mw of electricity to the national grid.
Out of 2,791 mw it has already implemented two projects commissioning 250 mw of electricity and the remaining 30 projects to generate 2,541 mw is under construction.
Besides, contracts for 24 more projects in public and private sectors to generate 3,840 mw of electricity would be signed within March 2011.
The government has resumed providing new electricity connections from November, after a halt for seven months, on priority basis putting solar panel installers on top of the precedence.
In its bid to quicken electricity generation the government has attached utmost priority to resolve power crisis on ad-hoc basis awarding high cost rental and quick rental power plants across the country.
The high-cost rental power plants is set to emerge as the country's single largest power plant category for electricity generation by 2011.
Expensive diesel and furnace-oil run rental power plant, which was nil until 2008, has already accounted for over one-third of the country's total power plants with the operation of 14 plants out of 40 operational plants.
A good number of gas-fired and oil-based power plants have been kept shut making room for operation high-cost private sector owned fuel-run power plants.
Some 15 more rental power plants will initiate electricity generation by 2011.
Currently the country has a total of 50 power plants but 40 of them are operational. Of the total plants 17 are owned by Power Development Board (PDB), 15 are rental power plants, nine are small independent power producers (SIPPs), six are independent power producers (IPPs) and two plants one owned by Electricity Generation Company of Bangladesh (EGCB) and another by Ashuganj Power Station Company Ltd (APSCL).
Electricity generation from the rental power plants is now hovering around 665 megawatts (mw), which is almost one-fifth of the country's overall electricity generation of around 3,500 mw.
Experts said the government's stance on allowing more rental power plants branding them as 'quick rentals' on the basis of negotiations with the sponsors bypassing competitive tendering process might impede the country's growing economy.
Although most of the rental power plants failed to generate electricity in time, the government's electricity generation augmentation drive riding on costly rental power plants might prove wrong in the long run, they feared.
Besides, the absence of any policy over rental power plants and their diversified tenure ranging from three years to 15 years might trouble the regulators in future, they added.
The multilateral donor agency, World Bank, has also expressed its concern over the government's higher expenditure to buy electricity from rental power plants and import necessary fuel.
The burden may restrict the country's economic growth in the range between 6.1 percent and 6.3 percent, said the Washington-based donor agency in its latest economic outlook.
Additional fiscal cost for fiscal year 2011 would be ranged between Tk 52 billion and Tk 56 billion, which is about 0.6 per cent or 0.7 per cent of the gross domestic product (GDP), the WB projected.
Average tariff rate for oil-fired rental power plants is around Tk 8.0 per unit (1 kilowatt hour), which is more than double than the tariff rate for gas-based power plants of Tk 3.0 per unit.
Although the government has awarded contracts to dozens of high-cost rental and quick rental power plants within months, it could not do much progress in awarding low-cost base-load power plants.
The government is at risk of providing hefty subsidy worth over Tk 150 billion by 2013 in power sector as it has focused electricity generation from high-cost diesel and furnace oil run power plants instead of conventional gas or coal.
The amount of subsidy will scale up further if the state-owned Power Development Board (PDB) fails to make an upward tariff adjustment by 12 per cent annually.
Currently, the government is giving PDB subsidy worth around Tk 10 billion annually.
But the government is ready to shoulder the huge financial burden, much higher than the present level, to implement a road-map to generate augmented electricity by 2015.
A senior PDB official said the board will have to count an additional subsidy of around Tk 15.60 billion in 2010, Tk 35.54 billion in 2011, Tk 65.78 billion in 2012 and Tk 39 billion in 2013 for operating these high cost oil-run power plants.
The subsidy amount has been calculated considering power tariff hike by 12 per cent every year.
If the government fails to raise the tariff every year the financial burden will romp up further, said the official.
The PDB currently incurs Tk 0.35 loss for every unit of power it sells to consumer against its average bulk power supply cost of Tk 2.80 per unit.
The PDB's average bulk power supply cost might double to over Tk 5.0 per unit (1 kilowatt-hour) by 2013 with the commissioning of new oil-fired power plants.
The board's average supply cost will soar to over Tk 4.0 per unit by 2010, Tk 4.92 by 2011-12 and Tk 5.0 by 2013 with the start of electricity generation from the high cost fuel-run plants.
Average power supply cost will fall again to Tk 4.5 per unit after 2013 when several gas and coal-fired power plants will start supplying and the life of some high-cost oil-fired power plants will expire.
The government, however, has moved afresh to hike the power tariff to contain mounting subsidy as the cost of electricity generation is skyrocketing with the installation of high-cost rental power plants to be generated diesel and furnace-oil run power plants.
The PDB has recently submitted a proposal to the power ministry for an upward power tariff adjustment.
The PDB would require an increase of 53 per cent in tariff from the current rate for 2011 alone to reduce the amount of subsidy.
In the year 2012 the power tariff requires to be hiked by 22 per cent compared to the previous year and in 2013 it should be 13 per cent higher, said the official.
Alternatively, the government can resort to making upward tariff adjustment by 12 per cent every year, the PDB proposed.
Power tariff was adjusted upward in March this year when Bangladesh Energy Regulatory Commission (BERC) hiked in electricity prices for all types of urban and commercial subscribers by six to seven per cent, on an average.
The BERC is now considering approving an upward power tariff adjustment further considering the issues electricity producers, suppliers and consumers.
Currently, the domestic consumers who consume electricity up to 100 units are paying Tk 2.60 per unit, subscribers using electricity between 101 and 400 units are paying Tk 3.30 per unit and those who consume over 400 units are paying Tk 5.65 per unit.
Flat rate for the consumers of small industries is Tk 4.35 per unit, while peak-hour electricity rate is Tk 5.86 per unit and off-peak rate is Tk 3.50 per unit.
Commercial consumers are now paying Tk 5.58 per unit as flat rate, Tk 4.05 per unit as off-peak rate and Tk 8.45 per unit as peak-hour rate.
Flat rate for the 11 kilo-volt (kV) consumers is Tk 4.17 per unit, while the off-peak-hour rate is Tk 3.43 per unit and the peak hour rate is Tk 7.12 per unit.
The flat electricity tariff for the consumers of 33 kV is now Tk 3.92 per unit, while the off-peak rate is Tk 3.33 per unit and peak hour rate is Tk 6.82 per unit.
Flat rate for 132 kV electricity consumers is now Tk 3.10 per unit. Meanwhile, electricity supply was inaugurated in Bangladesh in 1907.
During the period of partition of the Indian Sub Continent in 1947, the total generating capacity was 21 mw including 14 mw as captive generation in railway workshops, tea gardens etc.
Only 7 mw was available for public consumption distributed by 17 electricity companies that operated in seventeen districts of the then East Bengal.
By early 1950, all the power companies were gradually taken over by the government because they became bankrupt.
In 1958, the Water and Power Development Authority (WAPDA) was created to take over all the responsibilities for electricity generation and distribution.
After independence the Bangladesh government bifurcated the WAPDA.
The component related to generation, distribution and transmission of power was named Bangladesh Power Development Board in 1972 to operate as a vertically integrated public sector organisation.
The National Energy Policy of Bangladesh was adopted in 1995 for the overall development of the Energy Sector with special focus on public and private sector energy development, which is still in operation.