Rural electricity may face pressure as PDB pushes REB to raise revenue

The Bangladesh Rural Electrification Board (REB) supplies electricity to rural people through 80 cooperatives across the country.

For five decades, it has been delivering relatively low-cost electricity to villages. Loss-making cooperatives under REB are kept afloat through the income of a few profitable ones.However, to reduce its own financial deficit, the Bangladesh Power Development Board (PDB) is now exerting pressure on REB.

In a new proposal submitted to the Bangladesh Energy Regulatory Commission (BERC), PDB has said it wants to increase the bulk power tariff rates for REB’s profitable cooperatives.

However, REB officials said that in the last fiscal year only 13 cooperatives actually made profits. Another four did not incur losses. The remaining 63 cooperatives are sustained through subsidies from the profitable ones. If PDB’s proposal is implemented, the existing rural electricity supply structure could collapse. They say it would be a self-destructive decision by the government.

BERC Chairman Jalal Ahmed told Prothom Alo that the stakeholders will be included in the review of PDB’s proposal during the public hearings to be held on 20 and 21 May. The commission will then make a final decision considering consumer interests.

PDB claims REB receives electricity at a lower price than other distribution entities. Therefore, higher electricity consumption by REB reduces the average bulk price. While the current bulk power tariff per unit is Tk 7.04, PDB is receiving Tk 6.99. Most subsidy costs go toward REB.

According to PDB’s calculation, REB currently buys electricity at Tk 6.24 per unit, while selling it at an average retail price of around Tk 8.50. No other distribution company earns such high per-unit revenue. DESCO buys electricity at a maximum of Tk 8.58 per unit and sells it at Tk 10.40.

The proposal states that 21 REB cooperatives have a customer structure similar to urban distribution companies DESCO and DPDC in Dhaka. In these cooperatives, the average bill per unit is Tk 9.36. In contrast, the remaining 59 cooperatives have an average bill of Tk 7.85. Therefore, if these 21 cooperatives are separated and charged urban-like wholesale prices, PDB’s revenue will increase.

According to PDB officials, retail electricity prices are the same for all consumers, but wholesale prices vary by distribution company. In FY 2024–25, 63 per cent of the organisation’s financial deficit was due to supplying cheaper electricity to REB. This pressure will increase further next year. Reducing subsidy pressure in the power sector is necessary to avoid raising retail tariffs.

PDB said it pays capacity charges of around USD 12 (Tk 1,476) per unit monthly for liquid fuel and gas-based plants, and up to USD 25 (Tk 3,070) for coal-based plants. In addition, even when large consumers are directly connected from the grid, PDB does not receive demand charges (minimum monthly bill regardless of usage). Distribution companies collect demand charges even without providing direct service, and PDB said this should be paid to it to reduce deficits.

The proposal states that around 2,000 MW of 19 large connections under REB are currently in process. Once these become operational, they will create an additional subsidy burden of Tk 36 billion for PDB.

Such large connections under REB will continue to increase. REB supplies electricity to most economic zones. If these large consumers are supplied through 132 kV instead of 33 kV lines, PDB’s subsidy per unit would decrease by Tk 2.24, because wholesale tariffs from 132 kV are higher than 33 kV.

PDB has cited four large projects to demonstrate potential revenue gains, including the Jalsiri Housing Project.

According to PDB calculations, directly supplying electricity to this 500 MW-demand project would generate Tk 41.82 billion annually. But if supplied through REB, revenue drops to Tk 33.29 billion. Direct supply would also allow PDB to collect Tk 540 million in demand charges. This means PDB is losing about Tk 9.08 billion in potential annual revenue.

Following the proposal to increase wholesale electricity prices, REB submitted an application to BERC on 6 May to increase retail power tariff electricity prices.

It states that REB had a deficit of Tk 16.98 billion in 2024–25 fiscal. In the current fiscal year, it may rise to Tk 23.68 billion. Therefore, retail prices need to increase by at least 5.93 per cent. If wholesale price and wheeling charges increase, retail prices will also have to rise proportionally.

REB officials say the organisation was established in 1977 and currently serves about 37 million customers, covering about 77 per cent of the country’s total electricity users. It handles about 57 per cent of national electricity distribution. About 56 per cent of REB’s electricity goes to residential consumers, most of whom are low-income and low-usage customers. Providing cheap electricity to lifeline and first-tier consumers causes losses. REB has not proposed increasing tariffs for these groups. Therefore, even if wholesale costs rise, REB’s revenue will not increase proportionally.

REB officials and energy experts said that in the power sector, customers effectively provide subsidy outside government support. High-usage consumers pay higher tariffs. In residential use, consumption above 600 units costs Tk 14.61 per unit. This is higher than PDB’s production cost of around Tk 12.50 per unit. This extra revenue subsidises low-use consumers. Similarly, REB’s 21 profitable cooperatives subsidise others. This is known as cross-subsidy and maintains balance.

REB’s financial report shows that in the last fiscal year, Tk 35.15 billion from 13 profitable cooperatives was used to cover losses of 65 cooperatives. In reality, profitable cooperatives sustain the entire rural electricity distribution system. Most profitable cooperatives are located in industrial areas around Dhaka, Gazipur, and Narayanganj.

Rights organisation Consumers Association of Bangladesh (CAB) energy adviser M Shamsul Alam told Prothom Alo that REB operates on cross-subsidy. Profitable cooperatives support loss-making ones. Therefore, there is no scope to consider separate pricing for 21 cooperatives. He said PDB is shifting its “exploitative cost burden” onto everyone else.