Over Tk 1 trillion has been paid to power plants as capacity charges in 14 years throughout the three terms of the present government with private power plants receiving a major portion.
State minister for power, energy and mineral resources Nasrul Hamid disclosed details on capacity charges in parliament on Tuesday.
According to the data presented by the state minister, 73 independent power plants (IPPs) and 30 rental power plants in the country have received about Tk 1.05 trillion as capacity charge in the past 14 years as of 30 June this year.
Whether in operation or not, as per the agreements, the public or private power plants receive rent, which is known as the capacity charge. The government and the power plant owners argued if capacity charges are not paid private power plants would not be interested.
According to consumers’ rights bodies and energy experts, capacity charges must be fixed through competition, but Bangladesh signed agreements on capacity charges without competition under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act, 2010, better known as indemnity act, resulting in more profit for investors.
On the other hand, the country’s power generation capacity has increased significantly, yet electricity is not produced accordingly. As a result, some power plants are always paid capacity charges even when they are not in operation.
About the matter, Consumers’ Association of Bangladesh (CAB) vice president M Shamsul Alam told Prothom Alo nowadays people pay higher power tariff because of irrational capacity charge for power plants.
It is to mention that the government has increased the bulk power tariff for 11 times and retail tariff for 13 times in the past 14 years.
Discussion in parliament
Bangladesh strongly encouraged private sector investment in power production since the Awami League government came to power in 2009. The power generation capacity of the country has now increased to about 23,500 megawatts of electricity against a domestic demand of less than 15,000 megawatts.
As the power generation rose, entire country was brought under coverage of electricity and power outage was nearly gone, but load shedding returned following the recent fuel crisis. Besides, such a large number of power plants are not necessary to meet the demand of electricity.
Huge amount of capacity charges against huge power generation capacity have given rise to discussions and questions from time to time. The amount of capacity charges was revealed in reply to a question from Gonoforum lawmaker Mokabber Khan.
He asked how much the private power plants have so far been paid as capacity charge separately throughout the three terms of the Awami League government, which individuals and companies own these power plants, and what are the terms and conditions of the agreement between the government and the power plants owners.
Mokabber Khan placed the question during a question and answer session with speaker Shirin Sharmin Chaudhury in the chair. Replying to the query, state minister for power, energy and mineral resources Nasrul Hamid disclosed the details on the capacity charges of the power plants.
Earlier in July last year, the parliamentary standing committee on ministry of power, energy and mineral resources disclosed the annual expenditure on capacity charges paid to power plants. According to the committee, a little over Tk 189.77 billion was paid to power plants as capacity charges in the 2020-21 fiscal.
Private research organisation Center for Policy Dialogue (CPD) research director Khondaker Golam Moazzem told Prothom Alo the revelation of data in parliament made it clear that huge amount of money has been spent for power plants as capacity charges.
At the beginning, capacity charges might be paid to attract investment in power sector, and it was necessary to repeal the indemnity act and the condition of capacity charges after enough investment, but the government did not do so rather extended the duration of the law. As a result, the government and the people have been deprived of getting power at a competitive price, he added.
Golam Moazzem further said the Bangladesh Power Development Board (BPDB) may turn to a white elephant considering several issues including the present situation and future power generation plan of the power sector and the financial liability of the government.
Top 10 power plants receive Tk 647.71b
The state minister revealed data on the amount of capacity charges paid to each power plant. However, several local and foreign power companies operate more than one power station.
Analysis of the data presented by the state minister showed that top 10 power plants received Tk 647.71b.
Summit Group, which leads the power sector in the country, was paid at least Tk 176.10 billion as capacity charges for nine power plants.
Summit Group was followed by US-based Aggreko International, which was paid Tk 83.10 billion for seven power plants while United Group came in the third place receiving Tk 77.58 billion for six power stations.
While Bangladesh-China Power Company Limited, a joint venture of Bangladesh and China that has constructed Payra power plant, received Tk 74.55 billon. Since there was no power transmission line, a major portion of Payra power plant had not been in operation for about one and a half years.
State-owned Rural Power Company Limited, which is enlisted as an independent power plant, received Tk 73.25 billion for five power plants while five power plants of Bangla Trac Group and Onion Group each received Tk 54. 23 billion and Tk 40.80 billion respectively as capacity charge.
Khulna Power Company Limited (KPCL), jointly owned by Summit Group and United Group, was paid Tk 37.44 billion for three power plants while Doreen Group received Tk 30.66 billion for seven power stations.
Other than these, Haripur power plant was paid Tk 36.78 billion in capacity charges, Hosaf Group Tk 28.60 billion, Mohmmadi Group Tk 28.34 billion, NDPC Tk 28.24 billion, Max Group Tk 23.51 billion, Confidence Group Tk 21.85 billion, Sikder Group Tk 18.43 billion, Baraka Group Tk 16.93 billion, Paramount-Bangla Trac Tk 16.31 billion, Sinha Group Tk 14.54 billion, Regent Group Tk 11.72 billion and Energypac was paid Tk 11.13 billion in capacity charges.
Besides, Energis Power Corporation, owned by the family of Jatiya Party presidium member Anisul Islam Mahmud, and Northern Power Solutions, owned by ruling party lawmaker Enamul Haque from Rajshahi, received Tk 6.85 billion and Tk 6.62 billion respectively.
There were several power plants that had been in operation for a short time, yet they were paid huge in capacity charge. One such power plant was a diesel-run 300-megawatt power plant owned of APR Energy, which took Tk 27.88 billion in three years, but the power plant remained closed most of the time.
A list of 114 power plants was revealed in parliament, but no amount of capacity charges was mentioned for 11 of those power stations.
Conditions of agreements
State minister Nasrul Hamid also highlighted a list of terms and conditions from the agreements signed between the government and the private power plants receiving capacity charge.
These include ensuring 90 per cent of availability annually, or else capacity charge will be deducted; running annual dependable capacity test, and maintaining risk insurance during the power plant operation.
Former special assistant on energy to the chief advisor of the caretaker government M Tamim told Prothom Alo there are capacity charges for both the power stations in operation and without operation, but data that have been revealed in parliament does not make it clear that how much capacity charges have been paid to power plants that were not in operation.
It is difficult to justify for paying capacity charges throughout the year to power stations that had been in operation for a short time, he said adding the model of power sector was wrong.
If it is learned beforehand that rental power plants would be operated during the peak of the demand, so why the deals are made for entire year, he asks.