Power price hike again

Electricity prices are going up again. The Bangladesh Energy Regulatory Commission (BERC) has completed scrutinising the proposals submitted by the concerned companies. The proposals are from an increase of up to 15 per cent per unit of electricity at a wholesale level and from 6 to 14 per cent for subscribers.

A public hearing on the proposal will commence from 25 September. According to the BERC act of 2003, the commission will declare its decision within 90 working days of the public hearing. In the six years between 1 March 2010 and 1 September 2015, the price of electricity has increased five times at a wholesale level and seven times for retail subscribers.

Energy advisor of the Consumers Association of Bangladesh (CAB) M Shamsul Alam has told Prothom Alo that there is no justification for increasing the price of power now. After all, the government is not following BERC’s directives to produce power at low costs. On the contrary, it is stepping up furnace-oil-fired power generation at a higher cost. Even if the furnace oil was supplied to all the power plants at the market price, production costs would decrease considerably. But that isn’t being done either. The effort to reduce system loss and increase profits is also ineffective. Had these steps been taken, then there would be no need to increase power prices. In fact, it would be possible to reduce the cost of electricity.

According to BERC officials, the Power Development Board (PDB) has proposed an increase of 72 paisa per unit of electricity (almost 15 per cent) to be sold wholesale to the distribution companies. And the various distribution companies have proposed a 6 to 14 per cent increase in retail price of electricity per unit to be sold to the subscribers.

The distribution companies said that every time the price of electricity has been increased less at a retail level than wholesale. This makes it difficult to run the companies.

However, a review of the proposals submitted to BERC by the distribution companies reveals that of the six companies, only the Rural Electrification Board (REB) is recording losses. The four that are making profits are the PDB distribution zone, Dhaka Power Distribution Company (DPDC), Dhaka Electric Supply Company (DESCO), and West Zone Power Distribution Company Limited (WZPDCL).

The North-West Zone Power Distribution Company Limited (NWZPDCL) has been newly formed. This company started operating in October last year. For the first time it has approached BERC regarding PDB’s Rajshahi and Rangpur Zone assets and liabilities.

In PDB’s proposal to increase wholesale prices, it was said that expenditure in supplying per unit of electricity to the power distribution companies is Tk 5.59. But the price fixed at present in Tk 4.87 per unit. It is necessary to increase the price by 72 paisa to close the gap as it will not be possible for PDB to arrange the funds.

At a subscriber level, DPDC has proposed an increase of 6.24 per cent, DESCO 6.34 per cent, WZPDCL 10.36 per cent, REB 10.75 per cent and PDB 14.5 per cent. A few distribution companies have reportedly asked for an increase in demand charge and service charges at a subscriber level. Presently the companies charge up till Tk 30 per meter as demand charge and up to Tk 20 as service charge.

Concerning the proposal for a price hike by the profit-making companies, BERC member (power) Mohammed Mizanur Rahman said, the profits and losses of the companies will be made public at the hearing and BERC will decide accordingly. It is not that the prices will be hiked simply is they propose it.

However, PDB sources said that the price of gas used for power generation has been increased. Many power plants are also having to purchase furnace oil at higher costs. As a result, production costs are higher than the sales price. That is why there is no alternative but to increase prices.

According to CAB and private sector experts, there is an effective alternative to raising prices and that is supplying furnace oil at the market price. Presently the per unit price of electricity produced with furnace oil at the market price is around Tk 6. The power plants which have been given furnace oil import licences by the government, are selling electricity to the government at this rate.

On the other hand, the per unit cost electricity of the power plants purchasing furnace oil from the Petroleum Corporation (BPC) at the price fixed by the government, is Tk 12 higher.  The international market price of furnace oil at present is between Tk 22 to Tk 24 per litre, but BPC sells this at Tk 42.

Power price hike at a glance

Date                              Wholesale                      Subscriber

1 March 2010                                                           5%

1 February 2011                   11%                            5%

1 August 2011                   6.66%

1 December 2011               16.79%                      13.25%

1 February 2012                14.37%                        7.09%

1 September 2012              16.92%                          15%

February 2014                                                       6.96%   

(announced on 13 March)             

1 September 2015                                                    2.9%