Proposal to increase electricity prices now

After raising fuel prices, the government is now moving to increase electricity tariffs. The Bangladesh Power Development Board has proposed a 17 per cent to 21 per cent hike at the wholesale level, following policy-level approval from the Power Division. In response, the Bangladesh Energy Regulatory Commission (BERC) has formed a technical committee to review the proposal.

According to BERC sources, the commission took the proposal into consideration at a meeting held on Tuesday. Alongside wholesale adjustments, BPDB has also proposed a proportional increase in retail electricity prices.

BERC Chairman Jalal Ahmed told Prothom Alo that retail prices are typically adjusted in proportion to wholesale rates. A technical committee has already been formed, and one of the five distribution companies has submitted its proposal. The remaining companies are expected to do so within a day or two.

Under BERC rules, the technical committee will evaluate all proposals. This will be followed by a public hearing with stakeholder participation, after which the commission will decide on the tariff hike based on its justification.

The final adjustment will also consider the sector’s revenue-expenditure gap and the government’s subsidy commitments.

The BPDB purchases electricity from both public and private power plants at contractually fixed rates and sells it to six distribution companies at a government-set wholesale price, which is lower than the production cost.

The deficit is covered through government subsidies. Distribution companies, however, do not receive subsidies and generate profit by selling electricity to consumers at retail rates.

The last electricity price hike was in February 2024 through an executive order, increasing wholesale tariffs by 5 per cent and retail prices by an average of 8 per cent. Currently, the average retail tariff stands at Tk 8.95 per unit, while the wholesale rate is Tk 7.04 per unit.

According to BERC sources, BPDB has proposed raising wholesale tariffs by Tk 1.20 to Tk 1.50 per unit. With an annual supply of around 90 billion units, a Tk 1.50 increase could generate over Tk 135 billion in additional revenue, while a Tk 1.20 hike would bring in more than Tk 100 billion. Retail prices could rise proportionately by up to Tk 1.38 per unit.

On Tuesday, Northern Electricity Supply Company (NESCO) submitted its proposal for retail tariff adjustment. Meanwhile, Power Grid Company of Bangladesh PLC (PGCB) has proposed increasing the transmission charge by Tk 0.16 per unit for supplying electricity from power plants to distribution companies.

BPDB stated that about 63 per cent of electricity consumers are low users, consuming less than 75 units per month. The proposal considers keeping tariffs unchanged for this group while imposing higher rates on larger consumers—meaning around 37 per cent of users may face increased bills.

Global energy markets remain volatile due to conflicts in the Middle East, pushing fuel costs to more than double. This has significantly increased expenses in Bangladesh’s power and energy sector.

To manage the deficit, fuel prices were raised through an executive order on 18 April. Earlier, on 9 April, a high-level cabinet committee led by the finance minister was formed to review electricity and fuel price adjustments.

Under the previous Awami League government, special legislation enabled the construction of multiple power plants without competitive bidding, leading to heavy capacity payments.

Despite this, power generation often remains below half of installed capacity due to fuel shortages. Over the past 15 years, electricity prices were increased 12 times at the wholesale level and 14 times at the retail level.

The interim government initially chose to reduce costs instead of raising tariffs and returned pricing authority to BERC. However, cost-cutting measures have had limited impact. In the last fiscal year, subsidies reached a record Tk 580 billion.

Energy adviser M Shamsul Alam of the Consumers Association of Bangladesh said citing deficits to justify price hikes is an old approach. “Increasing prices is not a solution,” he said, noting that around 40 per cent of power generation costs are excessive and could be reduced to lower subsidy needs. Otherwise, he warned, there would be little difference between the current and previous governments.