The Bangladesh Energy Regulatory Commission (BERC) has recommended hiking bulk electricity price by 57.83 percent. However, if the government subsidizes, there will be no need to increase prices.
The recommendation was made on Wednesday during a day-long public hearing on the Bangladesh Power Development Board (BPDB) proposal to hike bulk electricity tariffs by 66%.
At present, BPDB sells per unit of electricity at Tk5.17 to the electricity distribution companies which was increased in the last tariff order in February 2020.
They proposed to increase the price by Tk3.39 per unit in January. However, the BERC technical team recommended Wednesday to hike the price by Tk2.99.
BPDB, the sole wholesaler of electricity, is buying from its own generation as well as from imported and privately-owned power plants.
They are also selling at wholesale prices to five distribution companies and distributing in the urban areas of Mymensingh, Sylhet and Chattogram divisions.
BPDB has proposed to increase the current tariff from Tk 5.16 per unit to Tk 8.58 per unit considering the current price of gas. In the case of power generation, it has been proposed to increase Tk 9.14 per unit of electricity if the gas price hiked by 100 per unit and if the gas price increases by 125 percent then it will be Tk 9.27 per unit. On the other hand, the technical committee of the Energy Regulatory Commission has recommended making it Tk 8.16 per unit price of electricity without subsidy.
According to BPDB's proposal, the cost of generating electricity from oil has gone up due to the non-availability of gas supply as per the demand. The average production cost of electricity was Tk2.13 in FY 2019-20 which increased to Tk3.16 in FY 2020-21.
The cost of power generation per unit will stand at Tk4.24 in 2022 due to an increase in fuel oil price and coal VAT. If the wholesale price does not increase, BPDB will lose over Tk30,000 crore in 2022.
Abdul Jalil, Chairman of the Bangladesh Energy Regulatory Commission said that the order will be given in the most impartial and fair manner. It is the responsibility of Bangladesh Power Development Board to prove the rationale of increase in bulk price of electricity.
"There is an unusual situation all over the world due to covid-19 pandemic. The Russia-Ukraine war has had an impact on developing countries. We are not out of it,” he added.
The chairman said “the question may arise as to why we are holding a hearing on electricity prices without announcing a public hearing on gas prices. As you know, with the rise in prices comes the issue of government policy decisions, which is a matter of documentary evidence. The process is continuing. After ending it, we will take necessary decisions about the gas prices.”
In the proposal, BPDB said if the bulk electricity price is not raised then it will face a shortfall of Tk30,251 crore in the current fiscal year due to electricity purchase from expensive liquid oil-based plants and also gas price hike (which is now under process).
Therefore, it asked the regulator to increase the bulk electricity price to offset its expected deficit, said a source at BERC.
Due to the high-cost purchase and sales at a lower rate, BPDB has been incurring losses gradually which was being tackled by the government subsidy.
In 2010-11, the government provided a Tk4,511.90 crore subsidy to BPDB which was increased to Tk11,777.91 crore in the 2020-2021 fiscal year.
Earlier, the BERC held a public hearing on gas distribution companies' 117% price hike proposals from 21-24 March, which received stark criticism from the consumers and other stakeholders. The BERC's technical evaluation committee analyzed the proposal and proposed to increase the price of gas by 33 percent.
Power industry insiders said that it is obvious that if the bulk electricity tariff is raised, it will ultimately push up the tariff at retail level. So, the public hearing on retail tariff will come consequently.