Govt to set benchmark rate for power purchases to cut subsidies: Energy adviser

The government will implement a benchmark price to lower the power purchase rate with a view to reducing electricity subsidies, Power and Energy Adviser Muhammad Fouzul Kabir Khan said today (5 February).

Despite being under significant pressure due to electricity subsidies, the government has no immediate plans to increase prices, he said.

He was responding to journalists' questions after a preparatory meeting on ensuring an uninterrupted electricity supply during the upcoming Ramadan, the fasting month for Muslims that will begin early March, and the subsequent summer season.

The meeting at Bidyut Bhaban in the capital was attended by top executives from relevant government and private organisations.

The adviser said, "Despite significant pressure, we have not increased electricity prices. At this moment, there is no initiative to raise prices and electricity rates will not increase in the near future.

"Only the pricing initiative taken by the Bangladesh Energy Regulatory Commission for new gas connections will be implemented – because the government incurs a cost of Tk72 per unit for importing gas, while it is supplied to the industrial sector at Tk30 per unit. This gap will be reduced."

Fouzul Kabir said the government-formed task force will soon begin work on adjusting electricity tariffs. "We want to set a benchmark rate for power purchases. The power purchase agreement for the Matarbari coal-based power plant has been prepared, setting the tariff at Tk8.40 per unit. This rate will serve as a benchmark for all coal-based power plants."

He continued, "We will ask all other coal-based power plants why their rates are higher when the Matarbari plant is supplying electricity at Tk8.40 per unit. Negotiations will be held to ensure that they also supply electricity at this rate."

The adviser said a similar benchmark will be set for gas-based power plants and implemented across all such plants. Additionally, a separate benchmark rate will be determined for liquid fuel-based power plants, and its implementation will help reduce the government's expenditure on electricity, he said.

He said none of the power plants established during the previous Awami League government's tenure, whose contracts have expired and are up for renewal, will have their contracts renewed. He further mentioned that any renewal initiatives taken before 5 August have been halted.

The adviser said the Ministry of Finance and the Bangladesh Bank have given assurances that in addition to reducing outstanding dues for gas and electricity imports, efforts will be made to minimise the arrears of Independent Power Producers (IPPs) as much as possible.

No load shedding, early closure of shops this Ramadan

The adviser said electricity will be supplied nationwide as per demand, with no scheduled market or shop closures during Ramadan.

"Electricity demand in Ramadan is expected to reach 15,700MW and no load shedding is anticipated due to a planned balance between supply and demand," he said.

He further said to support additional electricity generation, gas supply will be increased to 1,200 million cubic feet per day (mmcfd), up from the current 900 mmcfd.

Mentioning that there will be no mandatory closures for markets like last year, the adviser said closures could be considered if electricity consumption in markets threatens to cause load shedding or disrupt irrigation. 

However, he said, "Load shedding is likely to resume after Ramadan, starting in April."

He said electricity demand during summer is estimated to reach 18,000MW, which could result in load shedding ranging from 700MW to 1,400MW.

He emphasised that no reduction in electricity supply will occur for irrigation purposes. 

Mentioning that air conditioners contribute an extra 6,000MW of demand during the summer, he said, "Setting ACs to 25 degrees Celsius in mosques, markets and offices could save 2,000MW to 3,000MW of electricity."