The Bangladesh Power Development Board (PDB) wants to increase the bulk price of electricity by almost 22 percent from the existing Tk4.83 to Tk5.88 per kilowatt-hour.
The PDB submitted a proposal to the Bangladesh Energy Regulatory Commission on October 15 asking for the increase.
Later, the six distribution companies also submitted proposals to the commission, in which most of them said it will not be necessary to increase the price of electricity at the retail level if the bulk price is not increased.
In its proposal, the PDB said it has been providing electricity to the distribution companies at Tk4.80 per kilowatt-hour – a bulk rate fixed by the regulatory commission in November 2017. However, it is making a loss by supplying at that price.
In 2020, the organisation will need Tk45,208 crore to supply 76,830 million units of electricity to the distribution companies.
But its earnings will be only Tk36,648 crore from selling the electricity at the current rate, facing a deficit of Tk9,552 crore, said the proposal.
In the proposal, the PDB urged the commission to take the deficit issue into consideration.
State Minister for Power, Energy and Mineral Resources Nasrul Hamid said, "We need to assess if it is actually necessary to increase the bulk price of electricity."
Until now, the government has been subsidising the PDB for providing electricity at the bulk rate, he said, adding, "Now the PDB wants to get out of this subsidy system."
In 2018-2019, the government under the budgetary support system subsidised Tk5,415 crore out of a total deficit of Tk6,862 crore.
PDB data revealed that in the 2018-2019 financial year, it had to pay Tk8,930 crore as a capacity charge to independent power producers and rental power plants.
Of the amount, Tk6,811 crore went to 55 power producers and Tk2,117 crore to 27 quick rental power plants.
And the total payment to independent producers, small independent producers and rental plants was Tk20,781 crore in the same fiscal year.
At present, all distribution companies are making a profit by selling electricity to consumers.
The Dhaka Power Distribution Company, the company responsible for supplying electricity to some parts of Dhaka and Narayanganj, earns Tk1.78 per unit, since it buys electricity at Tk5.88 per unit from the PDB and sells it to consumers at Tk7.67 per unit.
In the 2017-18 financial year, DPDC's profit was Tk70 crore, and in FY2016-17, it was Tk32 crore.
In its proposal, the company urged the regulator to increase the retail electricity price in proportion to the PDB's bulk price, if it is increased.
The Bangladesh Rural Electrification Board (REB), the largest distribution company of the country, has the highest markup – Tk2.28 per kilowatt-hour.
It has been supplying electricity in the no-profit and no-loss method.
The latest report says that the company is now breaking even after suffering losses for several years.
Like the DPDC and the REB, other distribution companies are also making a profit by selling electricity to consumers.
Therefore, experts think that this new proposal for increasing the price of electricity both at the bulk and the retail levels is unjustified.
There is no need to increase the price of electricity if these companies operate transparently and efficiently, they said.
Professor M Shamsul Alam, energy advisor of the Consumers Association of Bangladesh, said the PDB can reduce its deficit by minimising unnecessary expenses and reducing the amount of electricity being purchased from costly private power plants.
"Even though the country has the capacity to produce at least 5,000 megawatts more than the demand at present, the government is still giving permission for more power plants to be set up in the private sector – which is really ridiculous," said Shamsul Alam.
He said, "The PDB's reasoning behind the proposal for increasing the bulk price is that the organisation will face a big deficit if the price is not increased, whereas it is also paying a huge amount of money to private power plants in the form of capacity charge."
And most of the power plants were commissioned in recent years which was an unwise decision, he added.