Consumer Empowerment in Power Sector Reforms : Bangladesh

1. Consumer Empowerment in Power Sector Reforms : Bangladesh M. Shamsul Alam Professor, Electrical & Electronic Engineering Chittagong University of Engineering & Technology Bangladesh

2. Power Sector in Early 90’s • Ownership: Constitutionally Public • Sector: Service • Utility: Integrated • Activity: Politically Pressurized • Bill Collection Efficiency: Poor • System Loss: Excessive • Supply: Interrupted • Investment: Poor • Deficit: Excessive

3. Reform objectives To promote competition To encourage private sector investment To ensure effective consumer participation /empowerment Reform Initiatives Unbundling intergraded utility Corporatizing for privatization Establishing independent regularity body

4. Power Sector in Bangladesh • 1972 Transferred to public from private • Vertically separated: upstream and downstream • Generation, Transmission and Distribution in downstream • Act and Policy formulation in upstream • For reform Regulation in midstream • Before REB, PDB only one utility • PDB now under unbundling Electricity Reform in Bangladesh • 1977 REB established for rural electrification • 1993 actual reform start on recommendation of interministrial committee • REB beyond the scope of reform

5. Reforms in Upstream Act and Policy formulation • Private Sector Power Generation Policy 1996 (IPP) • National Energy Policy 1996 • Policy Guidelines for Small Power Plant (SPP) in Private Sector 1998 • Vision and Policy statement on Power Sector Reforms 2000 • Bangladesh Energy Regulatory Commission Act 2003 • Rationalization of Tariff 2007 • Policy Guidelines for Captive Power Purchase 2007 • Renewable Energy Policy 2008 • Guidelines for Enhancement for Public Private Partnership in the Power Sector 2008 • Power Sector Master Plan 2006 (Amended 2009)

6. Reforms in Midstream Regulation • Established BERC • Power and Energy regulated • Ensured consumer participation in regulation • Import/purchase fuel and power out of regulation • public sector generation regulated • Private sector out of regulation • More profit in private sector • Discrepancy betn local and foreign private sector • Competition not effective due to discrepancy

7. Reforms in Downstream Unbundling • Due to unbundling generation, transmission and distribution converted to different corporatized companies under govt. ownership Generation • Asuganj Power Station Ltd (APSCL) • Electricity Generation Co. of Bangladesh Ltd (EGCP) • North-West Power Generation Co. of Bd Ltd. (NPGCB) • Part of generation still in PDB Transmission • Power Grid Co. of Bd Ltd (PGCB) Distribution • Dhaka Electric Supply Co. Ltd (DESCO) • Dhaka Power Distribution Co. Ltd (DPDC) • West-zone Power Distribution Co. Ltd (WZPDC) • South-zone Power Distribution Co. Ltd (SZPDC) • Central-zone Power Distribution Co. Ltd (CZPDC) • Part of distribution still in PDB

8. Generation in Regulation • 100% generation in public sector till 1996 • At present 60% • Suspended public generation to provide gas in private generation • Inequitable competition betn local & foreign investor • Government not interested to invest • No profitable scope for public sector • Opening opportunity for foreign investment • Private sector leads BERC ineffective • Ultimately consumer empowerment uncertain Transmission in Regulation • For corporatization, PGCB profitable • Earning Tk. 0.2291 per unit power transmission • BERC/Consumer’s no role on PGCB

9. Distribution in Regulation • DESCO’s distribution cost/kWh Tk. 0.51 • Power flow 2.74 BU, Profitable • Flow in DPDC 5.25 BU, Profitable • WZPDC non-profitable, flow 1.49 BU • Manpower 2700, need 1500 • Distribution cost Tk.1.26 per kWh • Capacity underutilized • If flow increased manpower decreased, profitable • Chittagong zone one of 6 zones of PDB • Power flow 2.48 BU • Profitable, if corporatized • Dhaka & Chittagong in profitable scope • No scope for others

10. Rural Electrification Board (REB) • In REB 36.5% of total power flow • DC varies Tk. 0.42 - 6.28 per kWh • Flow 13.5 – 839.4 MU varies PBS to PBS • 4 out of 70 PBSs profitable • Non-profitable for low power flow & under utilization • Profitable, if capacity full utilized

11. Impact • For profit improve tariff w/o P-flow only not viable • Except Dhaka & Chittagong demand growth low • Recently, tariff increased 6 – 7% • DESCO & DPDC earn profit earlier • Now much more • Others in deficit earlier • Now also in deficit • Govt. bears no deficit • Deficit companies provide no quality service • Profit own individual company About 40% population of the country use electricity. But as a result of reform only 12% will enjoy better quality service.

12. 2007-08 Gas based power • Power purchase from a public co. @ Tk. 1.35 • Generation cost of an IPP @ Tk. 1.23 • Av. price of IPP power @ Tk. 2.519 (132 KV) • For SPP Power @ Tk. 2.85 (33 KV) • For captive power @ Tk. 2.11 (132 KV) • For a period of 6 months • Govt. disinterested to purchase CP, contradictory

13. Reference to last year in 2008-09 • Cost increase for IPP power Tk. 2427.8 million • For rental power Tk. 9567.5 million • Av. cost for both @ Tk. 2.996 • Gradually suspended public Gn. for gas crisis • Ensuring gas supply to private Gn. • Encouraging gas based captive power • 25 March stop issuance of license for CP against protest • At least 1500 MW CP available • Even in gas crisis CP out of gas rationing • Private commercial generation on going • But with subsidized gas • 1009 MW public Gn. stop for gas shortage • setup public peaking plant on going

14. Encouraging private sector • Provide gas for private Gn stop low cost public Gn. • Purchase power @ higer from private for more profit • Peaking plant to increase public power cost

15. Constitution in Reform • State own power as a nationalized public sector (Article 13) • Corporatized utilities converting private sector through share market • Profit of the private sector not a pubic money • Deficit bear by public as a partial owner • To remove urban and rural disparity rural electrification state obligation (Article 16) • Reform increasing disparity • Which conflicting with Constitution • Reform introduced by ministry executive decision • Power cell established by ministry executive order • Overall Reforms not compliant with Constitution

16. Power Tariff • controversial Tariff structure Large industry 132 kV • flat@Tk. 3.10 • off-peak@Tk. 1.63, Tk. 1.82 and Tk. 2.72 Medium industry 33 kV • flat @Tk. 3.92 • off-peak Tk. 3.33 Medium industry 11 kV • flat @ Tk. 4.17 • off peak @ Tk. 3.43

17. Power Tariff (cont..) Small & cottage industry low voltage • @Tk. 4.35 • High & medium voltage load shedding lower than low level voltage • At low level voltage tariff & load shedding both higher • Small & Cottage industry in disparity • 132 kV level balk power @ Tk. 2.37 • Monthly min. bill Tk. 72.0 upto 25 kWh • Min bill consumers almost 27 lac • They need power at Peak • Pay fixed bill w/o having almost no power

18. Economy in Reform • Bangladesh a poorest country in the world • Economy size not large as DCs • No fair competition betn public and private sector • Disparity in local and foreign private sector • Continuous devaluation of Taka high cost pay in foreign currency • Loss avoided if payment in Taka FDI in power utility in Bangladesh like countries is difficult to compliant with public interest.

19. Power need • To be a lower middle income country • For poverty reduction • To achieve millennium development goal For only profit, power is now going to private sector. Planning in Reform • 2001-06 no increment of generation capacity • Distribution line constructed about 5 lac km • 2007-08 generation capacity increased • almost no increment of power generation • Now increasing Gn. capacity for alternative fuel • Planning for fuel supply not clear • Power development plan FDI dependent • No Govt. investment As a result Reform has become unplanned and inconsistent. Consumer suffers with load shedding almost every alternate hour.

20. Reform Benefit • System loss reduced up to 9% • Bill collection efficiency satisfactory Consumer Empowerment • No role of consumer on upstream and downstream reforms • In midstream consumer empowerment not yet effective • Consumer representatives participate in public hearing only • Balancing public interest BERC made pricing decision in hearing • Communication buildup among utility authority, public representative and consumer at grassroots level through RESA project

21. Recommendation • To ensure consumer empowerment change BERC Act to impose regulation on energy & power purchase price • To ensure effective consumer participation on regulatory decision & policy making through public hearing • BERC Organizes training to enhance consumer capacity • BERC supply information to consumer in a definite process • To protect consumers interest & right BERC creates fund to provide legal help to consumer

22. Recommendation (cont..) • In response of consumer’s complain for violation/non-implementation of BERC order/decision BERC takes steps w.r.t. BERC Act • Ensure consumer effective participation in upstream & downstream activities • Constitution public advocate office in BERC • Planning utilities finalize on public hearing • One BERC member should be consumer representative

23. Concluding Power sector reform is not compliant with public interest. It conflicts with the constitution of Republic. So it should be reviewed immediately. The consumer empowerment may be more effective on reforms, if as a model the RESA project is implemented in modified form for pro-public power reforms in South Asian Countries as a whole.

24. Thank you all