Rental power sponsors bag king’s ransom as ‘incentives’

Dhaka,  Mon,  25 September 2017
Published : 12 Jul 2017, 00:50:05

Rental power sponsors bag king’s ransom as ‘incentives’

Govt disburses Tk 392.26b as ‘capacity payment’, continues dependence on costly ‘quick’ solutions beyond tenures
Rental power sponsors bag king’s ransom as ‘incentives’
M Azizur Rahman

Owners of rental-and quick-rental power plants bagged over Tk 392.26 billion as 'incentives' from the government over the past decade sans generating electricity, said officials.

The money was exacted by the private power sponsors in the form of 'capacity payment' stipulated in the contacts made with them when the government opted for a quick-fix solution to a nagging power crisis in the country.       

This amount is over 41.82 per cent of the total payments worth Tk 937.89 billion that the state-owned Bangladesh Power Development Board (BPDB) disbursed to all power producers against electricity purchase between July 2008 and December 2016, they added.  The remaining Tk 545.63 billion of the total was paid to all the power-plant owners as energy payments during the period under consideration.

Capacity payment is a sort of penalty, which the BPDB is bound to pay to the owners of rental-and quick-rental power plants if the government fails to purchase a certain portion of electricity readily available with them.

As per the power-purchase agreements, this penalty is calculated on the basis of 40 per cent plant factor of the oil-fired rental-and quick- rental power plants on average, a senior official of the state-run power board told the FE.

There are, however, allegations that a section of unscrupulous power entrepreneurs are capitalising on the 'loopholes' in the contracts, leaving the government to count the cost.

Some of the plants are failing to generate electricity in line with their commitments because of old and outdated equipment and generators of their plants but are shifting the blame for their failure on to the government to realise capacity payments, industry-insiders said.

The rental and quick-rental power plants are also consuming more oil than specified in the contracts, they added.

The BPDB has to pay around Tk 3.36 million per day to a 50- megawatt (MW) oil-fired rental or quick-rental power plant as 'capacity payment' in case of the former's failure to purchase electricity,

Sources said the board had to pay around Tk 12.80 billion to privately-owned power-plant sponsors during the fiscal year (FY) 2007-08, which was 54.23 per cent of the total payments worth Tk 23.64 billion made to all power producers.

During FY'09, the BPDB had to pay around Tk 15.06 billion to these plant sponsors, which was 48.84 per cent of the total payments amounting to Tk 30.83 billion made by the BPDB to all the power producers.

Total capacity payments by the BPDB to privately-owned oil-fired power-plant sponsors during FY'10 amounted to around Tk 17.90 billion, which was 50.35 per cent of the total payments worth Tk 35.55 billion from BPDB to all power producers against electricity purchase.

The payment was around Tk 29.73 billion to the private oil-fired power- plant sponsors during FY '11. The amount was 38.27 per cent of the total payments worth Tk 77.67 billion made by the BPDB to all power producers for electricity purchase.

During FY'12, the board had to pay around Tk 50.01 billion to these power sponsors, which accounted for 40.64 per cent of the total Tk 123.04 billion paid to all power producers in electric bill.

Its total capacity payments to the sponsors during FY'13 were around Tk 54.90 billion or 38.96 per cent of the total payments worth Tk 140.90 billion given to all the power producers against electricity purchase.

Around Tk 47.14 billion had to be paid to these power sponsors during FY '14. It was 33.16 per cent of the total power-purchase payments worth Tk 142.13 billion.

The FY'15 bill was around Tk 82.43 billion or 55.29 per cent of the total Tk 149.06.

Total capacity payments during FY'16 were around Tk 53.76 billion or 38.35 per cent of the total Tk 140.17 billion paid by the BPDB to all the power producers against electricity purchase.

The capacity payments were around Tk 28.48 billion during the first six months of FY '17, until December 2016. It accounted for 38.04 cent of the total power-purchase bill worth Tk 74.86 billion during this period.

The government had launched a drive to install under private sector a significant number of oil-fired rental-and quick-rental power plants from 2009, as a 'short-term' solution to a nagging countrywide electricity crisis.

The government also awarded private-sector sponsors several gas-fired power plants to be set up on rental basis.

Most of these power plants were awarded on the basis of unsolicited offers under the Speedy Supply of Power and Energy (Special Provision) Act 2010. The law has a provision of immunity to those involved with the quick-fix remedies.

The government also allowed the private entrepreneurs duty-free import of furnace oil to run their power plants with 9.0 per cent service charge along with import costs as an incentive, said a senior official of Power Division under the Ministry of Power, Energy and Mineral Resources.

Alongside the rental power plants the government also had a plan to install a number of big peaking power plants as 'mid-term' and 'long-term' measures.

The Power Division also then had planned to retire the rental-and quick-rental power plants after expiry of their initial tenures and bring down the electricity tariffs as well, he added.

But, instead of retiring 'expensive' rental-and quick-rental power plants, the government continued extending their tenures and installed more such plants with the capacity-payment provision intact in the order, the official said.

For a lack of monitoring and supervision from the government, the mid-term power plants 'failed' to come up, he said.

As a consequence, the electricity tariffs for retail-level consumers were hiked seven times-almost doubling it from previous rates-instead of reducing that as per government's initial plan.

Furthermore, the government recently moved to award afresh over a dozen oil-fired power plants to private sector under the special law that skips tendering, keeping the provisions of capacity payment, and 9.0 per cent service charge.

Currently, the country has a total of 43 oil-fired power plants, of which 34 with a total generation capacity of 2567 megawatts (MW) are furnace oil-fired and the remaining nine with a total capacity of 846MWs are diesel-based plants.

 "The government is  keeping intact the way of making hefty money by a section of 'unscrupulous' power entrepreneurs by relying heavily on rental-and quick-rental power plants for electricity generation," energy adviser of the Consumers' Association of Bangladesh (CAB) Prof M Shamsul Alam told the FE Tuesday.

He said the initial plan of the government to install such oil-fired power plants as a 'short-term' solution and retire them after initial expiry deadlines and subsequent reduction in tariffs was a 'pro-people' decision.

But continued extension of the 'expensive' rental-and quick-rental power plants with capacity-payment provisions went the way of dishonest businesspeople, he added.

Electricity tariffs continued to rise over the past several years as an outcome of the government's 'wrong' policy, said the CAB adviser, adding: "It is not at all an ideal policy".

Apart from furnace oil-fired power plants, the government is also continuing with high-cost diesel-run rental power plants, which he said is raising electricity-generation costs further.

Former director-general of the state-run Power Cell BD Rahmatullah said the government's mid-term plan to build large low-cost power plants "failed due to 'intentional' negligence of the sponsors most of whom also own rental-and quick-rental power plants".

He termed the government's dependence on expensive oil-fired rental power plants a 'total failure'.

"A powerful syndicate is active in the country to keep it continued," he alleged.

Although this government is completing two consecutive tenures in power, it is still in 'crisis-management' mood for power sector, said Prof Ijaz Hossain of Bangladesh University of Engineering and Technology (BUET).

"It's a total failure," he said.

The engineering professor feels that the government should have implemented at least several big power-plant projects in the meantime.
Editor : A.H.M Moazzem Hossain
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