Despite surplus electricity, 10 rental power plant deals extended in four months

Despite surplus electricity generation over supply, the government in the last four months extended the contracts of a total of 10 rental power plants.

Official documents of the Cabinet Committee on Public Purchase (CCPP) reveal the latest approval came on March 23 this year for extension of deals for 5 rental power plants. Earlier 4 rental power plants got the approval for contracts extension on January 5 this year and one got approval for extension on December 29 last year.

Although the deals were extended on “No Electricity, No Payment” basis, an allocation of Tk 6,564.08 crore was approved by the CCPP to pay the owners of the rental power plants for their operations.

As per the BPDB statistics, the current total electricity generation capacity now stands at 25,514 MW while the supply is about 14,000 MW meaning that the country has an installed surplus capacity of 11,500 MW.

State Minister for Power, Energy and Mineral Resources Nasrul Hamid, however, defended the extension of the rental power plants’ contracts saying that the deals were extended for “emergency necessity” to tackle the current situation.

“As there is a gas shortage, we have to run liquid-fuel based rental and quick rental power plants on full capacity to meet the demands," he told UNB.

He also said these plants don’t oblige the government to make 'capacity payment' - i.e. payment for unused electricity, that was the case with some earlier contracts. “As a result, the cost of electricity from these extended rental power plants came down by 30-40 percent from the original cost," Nasrul Hamid said.

The government documents show that of the approved 5 plants in March this year, three belong to Summit Group, one belongs to Dutch-Bangla Group and one to Orion Group.

As per the approval the Bangladesh Power Development Board (BPDB) will pay Tk 459.98 crore to Summit Group for purchase of electricity from its 40 MW furnace oil–based plant of the Khulna Power Plant, Tk 1295.42 crore to its Khulna Power Company Unit-II Ltd’s 115 MW Goalpara plant, and Tk 1157.52 crore to its Summit Narayanganj Power Limited’s 102 MW Madanganj plant.

The BPDB will pay Tk 1146.51 crore to Dutch Bangla Power & Associates Ltd’s 100 MW furnace oil-based Siddhirganj plant, and Tk 1146.51 crore to Orion Power Meghnaghat Ltd’s Meghnaghat 100 MW plant as per the approval.

Additional secretary of the Cabinet Division, Zillur Rahman Chowdhury while briefing reporters on the issue after the approval, said the government is purchasing electricity from the plants at Tk 17.529 per unit (each kilowatt hour) while under the new contract, it will purchase each unit of electricity at a reduced rate of Tk 16.40.

Cabinet body approved extension of deals with 5 rental power plants earlier.

Four of them were the 50 MW Kumargaon power plant, 50 MW Fenchuganj plant, 20 MW power plant in Bogura and 53 MW Ashuganj power plant.

Of these, the contract with Energy Prima Ltd.’s 50 MW plant in Kumargaon will get extension for another one year till December 31 in 2022 at a cost of Tk 86.52 crore while the same company’s contract for 50 MW power plant in Fenchuganj will be extended for 3 years at a cost of Tk 278.64 crore. Contract for 20 MW Bogura plant will be extended for 3 years at a cost of Tk 106.92 crore and United Energy Ltd’s contract for 53 MW Fenchuganj plant will get extension for another 5 years at a cost of Tk 451.20 crore.

The Cabinet body also approved the 40 MW Bhola gas-fired rental power plant’s agreement with BPDB for another 4 years. The BPDB will pay the Venture Energy Resources Ltd, owner of the plant, Tk 380.90 crore during the period.

The power tariff has been lowered to 3.3970 US cents (Tk 2.7176) from 3.49 US Cents (Tk 2.79) per kilowatt hour (each unit) which will save Tk 49.88 crore over the next 4 years.

Advisor of the Consumers Association of Bangladesh (CAB) and energy expert Shamsul Alam expressed resentment about the repeated approval of the rental power plants saying that there is no logical basis for the extension.

He said the government should have taken consumers’ opinion through public hearing at Bangladesh Energy Regulatory Commission before the approval.

“No approval is made for the interest of the consumers. Rather, all the approvals were given only to serve the interest of certain vested quarters," he told UNB.