Bangladesh paid over Tk 1 trillion in capacity charge to power plants during the 14 years of rule of the immediate-past and now ousted Awami League government until 2023.
The country also paid nearly $.5 million daily to two floating storage and regasification units since 2019.
While the floating storage and regasification units, built for importing liquefied natural gas, remained roughly 40 per cent unused, barely half of the country鈥檚 power generation capacity was utilised.
The power and energy projects were approved under the special act, the Quick Enhancement of Electricity and Energy Supply Act 2010, without bidding and also ignoring warning from local and international energy experts who forecast that the projects were bringing economic downfall.
But the Awami government invested $32 billion in the power sector alone, never assessing how the money got spent amidst allegations of widespread corruption and financial irregularities.
The energy sector expense was as well. Bangladesh spent Tk 1.73 lakh crore in importing Liquefied natural gas until September since the import began in August 2018. Bangladesh now owes Tk 1,787 crore to LNG importers.
A High Court bench on Thursday declared unconstitutional two of the key provisions of the 2010 act. One of the provisions authorised the energy minister to approve power projects without bidding, while the other one provided immunity from prosecution to all actions done under the act.
鈥楾he verdict finally recognises that the past government did immense damage to Bangladesh鈥檚 economy going against the interest of the state and the nation,鈥� said Hasan Mehedi, member secretary, Bangladesh Working Group on Ecology and Development.
Capacity charge is the amount of money payable by the government based on a power plant鈥檚 capacity to produce power rather than the power actually produced. The capacity charge is calculated in a way that ensured hefty return on investment by taking care of liabilities such as interests on loans.
In the gas sector, particularly in importing LNG, the term capacity charge does not exist. But there is a fixed regasification charge. Whether or not Bangladesh imports any gas, the charge has to be paid daily.
The Petrobangla is legally bound to pay power company Summit $2,47,757 per day as the regasification charge, which has to be paid a month in advance.
Excelerate Energy, on the other hand, receives more than $2,50,000 every day as the regasification charge.
For one reason or the other, Bangladesh sees its floating storage and regasification units capacity remain unused, though it generates a huge financial burden that is eventually passed onto consumers鈥� shoulders in increased tariffs.
In September last year, the Awami League government revealed that 114 power plants, including 32 rental plants, received over Tk 1 trillion as capacity charge in the past 14 years.
The capacity charge was paid mostly in dollars. The dollar crisis that plagued Bangladesh for more than two years was to a great extent triggered by the capacity charge expenses.
Individual reports sounded the alarm bell that the capacity charge was actually the means by which public money was going into private pockets.
About a third of the capacity charge was paid to rental power plants.
Introduced initially as an immediate measure to resolve power crisis, the Awami government started building the rental power plants with three to five years terms, promising they would retire with the introduction of baseload power plants.
Rental power plants are categorised into rental and quick rental power plants. Rental power plants are required to come into operation in nine months of their approval, while quick rental ones get only three months to get into operation.
The economic cost is very high for reasons, among others, that the rental power plants get a very short time to begin operation.
In a rental power plant small power generators are brought together to supply rather small amount of power.
At least 13 rental power plants worth 982.5MW are still in operation in the country, some of them existing for 15 years.
Energy experts left outraged by the past government鈥檚 increasing these plants鈥� recommended economic life up to three times, even after rather cheaper power generation capacity became available.
Bangladesh鈥檚 current power generation capacity stands at 27,791MW against its best use during summer peak at about 16,500MW. Even some baseload power plants are only partly used鈥攁ll enjoying capacity charge entitlement.
Even this year in May, less than three months before the Awami government was overthrown through a student-led mass uprising, the agreement with Noapara 40MW furnace oil-based power plant, set up in 2011 jointly by the Summit and United groups, was renewed.
Seven of the rental power plants currently in operation through repeated renewals will remain so until 2026.
The other reason for the rental power plants becoming burdensome was their use of expensive fossil fuels of furnace oil and diesel in amounts that are far higher compared with base-load power plants.
In 2023, the average power generation cost of oil-fired power plants was around Tk 23 per unit, against the average power system cost of Tk 11.5 per unit. Some oil-fired power plants even spent Tk 40 to produce a unit of electricity.
In 2023, a unit of power produced using diesel cost eight times more than the power generated by gas and three times more than the power produced by coal, the working group said.
The import of oil for power production also inflated cost by at least 20 per cent, revealed a recent analysis by the BPDB, due to the importers鈥� manipulation of the existing import conditions.
Regarding gas-based rental power, a Petrobangla report said that on average small rental and quick rental power plants needed 57.4 per cent more gas compared with combined cycle power plants.
Local think tank the Centre for Policy Dialogue pointed out two major implications of capacity charge鈥攊ncreased energy bills and the need for subsidies. The average cost for per unit power production increased by 330 per cent last fiscal compared with 2009. The per unit gas cost, on the other hand, increased by 400 per cent.
Despite paying more than ever before, the people still suffered from acute electricity and gas crises with frequent power cuts all over the year and not enough supply of gas in the pipeline to cook.
In 2022鈥�23, the government paid Tk 39,535 crore in subsidy to the power sector鈥攁lmost the amount paid over the years between 2006 and 2021鈥� 43,000crore.
The Bangladesh Power Development Board鈥檚 annual loss nearly quadrupled in the 2022鈥�23 financial year, compared with the year before, mainly because of a dramatic increase in capacity charge and fuel costs. When the past Awami government assumed power the loss was less than Tk 1,000 crore. Last year, the loss neared Tk 12,000crore.
The top 10 capacity charge recipient rental power plants that the now ousted government announced last year included Aggreko International, Khulna Power Company Limited, Summit Power Limited, Dutch Bangla Power and Associates Limited, Acorn Infrastructure Services Limited, Desh Energy, and Max Power.
The companies whose rental power plants are still in operation include Summit Group, Sikder Group, Orion Group, United Group, Sinha Group, Baraka Group, Hosaf Group, Banglatrac, Youth Group, and Anlima Group.
