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Some of the power projects approved without tender by the Awami League regime ousted in August 2024 continue to receive excessive capacity charge, up to 73 per cent more than what they should get, according to a Bangladesh Power Development Board analysis.

The capacity charge entitlement is itself a controversial arrangement that allows power and energy sector investors handsome profits based on their investment, rather than on the quality of their service.

The capacity charge is an amount of money, often paid in dollars, guaranteed to be paid by the government irrespective of power plants producing power or floating storage and regasification units supplying gas.

Explaining how the past AL regime channelled public money into private pockets through the power sector, energy experts said that the BPDB analysis also highlighted the lack of initiatives on the part of the interim government to take steps against the companies making predatory profits.

The power sector had also turned into a key window to launder money, they said.

The interim government that took office after the ouster of AL regime on August 5, 2024 cancelled the special power act under which the past government had approved power plants without tender, but the interim government did not take any actions against the power plants in operation, saying that taking action against the power plants would be difficult.

The BPDB analysis compared capacity charge expenses in six furnace-oil based power plants – three of them set up competitively, through bidding, while the other three were built without tender.

The contracts for building the power plants, with their  installed capacity ranged between 100MW and 163MW, were awarded between April 2017 and February 2018. They began commercial operation between November 2018 and September 2022 for 15 years.

The power plants installed through bidding are 163MW B-R Powergen, jointly owned by the BPDB and the Rural Power Company Limited, 105MW RPCL, owned by the Bangladesh Rural Electrification Board, and 149MW ACE Alliance Power Limited, 64 per cent of which owned by Summit Power.

The power plants installed without tender are 104MW Orion Power Sonargaon Limited, 113 MW Confidence Power Bogura Unit-1 Limited and 100MW Acorn Infrastructure Services Unit-3 Limited.

After comparing the construction costs, the BPDB analysis said that the installation costs of the two publicly-owned power plants were about $8 lakh per MW. State-owned power plants generally cost more than private power plants to be built. The analysis also considered equal returns on equity, LIBOR and fixed interest rate for all the power plants.

Built with a government loan, the power purchase agreement of B-R Power Generation Limited allowed $5.22 as capacity charge per MW per month, which could have been $8.37 per MW/month if the power plant got set up with commercial loan, the BPDB analysis showed.

The PPA of RPCL, built with commercial loan, allowed $8.35 as capacity charge per MW/month, which was less than what should be the actual capacity charge of such a power plant — $8.44 MW/month, the analysis said.

Of the power plants, Ace Alliance Power Limited secured a PPA allowing $8.81 MW/month as capacity charge, 10 per cent higher than the rate should be — $7.99 MW/month, according to the analysis.

Confidence Power’s PPA secured a capacity charge of $13.79 MW/month, which is 73 per cent higher than what the actual rate should be — $7.99 MW/month, the BPDB analysis said.

The PPA of Acorn Infrastructure Services allowed capacity charge payment of $12.75 MW/month, 60 per cent more than the reasonable rate of $7.99 MW/month.

Orion Power has a PPA with capacity charge entitlement of $12.64 MW/month, 58 per cent higher than the reasonable rate of capacity charge of $7.99 MW/month, the BPDB analysis revealed.

‘The same picture would have been found with all other power projects taken under the special power act without tender during the past AL regime,’ said Hasan Mehedi, member secretary of the Bangladesh Working Group on Ecology and Development, a coalition of green activists.

‘The lack of initiatives on the part of the interim government to stop paying such excessive capacity charges is a matter of concern,’ he said.

The AL government had approved more than 100 power projects after assuming power in 2009 under the Quick Enhancement of Electricity and Energy Supply Act, scaling up its installed power generation capacity to about 28,000MW, excluding 2,800MW of captive power capacity, in 2024 from about 5,000MW in 2009.

The power deals signed under the special act accommodated conditions discriminatory to Bangladesh and it remained entirely out of public notice for the deals were never made public, not even after the new government took office.

Energy experts had criticised the special act, often labelling it as the tool to transfer public money into private pocket, eventually leading to the dollar and economic crises that hit the country more than two years ago.

The BPDB said that the past AL government spent $32 billion only in the power sector before its ouster amid a student-led mass uprising.

Former state minister for power Nasrul Hamid told parliament in September 2023 that his government paid Tk 1.04 lakh crore to 82 independent and 32 rental power producers as capacity charge in the past 14 years.

RPCL and Bangla Trac, the owner of Acorn Infrastructure Services, were among the top 10 capacity charge receiving independent power producers with Tk 4,004.08 crore and Tk 1,853.22 crore received over the 14 years, respectively, Nasrul had said.

Two companies of Summit Power, partial owner of ACE Alliance Power, also found places on the list of top 10 capacity charge receiving IPPs with Tk 3,644.39 crore and Tk 2,683.03 crore earned as capacity charge over the 14 years.

Acorn Infrastructure Services was also among the top 10 rental power companies which had received Tk 1,484.30 crore over the 14 years in accordance with the government account.

Confidence Group was ranked sixth among a dozen IPPs listed as the ‘dirty dozen’ in a 2022 study released in March by the BWGED. The combined capacity of the ‘dirty dozen’ was 29.7 per cent of the then installed capacity and they accounted for 32.7 per cent of electricity generated in 2020-21. But the ‘dirty dozen’ received 66.4 per cent or Tk 8,730.14 crore of the capacity payment made in the financial year.

Rental power plants were introduced immediately after the AL assumed power as an immediate measure to tackle power shortages and were supposed to expire in a maximum of five years. But the past government continued to retain them, allegedly for paying huge sums to its favourites.

BD Rahmatullah, a former director general of the Power Cell, a regulatory agency under the power, energy and mineral resources ministry, said that those who had pulled the strings during the past AL regime still got to call the shots.

‘This is frustrating to see that the interim government fails to take initiative to change the system established by the past AL government,’ he said.

The power and energy adviser, the power secretary and the BPDB chairman could not be reached for comments on the issue over phone despite several attempts.