Capacity charge for power: Tk 16,785cr paid in 9 months Somoybulletin

The government paid Tk 16,785 crore in capacity charges to power plants in the first nine months of the last fiscal year for 22,118MW daily power generation capacity.

But the government had not been able to use more than 14,000MW a day during that period as the country’s electricity demand was not higher than this. 

As per the government’s agreement with power plants, the government has to pay “capacity charges” based on the plant’s capacity and establishment costs, regardless of whether the power is bought or produced.

The current demand for electricity ranges between 14,000MW and 14,500MW, but the government is producing 12,000-13,000MW, leading to ongoing power outages.

The government continues to pay for that unutilised power when austerity has been prescribed across all spheres to cope with rising inflation at home and abroad.

The Bangladesh Power Development Board (BPDB), the country’s sole electricity buyer, paid Tk 18,977 crore to 101 power plants in 2020-21 and Tk 18,123 crore to 102 plants in 2019-20.

The BPDB submitted this data to the parliamentary standing committee on power, energy and mineral resources ministry in a meeting yesterday.

The Daily Star obtained a copy of the submitted papers.

On Monday, the government shut down all diesel-fired power plants due to depleting fuel stocks, meaning 1,000-1,500MW remains unutilised daily but payment for the capacity continues.

The same day, the government also announced up to two hours of load shedding across the country.

Experts have suggested renegotiating capacity payments with power plant owners as the government is now struggling to cope with the decreasing forex reserves and capacity charges have to be paid in dollars.

In a report in February, the Institute for Energy Economics and Financial Analysis (IEEFA) said the government paid Tk 8,929 crore in “capacity payments” in 2019-20 and Tk 13,200 crore in 2020-21.

But these numbers were dwarfed by those provided by the BPDB in the meeting with the standing committee yesterday.

The subsidy package for the power sector was Tk 7,400 crore in the 2019-20 budget, Tk 8,900 crore in the 2020-21 budget and Tk 12,000 crore in the 2021-22 budget, but the capacity payments alone are greater.

“It is not possible to renegotiate the capacity payments at this moment as those are settled by the agreements between the government and individual power plant owners,” said Waseqa Ayesha Khan, president of the standing committee.

“But the [BPDB] officials at the meeting said when renewing agreements with some owners, the parties agreed that there would be no payments if electricity is not bought.”

Contacted yesterday, CPD’s Research Director Dr Khondaker Golam Moazzem told The Daily Star that both the government and the people have to bear the brunt of capacity payment. The government needs to give huge subsidies for capital payment.

“The government could have saved huge revenue, had it been able to avoid such staggering sums of capacity charges,” he said, adding that it is because around 42 to 48 percent of power generation capacity is not being used.

He also said the government should phase out inefficient or defunct power plants from the national grid, which are still getting capacity payments.

The government should also renegotiate regarding different clauses on capacity payment and try to ensure that capacity payment is not included in renewal contracts in any form, he said.

The Bangladesh-China Power Company limited — owner of the 1,320MW Payra coal-fired power plant — was paid the highest capacity charge of Tk 2,277 crore in the first nine months of the last fiscal year because half of its capacity remained unutilised till April this year.

“For the delay of about one and a half years [in utilising the second unit that started commercial operation in December 2020], BPDB had to pay the power plant over Tk 253 crore monthly,” said a BPDB official.

According to BPDB data, in 2019-20, between Tk 400 crore and Tk 600 crore was paid in capacity payments each to independent power plants Sembcorp NWPC Ltd of Sirajganj; APR Energy Ltd at Keraniganj; Summit Meghnaghat Power Ltd and Meghnaghat Power Ltd in Narayanganj; and United Anowara Ltd.

Among rental power plants, Khulna Power Company Ltd, owned by Summit Group, was paid Tk 160 crore in capacity payments, the highest in 2019-20; in 2020-21, Dutch Bangla Power and Associates were paid the highest Tk 182 crore; and Acron Infrastructure Services Ltd of Chattogram was paid Tk 100 crore, the highest in the first nine months of 21-22.