Power prices go up again

Power prices go up again

Consumers’ worst nightmare came true as the government in an executive order on Thursday, increased the average retail and bulk electricity prices by 8.5 per cent and up to 6 per cent, respectively, with the new prices taking effect in February.

The price hikes are set to hit a severe blow to consumers, who have seen no respite from soaring energy and essential prices for more than the past two years because of the persistent dollar crisis.

With the latest hike, the retail cost of a unit of electricity rose to Tk 8.95 from Tk 8.25 with heavy industries, the commercial sector, and offices witnessing the highest spike in their electricity prices.

A gazette notification to the effect was published around 10:00pm. 

The power price hikes came two days after the government increased the gas price for power plants producing electricity and captive power plants generating power for industries.

This is the fourth time the power price has been increased since 2023.

In the gazette notification, the power, energy, and mineral resources ministry said that the price hike came to adjust subsidy given to the sector by the government.

On Tuesday, state minister for power, energy, and mineral resources Nasrul Hamid, while announcing the price hike plans in a briefing at the secretariat, said that the decision would be made effective in March.

But within 48 hours, he backtracked from his previous stance on the effectiveness of the power price hikes.

On Thursday, he said that the decision would be effective in February while talking to reporters after a meeting of the cabinet committee on government purchases at the secretariat.

The state minister claimed that the upward adjustment in the prices of energy items was imperative to tackle the growing subsidy payments.

He calculated that arrears for power would hit around Tk 43,000 crore at the end of FY24, forcing the government to go for a hike.

He, however, said that the upward price adjustment would be made in phases over the next three years.

In the financial year 2021–22, the government said it gave a subsidy of Tk 12,000 crore in the power sector.

In 2023, there was a deficit of over Tk 39,000 crore, implying that it would have to be covered by subsidy.

The power, energy, and mineral resources ministry said in the press release that the average bulk price was increased by 5 per cent and stood at Tk 7.04 instead of Tk 6.70.

Lifeline consumers buying less than 50 units a month will have to pay Tk 4.63 instead of Tk 4.35 for a unit of electricity. There are 1.65 crore lifeline electricity consumers.

Consumers using 75 units a month or less saw their power bill for a unit rise by 8.45 per cent, followed by 8.60 per cent increase witnessed by people using 76 to 200 units a month. There are six categories of household consumers, according to the draft.

Those using more than 600 units a month saw their price go up by 10.18 per cent.

Under the new price, farmers will now have to spend Tk 5.25 instead of Tk 4.82 for irrigation, while the commercial sector and offices using high voltage saw their electricity costs rise to Tk 13.01 from Tk 11.93 per unit.

Industries using high voltage will now have to pay Tk 10.75 instead of Tk 9.90 for a unit of electricity.

Educational and religious institutions and hospitals saw the price of a unit of electricity rise to Tk 7.55 from Tk 6.97, according to the gazette notification.

The demand charge, security deposit, and connection fee have also been increased.

Outraged by these frequent electricity price hikes, consumer rights bodies accused the government of exploiting and robbing people to make up for its flawed power and energy policy  that was benefiting vested groups.

The subsidy in the power and energy sector was necessitated by predatory expenses resulting from corruption, inefficiency, and the massive amount of capacity charge paid to private power plants, they said.

The BPDB proposed to increase the power price by 81 per cent this year to stop paying subsidy in the power and energy sector.

The government is also under obligation to reduce its subsidy burden, particularly for the $4.7 billion loan being released by the International Monetary Fund.

A press release issued by the power and energy ministry over the gas price hike two days ago said that the hike would reduce the requirement to pay subsidy in 2023–24 from Tk 6570.54 crore to Tk 6,000 crore.

The BPDB’s annual loss stood at Tk 11,765 crore as the capacity charge soared to Tk 17,156 crore in 2023, with forecasts of the cost going up in the coming years with the introduction of more fossil-fuel-based power plants.

The government has so far paid over Tk 104,000 crore in capacity charge.

The bulk power price has been increased for all six distribution entities across different voltage levels. The bulk price represents the money power distributors pay for buying electricity from BPDB, which also has a distribution business.

The distribution entities are BPDB, Dhaka Power Distribution Company Limited, Bangladesh Rural Electrification Board, Dhaka Electric Supply Company Limited, West Zone Power Distribution Company Limited, and Northern Electricity Supply Company Limited.

The power distributors operate at three voltage levels – 230kv, 132kv and 33kv.

The price was equally increased by 4.19 per cent and 4.18 per cent for 230kv and 132kv for all distributors.

Only in the 33kv category, the six distributors saw varying rise in their costs.

Under the category, the BPDB saw its price increase by 4.66 per cent while the DPDC saw the price go up by 4.13 per cent, the BREB by 5.77 per cent, the DESCO by 4.12 per cent, the WZPDC 4.77 per cent and NESCO 5.07 per cent.

The BREB supplies power to people in villages and saw the highest rate of increase in the latest round of bulk power price hikes.

In 33kv category, the BREB has the lowest bulk power price, which is Tk 6.23 per unit.

The price hike is feared to take a toll on rural people, particularly the poor, who had to exclude protein from their menu months ago to cope with rising living costs.

The government also increased the transmission charge in a separate order on Thursday.

The new transmission charge for a KWH is Tk 0.3057 for 230kv while for 132kv the charge is Tk 0.3086 and Tk 0.3144 for 33kv.