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South Asia Energy Regulation South Asia Energy Regulation Partnership Executive Exchange Partnership Executive Exchange

ProgramProgramOctober 7-9, 2002Thimpu, Bhutan.

Power Sector Regulation and Regulatory Policy in Bangladesh

An Overview

Presented by : 1. Md. Mokhlesur Rahman Khandker, Director General,

Power Cell, Power Division, MEMR, Govt. of Bangladesh2. A.S.M. Alamgir Kabir, Director(Planning & Tariff)

Power Cell, Power Division, MEMR, Govt. of Bangladesh3. K.H. Masud Siddique, Deputy Secretary,

Power Division, MEMR, Govt. of Bangladesh.

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Present Structure of Power SectorPresent Structure of Power Sector

Owner & Regulator :Owner & Regulator : Power Division, Ministry of Energy & Mineral Resources

Generation :Generation : Bangladesh Power Development Board (BPDB) Private Power Generation Companies (IPPs)

Transmission :Transmission : Bangladesh Power Development Board Power Grid Company of Bangladesh Ltd. (PGCB)

Distribution :Distribution : Bangladesh Power Development Board Dhaka Electricity Supply Authority (DESA) Dhaka Electric Supply Company Ltd. (DESCO) Rural Electrification Board through Rural Electric

Co-operatives

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Power DivisionMPEMR

BPDB

REBDESABPDB

BPDBPGCB

IPP RPC

DESCO

Power Cell EA&CEI

PBSs

Generation

Transmission

Distribution

Bangladesh Power Sector : Bangladesh Power Sector : Present StructurePresent Structure

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Present Power SystemPresent Power System

INSTALLED CAPACITY : 4260 MW GENERATION CAPACITY : 3300 MW MAXIMUM PEAK DEMAND SERVED : 3218 MW TRANSMISSION LINES (230 & 132 KV) : 3799 KM GRID SUB-STATION CAPACITY (132 & 66 KV) : 6595 MVA DISTRIBUTION LINES (33 KV & BELOW) : 1,93,196 KM SYSTEM LOAD FACTOR : 66% SYSTEM LOSS (T&D) : 29.60% CONSUMER NUMBER : 6.54 Million AVERAGE GROWTH (LAST 10 YRS.) : 8% PER CAPITA GENERATION : 136 kWh GENERATION MIX

GAS : 90.16% HYDRO : 4.56% LIQUID FUEL : 5.28%

CONSUMPTION INDUSTRIAL : 44% COMMERCIAL : 7% DOMESTIC : 42% OTHERS : 7%

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Current State of Electricity Current State of Electricity RegulationRegulation

GOB/Power Division Functions as Regulator under Electricity Act 1910 Approves investment program Monitor performance of the public sector

entities/utilities Approves Tariff Appoint key personnel of the utilities Appoint Electrical Advisor and Chief Electrical

Inspector

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Current State of Electricity Regulation Current State of Electricity Regulation (Contd.)(Contd.)

Chief Electrical Inspector perform duties as regulator on behalf of the govt. in the following areas : Provides supply license Provides approval for captive generation Setup security & safety standards and approves

electrical installations’ in respect of safety measures Performs testing &inspection function of electrical

installations in respect of security & safety Presently no provision of stake holders participation like

public hearing in the tariff approval process by the Govt. No scope of appeal to the court against Govt. decision

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Scarcity of resources hinders development of the sector High system losses and accounts receivable affecting

the financial viability of the utilities Lack of clear goals, adequate financial and commercial

autonomy and adequate incentive hinders development Lack of differentiation of responsibilities for generation,

transmission and distribution is hindering segment specific corrective measures

Lack of cost and asset accounting system by units and absence of effective performance evaluation

Existing Tariff lower than cost reflective tariff

Key Constraints of Power Sector Key Constraints of Power Sector DevelopmentDevelopment

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Reform Measures in Recent YearsReform Measures in Recent Years

GOB has undertaken a series of reform measures:GOB has undertaken a series of reform measures: The National Energy Policy was prepared and adopted in

1996 Power Cell was created in 1995 to design, facilitate and

drive reform measures Private Sector Power Generation Policy was developed

and adopted in 1996, to introduce competition, induct foreign private capital and increase power supply

Policy has been adopted in 1998 to promote small-scale generation in the private sector

REB/PBS started buying electricity from private sectors

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Reform Measures in Recent Years Reform Measures in Recent Years (Cont.)(Cont.)

Ashuganj power station corporatization process started Govt. approved Haripur (99 MW) & Baghabari 100 MW Power Station to

convert into Strategic Business Unit (SBU) Draft legislation for setting up of a Regulatory Commission approved by

the Cabinet Government adopted a well specified power tariff formula to protect the

tariff in terms of real value Power Cell completed tariff study and its under consideration of the govt Under the Company Act 1994:

Power Grid Company of Bangladesh set up DESCO set up as distribution company Mixed sector generation company RPC set up

SBU activities adopted in 47 nos. distribution divisions of BPDB and DESA As a part of reforms and restructuring West Zone Power Distribution

Company under BPDB

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Long term goals for the power sectorLong term goals for the power sector

To make electricity available for all by 2020

To ensure reliable and quality supply of electricity

To provide electricity at a reasonable price

Government’s VisionGovernment’s Vision

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Reforms ObjectivesReforms ObjectivesTo bring entire country under electricity service by the year 2020To bring entire country under electricity service by the year 2020 Making the power sector financially viable and able to facilitate

economic growth Increasing the sector’s efficiency Making the sector commercial Improving the reliability and quality of electricity supply Using natural gas as the primary fuel for electricity generation

and exploring the possibility for export of power to augment and diversify foreign exchange earnings

increasing private sector participation to mobilise finance ensuring reasonable and affordable price for electricity by

pursuing least cost options promoting competition among various entities

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Reform StrategyReform Strategy

Segregation of generation, transmission and distribution into separate services

Corporatization and commercialization of emerging power sector entities

Creation of Regulatory Commission Private Sector Participation Introduction of cost reflective tariff structure Development of demand management including energy

efficiency measures to conserve energy Development of alternative/ renewable energy sources

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Reform Strategy (Contd.)Reform Strategy (Contd.)

Generation Generation : Separating out all existing power generation units through a

corporatized entity Under construction and future power stations may be

incorporated as independent company Generation projects be selected at least cost option Generation capacity would be sought through a mix of

public & private source

Transmission :Transmission : Transmission network will be owned, operated, planned and

developed by a corporatized entity in the public sector

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Distribution :Distribution :Highest in the agenda is to improve the commercial and financial performance of different entities. Specific measures to be considered are :

Introduction of consumer voice and organizational accountability in the form of citizen/ client charter

The existing distribution system of BPDB and DESA be transformed into a number of new corporatized entities

Private capital and management participation in distribution companies

The rural electric co-operatives (PBSs) under REB to continue functioning and additional PBSs to be formed as and when

Reform Strategy (Contd.)Reform Strategy (Contd.)

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MEMRRegulatory

CommissionRegulation

EA&CEI POWER CELL

BPDB HoldingCompany

Generation

GEN.CO.

GEN.CO.

IPP RPCIPP

P G C BTransmissioneration

Single Buyer(nitially BPDB)

DIST.CO.

DIST.CO.

DIST.CO.

Distribution

REB DESA (Co.) DESCO

PBS PBS PBS

Admn. LinkFunctional Link

Industry Structure of Industry Structure of Power Sector After ReformsPower Sector After Reforms

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Single Buyer ModelSingle Buyer Model

Single buyer model be adopted as market structure The Single Buyer shall be a public sector entity Planning of least cost generation expansion Arrange establishment of private power generating

stations as per generation expansion plan Purchasing electricity from generators (both public and

private) and selling to distributors under Power Purchase and power Sales Agreements

Power system operation including economic dispatch of generation

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GEN.CO.

GEN.CO.

IPP RPCIPP

Single BuyerPGCB

Trans. Co.

DIST.CO.

DIST.CO.

DIST.CO.

DESA (Co.) DESCO

PBS PBS PBS

Market Structure of Market Structure of Power Sector After ReformsPower Sector After Reforms

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Regulation of the power sector after Regulation of the power sector after establishment of the Energy Regulatory establishment of the Energy Regulatory

CommissionCommission

Establish an independent Regulatory Commission

The Regulatory Commission cover electricity, gas

and petroleum sector

The Regulatory Commission to :

Protect consumers interests

Protect industry interests

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Regulation of the power sector after Regulation of the power sector after establishment of the Energy Regulatory establishment of the Energy Regulatory

Commission (Contd.)Commission (Contd.) The Commission’s functions :

Approval of the utilities tariff proposal following GOB’s policy directives

Set & Enforce Codes & Standards of Operation

Issue, repeal & amendment of licenses - Generation (Electricity) Transmission Distribution Supply

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Regulation of the power sector after Regulation of the power sector after establishment of the Energy Regulatory establishment of the Energy Regulatory

Commission (Contd.)Commission (Contd.) Approval of expansion & investment plan of the

utilities to ensure least cost options Ensure better customer service and protect

consumers interest Promote competition by ensuring level playing field

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Tariff

Commission will approve the Tariff on the basis of the

policy directives issued by the govt.

Public hearing will be made during tariff setting

Appeal against the decision of the Commission Aggrieved person may appeal against the decision of the

Commission to the High Court Division of the Supreme Court

Regulation of the power sector after Regulation of the power sector after establishment of the Energy Regulatory establishment of the Energy Regulatory

Commission Commission (Contd.)(Contd.)

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The tariff setting be consistent with the financial requirements of the power sector institution Meets operating expenses Earns adequate return for self investment in future expansion

The tariffs take into account- Load Management and energy conservation Efficiency improvement

The GOB’s policy objectives be addressed in tariff setting and recommendations especially on social commitments. Tariff to each Consumer class reflects the cost of supply PBSs be subsidised by direct transfer from the GOB with the

aim of promoting rural development

Proposed Electricity Pricing PolicyProposed Electricity Pricing Policy

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Gradual withdraw of subsidy for agriculture consumers Gradual withdraw of subsidy for domestic consumers except

those fall in the life line slab (0-100 units presently) In the interim subsidies to domestic and Agriculture

Consumers be supported through the national budget Automatic price adjustment due to change of the

following using a well specified formula : Exchange Rate Consumer/industrial price index Fuel price

Proposed Electricity Pricing Policy Proposed Electricity Pricing Policy (Contd.)(Contd.)

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Impact : Make public sector utilities financially viable Increase ability of the public sector utilities to self-finance Reduced requirement of GOB assistance/subsidies for

development of the sector Brings competition and increase private participation both

foreign and local

Note : Tariff increase/rationalization be made along with the recommended power sector reform/ restructuring, otherwise it can’t bring desired financial viability of the sector.

Proposed Electricity Pricing Policy Proposed Electricity Pricing Policy (Contd.)(Contd.)

26C:/Parvez/Kabir Sir/2002/Country Paper/Energy Regulation in Bangladesh-For Bhutan.ppt

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