BERC estimates power sector subsidy at Tk41,000 crore by 2027-28

Despite increasing electricity tariffs at the wholesale, transmission and retail levels, the government will still need to provide around Tk41,000 crore in subsidy to the Bangladesh Power Development Board (BPDB) in the upcoming fiscal year to cover the remaining deficit, Bangladesh Energy Regulatory Commission (BERC) Chairman Jalal Ahmed said today (3 June).

Announcing the revised electricity tariffs at a press briefing, Jalal Ahmed said the latest tariff adjustment is expected to increase revenue by approximately Tk14,200 crore, but it will not be sufficient to eliminate the sector's financial shortfall.

According to BERC, the projected subsidy requirement for fiscal years 2025-26, 2026-27 and 2027-28 is around Tk56,000 crore. Following the latest tariff revision, the subsidy burden is expected to decline by roughly Tk14,200 crore, leaving an estimated Tk41,000 crore gap that would still need to be covered through government support.

"The tariff increase has been determined after considering electricity generation, procurement and import costs, transmission and distribution expenses, government subsidies and the overall condition of the power sector," Jalal Ahmed said.

BERC revised the wholesale electricity tariff from Tk7 per kilowatt-hour (kWh) to Tk8.39 per kWh, an increase of Tk1.39 per unit. The transmission wheeling charge has also been increased from around Tk0.35 per kWh to Tk0.39 per kWh.

At the retail level, the average electricity tariff has been raised from Tk9.11 per kWh to Tk10.63 per kWh. Demand charges for various consumer categories have also been adjusted.

The new rates will come into effect from June 2026 billing and remain effective until further notice.

Addressing concerns that tariff hikes primarily benefit power sector entities, the BERC chairman said the commission has significantly reduced the allowable rate of return for power companies.

He noted that power generation companies under BPDB previously enjoyed a 12% rate of return, which has now been reduced to 6%.

"We have kept the rate of return at a minimum level. There will be very limited scope for excessive profit-making. The objective is to ensure operational sustainability rather than profitability," he said.

Responding to questions from journalists about recurring losses in the power sector despite repeated tariff adjustments, Jalal Ahmed acknowledged that subsidy dependence remains a major challenge.

He said BERC would issue specific directives aimed at reducing generation costs, particularly through stricter adherence to the merit-order dispatch system, under which lower-cost power plants are prioritised for electricity generation.

The chairman also identified capacity payments as a major contributor to high electricity costs.

"A significant portion of power generation expenses comes from capacity charges. If capacity payments can be reduced, the subsidy burden will also decline substantially," he said.

According to him, BERC plans to recommend measures to reduce capacity payment obligations by reviewing plant availability factors and dependable capacity assessments.

He added that although the sector is not yet in a position to reduce tariffs or eliminate subsidies, the situation could improve in the future with the full commissioning of the 2,400 MW Rooppur Nuclear Power Plant and greater integration of renewable energy.

"If Rooppur begins generating electricity at its expected capacity and renewable energy targets are achieved, many costly power plants may no longer be required. Combined with lower capacity payments, this could significantly reduce production costs and subsidy requirements," he said.

On concerns over prolonged load-shedding in rural areas, particularly ahead of Eid-ul-Adha, Jalal Ahmed said service quality issues would be addressed separately in BERC's detailed order.

He assured that the commission would include provisions and directives to ensure better quality of service and improved electricity supply for consumers.

BERC said it had reviewed applications submitted by BPDB, Power Grid Bangladesh PLC and other distribution utilities, conducted technical evaluations and held public hearings with stakeholders before finalising the new tariff structure.