BPDB sits on power producers’ bills, yet imposes supply shortfall penalties
Power producers say penalties are breach of contract
Highlights:
- BPDB imposes penalties despite delaying payments to power producers
- Tk249.75 crore deducted from four plants for outages
- IPPs blame fuel shortages caused by BPDB's delayed payments
- Outstanding dues to IPPs exceed Tk4,422 crore nationwide
- BERC issued temporary halt on penalties until October 23
- IPPs supply over 60% of Bangladesh's electricity capacity
Despite delaying power purchase payments for up to seven months, the Bangladesh Power Development Board (BPDB) is imposing penalties on independent power producers (IPPs) for excess outages.
These penalties, known as liquidated damages (LDs), are predetermined charges applied when a plant fails to meet contractual obligations such as availability, capacity, or timely delivery of electricity.
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The affected producers describe the move as arbitrary and a breach of contract, saying the outages resulted from fuel shortages caused by BPDB's chronic payment delays, not operational negligence.
So far, BPDB has deducted Tk249.75 crore in LDs from four power plants, citing shortfalls in electricity supply between 2021 and 2024. At least 17 IPPs have lodged formal complaints with the Bangladesh Energy Regulatory Commission (BERC) since January, urging the regulator to direct BPDB to halt the deductions and settle outstanding dues.
The cumulative unpaid bills owed to these plants exceed Tk4,422 crore.
David Hasanat, president of the Bangladesh Independent Power Producers' Association (BIPPA), said BPDB is deducting LDs from IPP owners in breach of the contract, which we challenged to BERC.
"BPDB is unable to pay us in due time. Payment is still delayed for 6-7 months from the due date but yet imposing penalty for outage. If we don't get a remedy in BERC, we will challenge the deduction of LDs in the High Court."
Under the Power Purchase Agreement (PPA), if BPDB fails to pay within the agreed period, it must pay interest based on the central bank's one-year treasury note yield plus 4%. Industry insiders said BPDB has rarely honoured this clause.
When approached for comment, BPDB Chairman Md Rezaul Karim declined, citing ongoing regulatory proceedings.
Today, IPPs supply over 60% of Bangladesh's installed generation capacity, forming the backbone of national electricity supply
Affected power producers
The four plants already facing LD deductions include 162MW Manikganj Power Generation, which is owed Tk542 crore and has seen Tk142 crore deducted as LDs. Chandpur Power Generation, with Tk329 crore in unpaid bills, has faced Tk78 crore in penalties.
BPDB also deducted Tk11.6 crore from Kanchan Purbachal Power Generation, owed Tk114 crore, and Tk17.6 crore from United Power Jamalpur, which has dues of Tk63 crore.
A senior executive of a power company warned that such practices could deepen the sector's financial distress. "Private producers are already struggling with fuel shortages, rising costs, and limited access to loans. These arbitrary deductions may further erode investor confidence in Bangladesh's power sector."
For instance, 115MW HFO-based United Power submitted a bill of Tk63.83 crore to BPDB on 12 February 2025, due on 14 March. However, BPDB paid only Tk46.17 crore on 23 July – 131 days late – after deducting Tk17.65 crore as outage penalties.
Under Section 13.2(j) of the PPA, BPDB loses the right to impose outage charges if it fails to settle payments within ten working days of the due date.
Other IPP owners noted that fuel accounts for roughly 80% of operating costs
Temporary relief from BERC
In April, BERC ordered a temporary status quo on LD deductions following the first round of hearings. The regulator also asked BPDB to justify its actions given its persistent delays in clearing invoices.
The interim order remains in effect until 23 October. Industry representatives hope BERC will recognise that the penalties contradict the PPA's provisions.
LD suspension reversed amid financial crisis
Amid a severe financial crisis between 2021 and 2024, BPDB struggled to clear electricity bills on time. In response to a request from BIPPA, BPDB decided on 15 May 2024 to suspend LD deductions for public and private plants from July 2022 to April 2024.
The suspension, later extended until December 2024, was introduced as BPDB repeatedly failed to make timely payments under the PPA.
The board noted that the move complied with PPA Section 13.2(j) and the operational requirements of the National Load Dispatch Centre (NLDC).
Yet, despite that commitment, BPDB has resumed imposing penalties, prompting a wave of complaints to BERC.
Dozens at risk of LD imposition
According to BERC, 21 power plants have lodged complaints against the BPDB over delays in releasing dues and are at risk of being imposed LDs on them.
The Business Standard (TBS) has obtained copies of complaints filed by 17 plants, which show that BPDB's outstanding dues to these plants stand at Tk4,422.55 crore.
Among the largest claims, Confidence Power Bogura is owed Tk483.62 crore, while Confidence Power Rangpur is owed Tk453.10 crore, with payments pending from August 2021 to April 2024.
BPDB's outstanding dues also include Tk150.25 crore to Dhaka Northern Power Generation, Tk230.56 crore to Benco Energy Generation, Tk542.04 crore to Manikganj Power Generation, Tk329.88 crore to Chandpur Power Generation, Tk180.87 crore to Dutch-Bangla Power and Associates, and Tk192.87 crore to Orion Power Meghnaghat.
From June 2022 to November 2024, Orion Power Sonargaon is owed Tk241.21 crore, while Orion Power Rupsha awaits Tk198.02 crore for October 2018 to September 2024.
Why IPPs failed to meet electricity demand
Speaking to TBS, IPP owners said BPDB has consistently failed to pay electricity bills on time. Settlements were often delayed by six to seven months, and since 2021, following the Covid-19 pandemic, delays have extended to 180 days or more than 300 days in some cases.
BIPPA President David Hasanat said the situation worsened after the Russia-Ukraine war. "Banks are refusing to open LCs for HFO, lubricants, and spare parts due to BPDB's irregular payments, forcing us to operate at limited capacity. Yet, BPDB is imposing LDs for electricity shortfalls beyond our control."
Other IPP owners noted that fuel accounts for roughly 80% of operating costs. They added that banks are denying term loans because delayed capacity payments leave them unable to cover overheads, operations, maintenance, debt repayment, and other project costs.
Under the PPA, IPPs are allowed to suspend power supply for up to 876 hours annually for maintenance. Beyond this limit, BPDB may impose LDs for excess outages. Section 13.2(j) specifies that if a company's invoices remain unpaid beyond ten business days after the due date, any resulting outages may be considered "forced outages" caused by BPDB.
The section further allows IPPs to withhold electricity if BPDB fails to clear bills within 40 days of invoice submission. BIPPA has repeatedly written to BPDB since 2022, highlighting that delayed payments prevent IPPs from meeting electricity demand.
How IPPs started in Bangladesh
The partnership between BPDB and private producers began in 1996 under the Private Sector Power Generation Policy, designed to attract private capital amid frequent load-shedding that disrupted economic growth. The International Finance Corporation (IFC) helped draft standard PPAs, guaranteeing state purchase of electricity from private plants.
The model worked: private investors rapidly expanded generation capacity, helping reduce load-shedding and support economic growth.
Today, IPPs supply over 60% of Bangladesh's installed generation capacity, forming the backbone of national electricity supply. The first IPP, the 360MW Haripur combined cycle plant developed by AES Corporation, came online in 1998, setting the stage for decades of private investment.
