Retail power price hike looms after 19.92% rise in bulk tariff

Yet another price shock looms large on consumers as power distribution companies have started submitting proposals for adjusting retail prices of electricity in line with the bulk tariff that was hiked by 19.92% on Monday.

The Bangladesh Energy Regulatory Commission (BERC) has increased the bulk price per unit of electricity to Tk6.20 per kWh (kilowatt-hour) from Tk5.17 kWh.

The new tariff, which has been fixed considering the government subsidy of Tk17,000 crore, is going to take effect next month, said BERC Chairman Md Abdul Jalil on Monday while announcing the tariff.

"The bulk tariff will pass on to the retail consumers if the distribution companies propose for adjustments," he said.

State Minister of Power, Energy and Mineral Resources Nasrul Hamid on Monday said the increase in bulk electricity prices will not have any effect on the consumer level immediately.

"We do not think there is any concern about it [bulk price increase] as this will not have any impact at the customer level at the moment," he said while speaking to reporters at his office at the Secretariat later on the day.

Meanwhile, the West Zone Power Distribution Company Ltd, which supplies electricity to 21 districts of Khulna, Barishal and the south-western regions of the country, submitted a proposal to the BERC on Sunday, demanding adjustment of electricity prices at the retail level.

Other five distribution companies are also assessing the bulk tariff to submit their retail price adjustment proposals, according to sources.

The retail price hike will deal another major blow to the lives and livelihoods of the people following a record oil price hike and subsequent rise in transportation costs, and skyrocketing prices of daily commodities such as soybean oil, sugar, flour, and cooking gas.

Ghulam Rahman, president of the Consumers Association of Bangladesh, thinks that there is no need to increase the retail price right now.

"It is not necessary to increase the retail tariff after the bulk tariff hike. There are several machinimas to accumulate the distribution companies' costs such as reducing systems loss, government subsidy etc," he said.

With the latest one, electricity price at bulk level has been hiked ten times and by 161% in the last 13 years while retail price has been increased by 90% during the same period. 

The last electricity price was hiked in 2020 when bulk price was increased by 8.39% and retail price increased by 5.3%. 

Since 2014, retail electricity price has been hiked four times on an average of 5% after the bulk price hike. 

Before the latest hike in bulk price, the BERC, however, had earlier rejected the price hike proposal last month due to few reasons including lack of price hike impact assessment, data ambiguities, and other socio-economic situation. 

Insiders said the price is not increasing as per the wishes of the government in the current situation. But, pressure from the IMF has prompted the move.

An IMF delegation that visited Dhaka held a meeting with the Power Development Board (PDB) and Power Division on 2 November and the BERC on 6 November. The meetings discussed electricity prices, subsidies, and PDB's losses.

Sources said one of the International Monetary Fund (IMF) conditions for loan is to reduce subsidies in the power and energy sectors and the price hike came as part of that process. 

On 12 January, the PDB proposed a hike in bulk electricity prices. The company asked for a price hike of around 66%. A public hearing on their proposal was held on 18 May. BERC's technical committee at the hearing recommended a 58% price hike. After nearly 5 months, in an announcement on 13 October, the BERC said, considering the overall situation and as the PDB failed to show any rational reason, the application has been rejected.

Distributors opt for retail price hike

On Sunday, West Zone Power proposed increasing electricity prices by 20% at the consumer level.

Confirming the development to The Business Standard, West Zone Power Managing Director Azharul Islam said they have made the proposal considering the impact of increased bulk price on the sale at consumer level.

When asked, Managing Director of Dhaka Power Distribution Company (DPDC) Bikash Dewan said they have not applied yet but are preparing to send an application.

BERC Chairman Md Abdul Jalil told the media that the commission will scrutinise the proposals to make its order for retail tariff. 

CAB President Ghulam Rahman, however, said they will present their argument in the public hearing if distribution companies propose a retail price hike. 

"Whatever the order, it has to be logical and rational," he said.