Chart showing existing status of the utilities

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South Asia Energy Regulation Partnership
Executive Exchange Program October 7-9,
2002 Thimpu, 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
Bangladesh 2. A.S.M. Alamgir Kabir,
Director(Planning Tariff) Power Cell, Power
Division, MEMR, Govt. of Bangladesh 3. K.H.
Masud Siddique, Deputy Secretary, Power
Division, MEMR, Govt. of Bangladesh.
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(No Transcript)
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Present Structure of Power Sector

• Owner Regulator
• Power Division, Ministry of Energy Mineral
  Resources
• Generation
• Bangladesh Power Development Board (BPDB)
• Private Power Generation Companies (IPPs)
• Transmission
• Bangladesh Power Development Board
• Power Grid Company of Bangladesh Ltd. (PGCB)
• 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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Bangladesh Power Sector Present Structure
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Present 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 (TD) 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

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Current State of Electricity Regulation

• 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 (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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Key Constraints of Power Sector Development

• 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

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Reform Measures in Recent Years

• 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 (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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Governments Vision

• Long 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

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Reforms Objectives

• To bring entire country under electricity service
  by the year 2020
• Making the power sector financially viable and
  able to facilitate economic growth
• Increasing the sectors 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 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.)

• 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 network will be owned, operated,
  planned and developed by a corporatized entity in
  the public sector

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Reform Strategy (Contd.)

• 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

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Industry Structure of Power Sector After Reforms
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Single 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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Market Structure of Power Sector After Reforms
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Regulation of the power sector after
establishment of the Energy Regulatory Commission

• 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
establishment of the Energy Regulatory Commission
(Contd.)

• The Commissions functions
• Approval of the utilities tariff proposal
  following GOBs 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
establishment of the Energy Regulatory 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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Regulation of the power sector after
establishment of the Energy Regulatory Commission
(Contd.)

• 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

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Proposed Electricity Pricing Policy

• 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 GOBs 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

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Proposed Electricity Pricing Policy (Contd.)

• 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

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Proposed Electricity Pricing Policy (Contd.)

• 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 cant bring desired
  financial viability of the sector.

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