Govt pays 2.

6 times more than long-term

power plants
October 10, 2014
Manjurul Ahsan

The government has been paying money as rental or capacity charges to short-term power
suppliers over 2.6 times higher than what it pays to long-term suppliers.
In 2014 financial year, the Power Development Board paid Tk 4.5 as rental charge to buy a
unit of electricity from the owners of quick rental power plants under unsolicited contracts for
three to five years, according to the data available with the board.
In the last financial year, it paid Tk 3,106 crore as capacity charge to buy 691 crore units or
kilowatt-hours of electricity from the 17 QRPPs with the capacity of 1,386MW, the data
showed.
The board, however, spent Tk 1.73 as rental charge to buy a unit of electricity from
independent power plants under solicited contracts for 15-22 years.
It paid Tk 1,472 crore as capacity charge to buy 851.31 crore units of electricity from 13
independent power plants with a total capacity of 1,506MW.
A PDB official said that the authority spent 58.17 per cent of the total payment of capacity
charges to the private sector to purchase only 38.38 per cent of the total private sector
electricity from the QRPPs.
This has resulted in a rise average power generation cost which is ultimately shifted to the
consumers, he said.
Under the contracts, the PDB has to return the investment and pay profit to the private power
suppliers in the form of capacity or rental charge, the official said.
When an agreement is made for short-term, the amount of payment shoots up to a much
higher level than that of the long-term ones, he added.
Rental or capacity charge is calculated based on the investment to power plants, operation
and maintenance cost and profit margin.
Apart from the capacity charge, the PDB also pays money to the agencies concerned for fuel
Tk 12-18 per litre of fuel oil and about Tk 1 per 1,000 cubic-feet of gas consumed by
the plants.
In 2014 financial year, the PDB paid other rental power suppliers, who installed the plants
through tender process, Tk 2.95 as rental charge on an average to buy a unit of electricity
under contracts for 5-15 years.
It paid Tk 760.81 crore as capacity charge to buy 258.15 crore units of electricity from 15
rental power plants with a combined capacity of 1,386MW.
In 2009 and 2010, the government, bypassing tendering process, signed 17 power purchase
agreements with private entrepreneurs to buy electricity for three to five years on condition of
paying rental charges.
In the past 10 months, the government extended at least 10 power purchase contracts to buy
electricity from eight QRPPs and two RPPs for two to five more years.
Under the extended agreement, the owners will receive rental or capacity charge for the
QRPPs although the owners have recovered their capital investment during the original
tenure of the contracts, officials said.
The government drew huge criticism for its quick-fix solution in power purchase from
short-term power plants at a high cost and then extension of the contracts for five more
years.