A private electricity generation company, which has been supplying electricity to the Rural Electrification Board for over two and a half years, is demanding that it should be paid at a rate which is up to 54 per cent higher than the amount specified in its written contract.
The United Power Generation and Distribution Company, previously known as Malancha Holdings Ltd, claims that between October 2009 and May 2012, the REB has underpaid the company a total of Tk 19 crore, officials said.
They said that Tk 19 crore reflects the difference between the contractual rate of Tk 2.22 a kilowatt-hour at which the company is now being paid and the rate that that REB is required to pay to the Power Development Board, which is significantly higher.
The company argues that it should be paid at the higher rate as soon after it signed the contract with REB it received a ‘merchant power plant’ licence which meant that the contractual rate no longer applied.
The REB, however, has refused to pay the difference.
‘We will not pay what they want...But we have sought the opinion of the power ministry in this regard,’ said REB’s chairman Moin Uddin.
Soon after the Awami League government came to power in January 2009, the United Power Generation and Distribution Company initially obtained a ‘service-oriented industry’ licence
which allowed it to sign an agreement with the Savar Export Processing Zone for the provision of uninterrupted electricity during the factories’ working hours from its 42 megawatt power plant.
Separately, the company also negotiated another agreement with the REB, on the basis of the same licence, to supply it electricity for use by ordinary consumers in Savar who receive power from the Palli Bidyut Samity-1, a REB official said.
Clause 5 in the agreement specifies that the price of electricity, which REB is supposed to pay United Power, is set at around Tk 2.22 a kilowatt-hour, based on the government’s captive power policy.
However, in November 2009, one month after signing this agreement with REB, the company obtained a new ‘merchant power plant’ licence from the Bangladesh Energy Regulatory Commission, a Power Division told New Age.
The company now argues that because it obtained a different kind of licence the Tk 2.22 contractual rate should no longer apply, and instead it should receive payment at the same rate that the REB is required to pay the Power Development Board, he said.
The company states that Clause 18 of the argument now applies, which states that the tariff should be at the rate ‘determined by the Bangladesh Energy Regulatory Commission or the government of the People’s Republic of Bangladesh’.
Pinning its rate of payment to the one set by BERC allows the company to gain from the increases in the last two years of the price that REB has to pay the PDB for electricity. The increases in the price of the electricity have been made to reflect the increased cost of energy production — particularly due to the use of imported fuel oils, the official said.
In March the price set by BERC was Tk3.42 a unit —  significantly higher than the rate in the agreement.
It is controversial why Article 18 of the agreement was drafted into the contract, as it was irrelevant to the needs of the contract, and has allowed the company to argue that, with its new licence, it should be paid at the PDB rate.
BERC’s chairman Syed Yusuf Hossain said, ‘The inclusion of the Article was not done correctly. We have sent a letter asking the REB to explain the reason for its incorporation.’
New Age has also learnt that the Energy Commission’s own legal adviser has blamed the BERC itself for giving the company the merchant power plant licence in spite of the agreement that the company had with REB.
In a document that he wrote to the commission, the lawyer stated that BERC was ‘negligent’ in failing to properly scrutinise the terms and conditions by which the company was able to supply power to the REB.
Yusuf did not want to comment on this alleged ‘negligence’ of the BERC.
A Power Division report, seen by New Age, also questioned the provision of licence and the terms of the contract with REB, and claimed that the company’s claim was ‘illogical and unrealistic.’
‘For maximising profit Malancha Holdings has obtained the licence from BERC a month after it signed a deal with Rural Electrification Board under the captive power policy. And based on that, the company is claiming the price of electricity at which merchant power plants sell to the bulk electricity buyer, which is illogical and unrealistic,’ the report stated.
The Power Division report concluded that Malancha Holdings might have concealed the fact that it held a previous ‘captive power’ licence whilst seeking a new licence as a merchant power plant.
New Age has also learnt that United Power, while seeking a higher price for its electricity, is at the same time paying 48 per cent less for the gas it obtains from Titas Gas Transmission and Distribution Company than it did in the past. This is because this is a benefit given to all other Independent Power Producers.
Titas officials said that a captive power licensee receives gas at Tk 118.26 per thousand cubic feet, while an Independent Power Producer receives it at Tk 79.82.
A BERC official said that a commercial licensee is entitled to receive gas at the rate that an IPP licensee pays.
Hasan Mahmud Raza, chairman of the United Group, claimed that his demand was ‘just’ as per Clause 18 of the agreement.
The REB, however, continues buying electricity from the plant without specifying the price after the contract expired on 8 May, 2012.
When asked, REB’s chairman said, ‘We told them that we would pay them the price that the government sets.’
BERC member Mohammad Emdadul Haque said that the Energy Commission would soon introduce a ‘benchmark tariff’ for sale of gas to unsolicited or commercial power plants.
United Power is also supplying electricity to the Chittagong Export Processing Zone from its 44.5MW power plant installed inside the CEPZ premises.