Chart showing existing status of the utilities

Report
Overview of Legal Issues
in Regulatory Reforms :
Bangladesh Power Sector
November 11-15, 2002
Hyderabad, India
Country Paper
Presented by :
Bangladesh Team
Outline








Introduction
Country Profile
Power Sector at a glance
Current structure of power sector
Current status of regulation
Regulatory reform measures undertaken : An
overview
Future reform programmes
Establishment of Energy Regulatory Commission
& its salient features
2
Introduction
 Electricity essential ingredient for economic and social
development
 Power the most important pre-requisite for attracting both
domestic and foreign investment
 GOB committed to providing with affordable and reliable
electricity to all the citizens by 2020
 Scarcity of resources as well as the inefficiency of the
utilities hinders development of the sector
3
Country Profile

The Country
: The People’s Republic of Bangladesh

Capital City
: Dhaka

Area
: 147,570 Square km.

Population
: 130 Million

Per Capita income : 315 US$

GDP Growth Rate
: 5.16%
4
Power Sector at a glance

Installed Capacity
Total
BPDB
IPP & Mixed Sector










Generation Capacity
Peak Demand
Transmission Lines (230 & 132 Kv)
Grid Sub-station Capacity (230/132 Kv)
Grid Sub-station Capacity (132/33 Kv)
Distribution Lines (33 Kv, 11 KV & 0.4 Kv)
System Loss (T&D)
Consumer Number
Access to Electricity
Per Capita Generation
:
:
:
4,710 MW
3,420 MW
1,290 MW
:
:
:
:
:
:
:
:
:
:
3,750 MW
3,218 MW
3,764 KM
3,250 MVA
6,585 MVA
1,93,196 KM
29.60%
6.54 Million
30%
136 kWh
5
Current Structure of Power Sector
Owner & Regulator :

Government (Power Division)
Generation :



Bangladesh Power Development Board (BPDB)
Independent Power Producers (IPPs)
Rural Power Company Ltd. (RPC) - A mixed sector power
company
6
Current Structure of Power Sector (contd.)
Transmission :


BPDB
Power Grid Company of Bangladesh Ltd. (PGCB)
Distribution :




BPDB
Dhaka Electricity Supply Authority (DESA)
Dhaka Electric Supply Company Ltd. (DESCO)
Rural Electrification Board (REB) through Rural Electric
Co-operatives called Palli Bidyut Samity (PBS)
7
Power Sector of Bangladesh
MPEMR
(Ministry of Power, Energy and
Mineral Resources)
BPDB
(Generation)
EA & CEI
Power Cell
IPP
BPDB
(Transmission)
PGCB
(An enterprise of BPDB)
PBSs
REB
DESA
DESCO
BPDB
(Distribution)
Administrative Link
Power Flow Link
8
Current Status of Regulation
Regulatory Functions :

Power Division on behalf of Govt. functions as a
Regulator
Formulates policies
 Approves investment program of the public sector
entities
 Approves Tariff
 Resolves disputes
Electrical Advisor & Chief Electric Inspector’s office
and Power Cell perform some regulatory functions in
electricity sector on behalf of Govt.


9
Current Status of Regulation (contd.)
Performance Based :

No effective performance based regulation

Have some kind of incentive regulation for the consumers
mainly through tariff and tariff structure for load
management perspective

Penalty to consumers for low Power Factor
10
Current Status of Regulation (contd.)
Tariff :

Government approves tariff

Tariff is not cost reflective

Two-part metering tariff - peak & off-peak

No provision for stakeholders participation like public
hearing in the tariff approval process

No scope of appeal to the Court against Govt. decision
Provision of subsidy to domestic and agriculture consumers

11
Involvement of Judiciary in Power Sector
Regulation


Provision of punishment under The Electricity Act, 1910

Theft of electricity

Malicious use of electricity

Damages of electrical equipment, line materials, etc.
Recovery of bills 
Public Demand Recovery Act, 1913
12
Overview of legal framework : An example
Section
44 A
Penalty for
abettors in
certain offences
Electricity
Act 1910
No provision of
penalty for
abettors
Electricity
Act 1910 ( amendment `93)
• Provision of penalty for
users including officer /
employee of the utilities
• Imprisonment for a term of
maximum 5 years or fine
maximum Tk 10,000 or
both penalties
13
Regulatory Reform Measures Undertaken :
An Overview
 Power Sector Reform started in 1977 through the
creation of Rural Electrification Board (REB) to
expedite and strengthen rural electrification program
 DESA created
in 1991 as a part of distribution
unbundling process to supply electricity in Dhaka
metropolis
14
Regulatory Reform Measures Undertaken :
An Overview (Contd.)

To introduce competition, induct foreign private capital
and increase power supply “Private Sector Power
Generation Policy” developed and adopted in 1996

1290 MW IPP power plants contracted & it is under
operation

GOB has approved “Policy Guidelines for Small Power
Plants in Private Sector” to develop power plant up to 10
MW capacity.

Already a 10 MW Power Plant established and some are
in progress under this policy
15
Regulatory Reform Measures Undertaken :
An Overview (Contd.)
 As a part of unbundling process 
PGCB created in 1996 to take over transmission
business from BPDB. It already taken over about 63% of
the transmission assets from BPDB

DESCO established in 1996. It is currently functioning at
Mirpur area of Dhaka Metropolis

Corporatization of Ashuganj Power Station implemented

Cabinet approved constitution of the “West Zone Power
Distribution Company” under BPDB on September 2002
16
Example : Power Purchase Provision from IPPs
BPDB

No provision of power purchase from IPP in
Presidential Order (P.O. 59 of 1972)

P.O. amended in April 2001 as follows :
The Power Board may purchase power from any
person or entity authorised to generate electricity
by the appropriate authority at such rate as may be
determined by the Government
17
Example : Power Purchase Provision from IPPs (contd.)
REB

REB Ordinance (LI of 1977) :
Shall receive supply of electricity from BPDB at
such rates and on such terms and conditions as
may be determined by the Government

REB Ordinance amended in April 2001 as follows :
Shall receive supply of electricity from BPDB and
any power generating station run by any person
or entity under a contract with the Government at
such rates and on such terms and conditions as
may be determined by the Government
18
Example : Power Purchase Provision from IPPs (contd.)
DESA

No provision in DESA Act (Act 36 of 1990)

DESA Act amended in April 2001 as follows :
DESA may purchase power from any person or
entity authorized to generate electricity by the
appropriate authority at such rate as may be
determined by Government
19
Future Reform Programs
Generation
 Bangladesh Power Development Board (BPDB) be
converted into a holding company under Companies
Act
 The
existing generating stations of BPDB be
converted into a number of corporatized entities
under BPDB holding company
20
Future Reform Programs (contd.)
Transmission
 PGCB
remains responsible for transmission
business in the whole of Bangladesh
21
Future Reform Programs (contd.)
Distribution
 BPDB distribution segment be converted into a
number of subsidiary companies under BPDB
Holding Company
 DESA be converted into a company under
Companies Act, 1994
 Palli Bidyut Samities will continue its business in
their distribution areas under Rural Electrification
Board
22
Industry Structure after Reform
Regulation
Regulatory
Commission
Admn. Link
Functional Link
MPEMR
POWER CELL
EA&CEI
BPDB Holding
Company
Generation
GEN.
CO.
GEN.
CO.
IPP
IPP
RPC
Single Buyer
PGCB
Transmission
Distribution
DIST.
CO.
Network
Co.
DIST.
CO.
Supply
Co.
DIST.
CO.
PBS
REB
PBS
DESA (Co.)
PBS
Network
Co.
DESCO
Supply
Co.
23
Power Market after Reform
 Single Buyer Model be adopted
 Single Buyer purchases all the power/energy from
the generators and sells to different distribution
companies.
 Multi-buyer and Competitive Pool may be adopted
when the market becomes mature and stable
24
Market Structure after Reform (contd.)
GEN.
CO.
GEN.
CO.
IPP
IPP
RPC
Single Buyer (PGCB)
DIST.
CO.
DIST.
CO.
DIST.
CO.
PBS
DESA (Co.)
PBS
DESCO
PBS
25
Future Reform Programs
Independent Regulation
 An independent Energy Regulatory Commission (ERC)
be established for regulating electricity, gas and
petroleum sector
26
What’s the Intent of Future Regulatory Reforms


Govt. wears too many hats i.e. owns, operates &
regulates
Intent is shifting of Govt. regulation towards
Independent regulation
Ownership
Govt. Control
Market Control
Regulation
27
Legal Issues

A legal framework is required for establishment of
ERC

Initially a draft legislation was prepared for
establishing an ERC for regulating Electricity Sector

Cabinet approved the draft

February 2002, Govt. decided to establish a single
ERC for regulating Electricity, Gas & Petroleum
sector

With this aim, draft act prepared & expected to be
enacted soon by the Parliament
28
Nature & Extent of the Proposed Regulation


Independent Regulation
High level body vested with adequate powers to
discharge responsibilities which embrace

Executive functions - within the broad Govt. policy
relating to the sector






Issue licences
Set Tariff
Set & enforce of standards of performance
Promote Competition
Advisory functions - Advise Govt. on all matters
connected with energy
Quasi judicial functions - Dispute resolution
29
Nature & Extent of the Proposed Regulation (contd.)


Extent of regulation is a quantum of regulation for the
sector
What type regulation required



Soft hand or
Hard hand
Our intent -- Medium hand regulation
30
Why Independent Regulation

Power Sector Reforms already started & it’s a
continuous process

Private power generation started (about 1290 MW
which is one third of present installed capacity)

Separation of commercial business from network
business is under way and private participation be
encouraged in commercial business

By the year 2006 and 2012 generation capacity to be
enhanced by 6,789 MW & 9,564 MW respectively for
which
(including
T&D
network
development)
investment needs about 3.68 b US$ & 6.70 b US$
31
Why Independent Regulation (contd.)

Not possible to fulfill this huge amount of
investment by Govt. alone

Private sector participation is essential

To increase confidence of private sector investors

Independent Regulation essential in the sector to
take corrective action in a timely manner & to
ensure level playing field for both public & private
sectors
32
Establishment of ERC delayed?

Yes, delayed

Preparation started in 1996

To give legal framework Power Cell Working on it

Establishment of Independent ERC is delayed due
to :

Suspicion

Lengthy bureaucratic process

Sometimes Donors’ pressure

Lack of political commitment
33
Salient Feature of the Energy Regulatory
Commission Act, 2002
Constitution of the Commission
Chairman
-
1
Members
-
4
 Appointed for 4 years and may be extended for another
term subject to satisfactory performance
34
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Appointment of the Chairman & Members
 Appoint by the Govt.
35
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Removal of Chairman & Members
 For removal of the Chairman or Members of the
Commission, a Committee will be constituted by the
Govt. comprising a Judge of the Supreme Court
36
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Funding
 All the expenses of the Commission will be met from the
annual budget of the Govt.
 Fees, charges etc.
 Surplus money be deposited to the consolidated fund of
the state
37
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Powers of the Government
 Govt.
will issue policy directives
development of the power sector
for
overall
38
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Resolution of disputes between the Commission & Govt.
 If
any
conflict
of
interest
arises
between
the
Commission and Government, Government’s decision
is final
39
Salient Feature of the Energy Regulatory
Commission Act, 2002 (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
40
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Appeal against the decision of the Commission
 Orders of the Commission are appealable before the
High Court.
41
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Rules
 Govt. may make rules by Gazette notification
42
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Regulations
 Commission may make regulations by Gazette
notification
43
Salient Feature of the Energy Regulatory
Commission Act, 2002 (contd.)
Proceedings of the Commission
 All the proceedings before the Commission shall be
deemed to be a judicial proceeding within the meaning
of sections 193, 219 and 228 of the Penal Code (XLV of
1860) and the Commission shall be deemed to be a
Civil Court
44
Thank You
C:/P\LF\2002\Amzad\Regulatory Reforms -- India (Hydrabad)-3.ppt
45

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