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ENERGY

is not a service
***In our country, any price hike of gas and electricity is a contentious one. Precisely what fundamentals are considered to increase prices is unknown to people. That much has been established through the latest round of hearings where BPDB failed to provide satisfactory answers to questions fielded by BERC's technical committee.**
THE recent public hearings organised by the Bangladesh Energy Regulatory Commission (BERC) and the sorry state of preparedness of the Bangladesh Power Development Board (BPDB) and its subsidiaries, gas distribution and transmission
companies including niAS and Gas Transmission Company Ltd. (GTCL) leave a lot to be desired. What surfaced during the hearings is that officials of companies like GTCL, niAS gas, Pashimanchal Gas Co.failed to make convincing cases to BERC for upward price revision. This sorry state of affairs has come to pass primarily because, perhaps the company officials are not prepared to appear before a public hearing where there would be various consumer groups and other stakeholders asking questions.
The other thing that became clear as day is that government bodies involved in the business of providing energy need to consider that the resource they sell must be assessed on market basics. Till date, state bodies had a monopoly. Natural gas, the major commercial primary energy source, has so far had been marketed without considering the resource value. The gas producing companies assumed that the well head price of natural gas per unit is Tk.25. Again the bench mark (Tk.25 per unit) is a figure proposed without making it clear on what basis it was done.
Subsequently, these companies failed to demonstrate clearly the cost of production and distribution of the per unit gas to the consumer. Unfortunately, there was no sincere effort to do so. Company officials claim that they have huge operational costs for reaching
gas to end consumers. From BERC's end there were suggestions that the said operation costs include a significant part of unnecessary and partly unaccounted for expenditures. From the utility companies' end easy efforts are made to transfer the huge 'operational costs' to the consumers. There were few or no statements confirming that the gas companies have concrete plans to increase efficiency in management for reducing cost of operations. If the utility companies (including gas companies) hope to make some real difference in marketing energy commodities they need to operate on market principles. They need to realise that in the near future local 'cheap gas' will be blended with costly imported gas (to be imported in LNG form). So far available information suggests that per unit import gas (LNG) will be ten times costlier than the local gas. Therefore, a small share of import gas if blended with local gas the price has to be raised significantly.
On the other hand, with the market evolving in terms of competition in both primary and secondary energy supply market fundamentals for pricing energy as a commodity has emerged. Now it has become imperative for BERC to create a reasonable level playing field. And since government companies are going to be in the market for the long haul, they need to work out the cost of the commodities and justify their prices.
In our country, any price hike of gas and electricity is a contentious one. Precisely what fundamentals are considered to increase prices is unknown to people. That much has been established through the latest round of hearings where BPDB failed to provide satisfactory answers to questions fielded by BERC's technical committee. Obviously things cannot go on like this. Energy and power need to be allowed to be traded "on the basis of their economic pricing.” Again total laissez faire cannot be allowed to take place and BERC as
regulator and protector of consumers' interests has a role to play. The cost of extraction of natural gas, its transmission to power plants and the transformation of that gas into electricity entail costs at every single stage. All these need to be factored into the cost of the commodities known as energy and power. Unless we take into account these cost elements and profit margins, there can be no cost recovery for the entities involved in power generation of distribution. And without cost recovery, new investments cannot be made to new exploration fields.
Now comes the tricky part. How are these "commodities" to be priced for end users? As has been revealed in the latest hearings, the various stakeholders other than BPDB have no clue as to what monies have been expended to produce the electricity. Any realistic price mechanism needs to be transparent in nature so that consumers are not taken for a ride. The government has to ensure that necessary readjustment of gas and power tariff are realistic, given the realities on the ground. Cost recovery and profit mark-ups cannot come at the behest of business and consumers. As long as political considerations take precedence over market principles, the pricing of gas and electricity will remain unrealistic and unsustainable. Experts agree that the price of gas in Bangladesh "trades" at a price that is below international prices. This is a trend that was set in motion in the early '80s because conditions were conducive then. The situation is no longer conducive. Today bilateral and multilateral agencies giving Bangladesh loans on energy development have added the "price adjustment’ clause to ensure that the pricing of the resource is economic. What we should be doing is quite different from what is being done.
The writer Is Assistant Editor, 77ie Daily Star.