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Mr. Paul Kouris Then Came Mr ESMAP TECHNICAL PAPER 018 Workshop on Bangladesh Power Sector Reform Public Disclosure Authorized 23876 Public Disclosure Authorized MI Th1* ;#* t-A, = , ' I 1i''a 9;,x,,>-,,.,-rW 1~~~~~~~~~~~~~ Public Disclosure Authorized Energy S51YI IAI -8 ..... > Sector December 2001 Management Assistance Programme Public Disclosure Authorized apers in the ESMAP and EASEG Technical Series are discussion documents, not final project reports. They are subject to the same copyrights as other ESMAP publications. JOINT UNDP / WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) is a special global technical assistance program run as part of the World Bank's Energy, Mining and Telecommunications Department. ESMAP provides advice to governments on sustainable energy development. Established with the support of UNDP and bilateral official donors in 1983, it focuses on the role of energy in the development process with the objective of contributing to poverty alleviation, improving living conditions and preserving the environment in developing countries and transition economies. ESMAP centers its interventions on three priority areas: sector reform and restructuring; access to modern energy for the poorest; and promotion of sustainable energy practices. GOVERNANCE AND OPERATIONS ESMAP is governed by a Consultative Group (ESMAP CG) composed of representatives of the UNDP and World Bank, other donors, and development experts from regions benefiting from ESMAP's assistance. The ESMAP CG is chaired by a World Bank Vice President, and advised by a Technical Advisory Group (TAG) of four independent energy experts that reviews the Programme's strategic agenda, its work plan, and its achievements. ESMAP relies on a cadre of engineers, energy planners, and economists from the World Bank to conduct its activities under the guidance of the Manager of ESMAP, responsible for administering the Programme. FUNDING ESMAP is a cooperative effort supported over the years by the World Bank, the UNDP and other United Nations agencies, the European Union, the Organization of American States (OAS), the Latin American Energy Organization (OLADE), and public and private donors from countries including Australia, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom, and the United States of America. FURTHER INFORMATION An up-to-date listing of completed ESMAP projects is appended to this report. For further information, a copy of the ESMAP Annual Report, or copies of project reports, contact: ESMAP c/o Energy and Water The World Bank 1818 H Street, NW Washington, DC 20433 U.S.A. S UMMA R Y PRO CEEDINGS OF BANGLADESH POWER SECTOR REFORM WORKSHOP 30 SEPTEMBER TO 2 OCTOBER 2000 Report Compiled by: Show & Tell Event Management 2/A Momenbagh4 Rajarbagh Dhaka- 1217, Bangladesh Tel: 880-2-8319322 E-mail: shahzama(&bdonline.com Editors: Shahzaman Mozumnder BP Roushan Zaman December 2000 TIhe editors are not responsible either for the stateinents made or lor the opinions cxpressed by the authors in their papers included in this proceedings TABLE OF CONTENTS Table of Contents ...................................................... 1 Preface ...................................................... 2 Executive Summary ....................................................... 8 Session - I: Bangladesh Power Sector Reform ........................................ 13 Session - Il: Other Stakeholders' Perspective .......................................... 18 Session - III: Panel Discussion on Challenges Facing Bangladesh Power Sector ....................................................... 22 Session - IV: International Experience in Restructuring (Market Design), Privatization, and Competition of Power Sector ....................................... 27 Session - V: Industrial Experience in Legal and Regulatory Arrangements in Electricity and Gas Industries ....................................................... 36 Session - VI: Interactive Session on Energy Market Reform: Lessons for Bangladesh ...................................................... 40 Session - VII: Management and Employee Issues in Power Sector Reform .................................................................................................................. 47 Session - VIII: Interactive session on Ownership, Labor issues and Financial Implications ....................................................... 53 Session - IX: Panel Discussion on Role of Multilateral and Bilateral Agencies ....................................................... 56 Session - X: Bangladesh Power Sector Reform: The Way Forward ........ 64 INDEX ....................................................... 85 Annex-1: Overview of Summaries and Lessons for Bangladesh ............. 87 Annex-2: AGENDA ................. 100 Annex-3: Participants list ................. 114 CD ROM CONTENTS .................. i PREFACE Electricity is the prime mover of economic and social development. Recognizing the importance of the power sector, the Government of Bangladesh has taken up appropriate policy measures to develop the sector. Progress achieved during the last few years glimmers a new hope. The installed generation capacity has increased to 3803 MW compared to 420 MW in 1971. The Rural Power Company now generates 140 MW and has the capacity of installing more power stations. The Private Sector Power Generation Policy, 1996 has made it possible to see Companies like AES, NEPC, Westmont Power, Khulna Power Company Limited etc. generate power in Bangladesh. Under this policy, a total of 2238 MW would be generated in the first phase. In addition to this, small power plants, each with 10 MW capacity are being set up by the Rural Electrification Board. The Policy Guidelines for Small Power Plants, approved by the Government, provides adequate incentives to the private sector to establish their own power plants. The Chittagong Municipal Corporation is establishing a 15 MW power plant to meet its own demands. Rolls Royce is establishing a 10 MW captive power plant. Some other Bangladeshi Companies are coming up to install their own power plants. The Small Power Plant Policy also allows the investors to sell the surplus electricity of the captive power plants in the neighbourhood using the national grid. The government has exempted CDVAT from the import of electricity generators. This incentive has helped captive generation of about 500 MW of electricity in the private sector meeting the demand specially during the peak hours. A number of initiatives have been taken both in Public and Private sectors to promote renewable energy. NGOs such as Grameen Shakti and other organisations are providing photo-voltaic services to rural people. The Government is also considering projects for private participation in Distribution. The Government has initiated a number of programmes to reform the sector. Some of them have already been implemented. The Power Grid Company of Bangladesh Ltd. (PGCB) has been established under the unbundling programme. It would own and operate all the transmission lines, and be fully functional by 2002. Some of the 2 power stations of the Bangladesh Power Development Board (BPDB) are going to be corporatised in order to achieve efficiency and operational autonomy. The Dhaka Electric Supply Authority (DESA) and the Dhaka Electric Supply Company (DESCO), established under the reform programme, are showing signs of improvement. They have taken up programmes to reduce system loss and improve quality of service to customers. The Power Development Board is seriously considering the establishment of Cost Centres in the distribution areas in order to achieve efficiency. All the Utilities are paying attention to improve the quality of service to satisfy the customers. The Rural Electrification Board has achieved a remarkable progress. It has so far given connections to about 3.1 million customers of which 1.7 million connections have been given during the last four years and a half. Now about 29,000 villages have electricity. Bangladesh has entered a new era of development because of pro-poor policies of the government. The country has achieved self-sufficiency in food production. The growth rate is satisfactory. Disaster management capacity has improved significantly. Literacy rate, especially female literacy has increased noticeably. Micro credit, and other development programmes implemented by the government, NGOs and private sector have resulted in social development, by raising the aspirations of the people. Democracy, freedom of press, new technologies including IT programmes and infrastructure development promise a better future for the people of Bangladesh. It is no surprise that demand for electricity is increasing at a faster rate than it was expected. About two-thirds of the people have to be provided with electricity during the coming years. The government has recently approved the Vision Statement along with a Policy Statement on Power Sector Reform aiming at reaching electricity to all the citizens by the year 2020. But twenty years is a long time. We must try to provide electricity to the majority of the people by the end of the next decade. The Government is well aware of the challenging task of the power sector. Accordingly, the Government has taken up measures to strengthen the regulatory framework necessary to develop the power
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