Power Tariff is expected to increase this July. Two power companies, Druk Green Power Corporation Limited (DGPCL) and Bhutan Power Corporation (BPC), have proposed for a revision to the Bhutan Electricity Authority (BEA).
Under the Bhutan Electricity Act 2001, the revision of power tariff takes place once every three years. DGPCL, who sells the power to BPC for domestic market, proposed for a revision of the domestic generation tariff.
Druk Holding and Investments (DHI), who holds 100 percent of shares in DGPCL and BPC, said the revision is long overdue considering the contributions they make to the economy. The generation tariff of Nu. 1.20 per kilowatt at present was set way back in September 2007.
“Only a small percentage of revenues from Power go to the maintenance of different power plants. Nearly 95-97 percent of the revenues from power go directly to Ministry of Finance. You may find only 5-3 percent being used for maintenance, payment to the staff and purchases,” said DHI’s Chairman Lyonpo Om Pradhan. He also said there is a loan repayment that we have taken to establish these plants. So it is like borrowing money to pay back and payment is going to come from revenues. It is not going to come from any other source.”
In the current proposal, the DGPCL has proposed the generation tariff of Nu. 1.99 Per kilowatt. The DGPCL has taken four factors while proposing the revision and one of these is allowance for higher cost of equity. Currently the DGPCL is allowed only six percent which is one of the lowest rates in the region.
“If you take into account the inflation at present time, which is about 9 percent, I think asking for 12 percent or 16 percent or 15.5 percent is really realistic on our part.,” said DGPCL’s Managing Director, Dasho Chhewang Rinzin. He also said at 6 percent they are making loss. “We are earning a return of 6 percent whereas inflation is already 9 percent. So unless you can match the inflation with your returns, you are actually making a loss in terms of real money.”
However, the Bhutan Electricity Authority said after going through the proposal, there were some inconsistencies.
“They compared it to Central Electricity Regulatory Commission (CERC) India but that rate was it has condition attached to it. It is not that you pay 15.5 percent to all of the equity that you have,” said BEA’s Chief Executive Office Samdrup K. Thinley. “Here they have proposed in a different manner while they picked up the same rate but they have applied over the whole equity. Therefore they need to do some correction here. The reason why they kept a cap of 30 percent of the equity is because the cost of equity is quite high. And if we allow it then the tariff will go up.”
The proposal also included the costing on investment and operational expenses which the Authority said was reasonable. Other factors, in the revision, also include cost of production of royalty energy- which comprise of 15 percent of total power generation-, and cost of power import. Bhutan produces 7,000 million units of power from the 1,480 Megawatt installed power plants. These proposals from Druk Green Power Corporation Limited and Bhutan Power Corporation, which were submitted in April to Bhutan Electricity
