Apparently it was a minor incident. But in reality it has enormous significance. The Energy and Mineral Resources Division recently sent a letter to Bangladesh Energy Regulatory Commission (BERC). The content of the letter was that the Energy Division has convened a meeting to review the activities of the BERC. The BERC Chairman and two Members were asked to attend the meeting. The letter also said that Energy Advisor Mahmudur Rahman will chair the meeting.

Sources concerned said that the Chairman showed interest to attend the meeting. But the two Members raised objection. They tried to justify that the ministry does not have legal right to review the activities of the BERC. The Chairman joined the meeting, but the two Members were absent. Obviously, it did not make the Energy Advisor happy.

Experts said that it was in fact a test case of the Energy Ministry. Although the BERC was formed through passage of an act in Parliament for regulating the sector, the ministry still considers the BERC like the ministry‘s corporation -- Petrobangla and BPC.

The incident did not take place all of a sudden. The bureaucracy from the very beginning was trying to how to hamper the activities of the BERC. Here is another example.

The BERC had sought cooperation from the Energy Ministry to arrange security passes for its two Members for entrance to the Secretariat. The ministry informed them that they cannot be given the security passes. The ministry also reminded that how many passes have been issued for the BPC and Petrobangla. As the BERC stuck to its position, finally the file went to the Home Ministry.

The Energy Ministry recently played another game. After the BERC in consultation with all concerned quarters formulated a guideline for utility licensing, it sought cooperation from the Energy Ministry to get legal opinion of the Law Ministry for gazetting the guideline.

But, the Energy Ministry instead of sending it to the Law Ministry invited the BERC to a meeting for its final review. Referring to concerned rules, the BERC informed that there is no scope to hold any such meeting. It also mentioned that the BERC obtained approval of Power, Energy and Mineral Resources Ministry before finalizing the draft of the licensing guideline. So, there is no scope to have any new opinion or amendment at this moment.

Although the ministry was dissatisfied, it did not proceed further. The Law Ministry has been killing time to give its final opinion although the BERC had obtained opinion of the Law Ministry before it was drafted. As the Law Ministry is dilly dallying in giving its final opinion, the licensing guideline could not be gazetted. Once the licensing guideline is gazetted, the BERC would be able to go for giving licenses to the utilities, which could have been a source of income of the BERC.

Sources said that the Energy Ministry is trying to keep the BERC under pressure through various ways. However, the activities of the BERC Chairman himself are inspiring the ministry to create obstacles.

A small example will clarify it.

The visiting card of the BERC Chairman reads: Dr Mujibur Rahman Khan, Chairman, Bangladesh Energy Regulatory Commission, Ministry of Power, Energy and Mineral Resources.

Experts said the simple card showed that the Chairman himself loves to see the BERC as an organization under the ministry. “That is why the Chairman in his talks says our ministry, our minister,” said one of them.

Analysts said that the BERC under the act is an independent body. But, they said, this kind of attitude of the Chairman undermines the dignity of the BERC and destroy its neutrality. “Above all, this kind of attitude of the Chairman will make the regulatory body a wing of the ministry,” said an analyst.

However, such kind of apprehension was expressed from the very beginning. After passage of the BERC Act, some analysts said that this crisis would not emerge had the commission been constituted as a constitutional body.

Despite many criticism, the success of the BERC is not insignificant. The act was passed three years back and the BERC started formal functioning with appointment of two Members on April 27, 2004. The commission stepped into third year only recently.

The BERC had started its journey at a room of Petrobangla also hiring a peon from the Petrobangla. Later the BERC rented a space at Anchor Tower at Sonargaon Road and shifted the office. Some officials of the Energy Ministry were also sent to the BERC on deputation. Although it took some time, a Chairman was also appointed. However, the time to appoint two more Members has already expired.

The Commission already finalized the draft of licensing for the utilities. It also chalked out an organogram of 132 staff. It almost finalized the procedures on determining price of electricity. On the other hand, it drafted five regulations for its operation. But still the BERC is an inactive organization due to financial crisis and non-approval of the organogram.

A Member was asked what are they doing, why everything is taking place so lately. He said changing mindset is not an easy affair. “The BERC is facing obstruction in every step due to non-cooperation of different government bodies. But we are working,” he said.

Background
During late nineties, it was felt necessary to make provisions for the establishment of an independent and impartial regulatory commission to create an atmosphere conducive to private investment in the generation of electricity, and transmission, transportation and marketing of gas resources and petroleum products, to ensure transparency in the management, operation and tariff determination in these sectors; to protect consumers‘ interest and to promote the creation of a competitive market.

Enactment of Act
Accordingly, a specific law entitled act 13/2003(Act) to establish the Bangladesh Energy Regulatory Commission was passed in Parliament in March 2003. This law is meant for the energy, which incorporates electricity, gas and petroleum products

Functions
Functions, powers and proceedings of the Commission have been enumerated in the article 22 of the Act which are reproduced below:

Subject to the provisions of this Act, functions of Commission shall be:
(a) to determine efficiency and standard of the machinery and appliances of the institutions using energy and to ensure through energy audit the verification, monitoring, analysis of the energy and the economy use and enhancement of the efficiency of the use of energy;
(b) to ensure efficient use, quality services, determine tariff and safety enhancement of electricity generation and transmission, marketing, supply, storage and distribution of energy;
(c) to issue, cancel, amend and determine conditions of licenses, exemption of licenses and to determine the conditions to be followed by such exempted persons;
(d) to approve schemes on the basis of overall program of the licensee and to take decision in this regard taking into consideration the load forecast and financial status;
(e) to collect, review, maintain and publish statistics of energy;
(f) to frame codes and standards and make enforcement of those compulsory with a view to ensuring quality of service;
(g) to develop uniform methods of accounting for all licensees;
(h) to encourage to create a congenial atmosphere to promote competition amongst the licensees;
(i) to extend co-operation and advice to the Government, if necessary, regarding electricity generation, transmission, marketing, supply distribution and storage of energy;
(j) to resolve disputes between the licensees, and between licensees and consumers, and refer those to arbitration if considered necessary;
(k) to ensure appropriate remedy for consumer disputes, dishonest business practices or monopoly;
(l) to ensure control of environmental standard of energy under existing laws; and
(m) to perform any incidental functions if considered appropriate by the Commission for the fulfillment of the objectives of this Act.

Licensing
The commission shall interact with the stake holders mainly through the License. The license, as awarded in the past, was not an appropriate instrument to make a transparent and effective mechanism to control, supervise and monitor the energy sector entity. The License as intended by the Act shall be an instrument for the BERC to deal with the entities and make the same answerable for their activities from operational aspects to the tariff, services to the customers etc. License is therefore very important for the regulatory purposes. The provisions of the Act regarding license are as follows:-

(1) No person shall engage himself in the following business unless he is empowered by a license or exempted from having it under this Act or any other Act, such as:-
(a) Power generation;
(b) Energy transmission;
(c) Energy distribution and marketing;
(d) Energy supply; and
(e) Energy storage.

(2) All persons empowered under Electricity Act, Presidential Order, Rural Electrification Act, DESA Act, Bangladesh Petroleum Act, or rules made there under for the power generation, and transmission, storage, supply and distribution of energy shall be treated as licensees under this Act and provisions of this Act shall be applicable to them.

(3) The private companies, with whom agreements have been executed between the companies and the Government or any of its agencies, immediately before this Act comes into force shall be treated as licensees for the generation of power and for the supply, transmission, distribution, storage and supply of energy along with the bulk energy under this Act, and notwithstanding anything contrary is contained in this section, the concerned conditions of the agreement shall be applicable to those cases.

(4) If a question or difference of opinion exists whether a person is engaged in power generation, and transmission, storage, distribution and supply under sub-section (1), the Commission’s decision on the issue shall be final.

(5) The Commission may order any person who is not a licensee or not empowered by any other way to disconnect or stop the operation of machineries relating to power generation, transmission, storage, marketing, supply or distribution of energy.

Issuance of Licenses
License may be issued to any person for the following purposes in a procedure prescribed by the Commission, such as:-
(a) for power generation;
(b) for energy transmission;
(c) for distribution and marketing of energy;
(d) for supply of energy; and
(e) for storage of energy.

Exemption
Exemption from the requirement of license --

(1) Commission may, make regulations for giving exemption from the requirement of license subject to the fulfillment of the specified conditions:
Provided that any person who is exempted by the Commission shall have to observe those conditions which a licensee shall have to observe under the license, or this Act, or the regulation, unless contrary is mentioned in the order of exemption.

(2) Exemption under this section may be given to a person for a specified period.

(3) Commission may revoke the exemption at any time recording reasons in writing.

License can be renewed, cancelled and revised by a process prescribed by regulation.

General Duties & Powers of the Licensee

(1) Every licensee shall make arrangement for the efficient, coordinated, cost-effective production, transmission and supply of energy.

(2) Every licensee shall maintain international standard and working method at the time of discharging his duties relating to energy operation, maintenance and safety.

Restrictions to the licensee --

(1) No license without having prior permission in writing from the Commission shall acquire any undertaking by purchase or any other means:
Provided that before making an application for such consent licensee shall serve 30 (thirty) day's notice to the Commission and if the license is for distribution and supply, in that case, to each of the concerned local authorities.

(2) No licensee, without the prior permission from the Commission shall sell, mortgage, lease, exchange or transfer by any other means his undertaking or any part of it.

(3) Unless clearly prohibited by the condition of license or by the general or special order of the Commission, any licensee can enter into contract for purchasing energy.

Annual accounts of licensee –

Every licensee shall prepare annual audit report of the undertaking and each of the business unit, in the form prescribed by the Commission, before the date specified by the Commission for this purpose and the same or an extract of a specific portion of it shall have to be published in a manner prescribed by the Commission.

Tariff is another field of activities on which much importance has been given in the Act. So long setting of Tariff, amendment, or changes thereof has been a monopoly act of the government. In a drastic reformative measure, the government has now decided to assign this arduous responsibility to the BERC as is the practice in many countries of the world. The Act has specifically referred to the policy and methodology which will be formalized by BERC in consultation with the Government and based on which BERC shall publish gazette notification for setting up the Tariff. The provisions of the Tariff in the Act 13/2003 are as follows:-

Tariff

According to the act
1) Notwithstanding anything contained in any other law for the time being in force, the price of power generation in wholesale, bulk and retail, and the supply of energy at the level of end-user, shall be determined in accordance with the policy and methodology made by the Commission in consultation with the Government:
Provided that this shall not be applicable in those cases, the tariff of which were determined by the agreement executed between the private company and the Government or by any of its agency before this Act comes into force.

(2) At the time of making the policy, the Commission shall take into consideration the following matters, such as:

(a) Electricity Act, Presidential Order, Rural Electrification Act and DESA Act;
(b) to harmonize the tariff with the cost of production, transmission, marketing, distribution, supply and storage of energy;
(c) efficiency, least cost, excellent service, excellent investment;
(d) consumers‘ interest;
(e) power generation, and transmission, distribution and supply of energy on commercial basis;
(f) development of national power system ; and
(g) other matters considered necessary by the Commission for the fulfillment of the objectives of this Act.

(3)Commission by regulation shall make methodology for determination of tariff.

(4)Commission shall determine tariff after giving hearing to licensees and others who have interest in it.

(5)Tariff determined by the Commission shall not be revised more than once in a fiscal year, unless there is change in the prices of energy including any other changes.

(6)A licensee may submit to the Commission proposal for revision of tariff along with detailed information and the Commission after hearing the intending parties may publish notification containing its decision within 90 days of receiving the proposal along with all information for tariff revision.

(7)Licensee shall publish a notice, at least in two widely circulated national daily newspapers, showing therein the tariff, and the tariff shall be effective within 7 (seven) days of such publication.

Objective
From the above provisions it is clear that the intention of setting up the BERC has been very clear and the objectives have a far reaching effect in bringing a qualitative change in the energy sector in Bangladesh. It was expected that with the introduction of the BERC the private sector investment in the energy sectors would find a level playing ground through which the quantum of Direct Foreign Investment in the energy sector would have been multiplied. But in practice the progress is far from satisfactory.

The BERC is termed an independent and impartial institution; with the provision in the Act that
13. Appointment of Secretary, officers and staff, etc. of the Commission—
(1) The Commission, for the purpose of carrying out its functions effectively, can appoint required number of officers and employees including its Secretary.
(2) The procedure of appointment and terms of service of officials and employees of the Commission shall be determined by regulation.
(3) Until the regulation is made, the Government may appoint a Secretary on deputation for the Commission;
on the other hand, the BERC has to depend on the government machinery to get its own manpower.

Now that if the BERC has to depend on the other ministry for approval of its organogram, it appears that a seed of self defeating methodology has already been sowed in the Act which needs attention of the law makers.

As no official has yet been appointed by the BERC the release of government fund as allocated for the BERC in the Budget has been strictly on the basis of the strength of approved manpower which is only 4 comprising the Chairman, 2 members and the secretary sent on deputation by the Ministry. As a result the Commission has been passing through financial hardships. Pay and allowances of 5 officials from Petrobangla, Bakhrabad Gas Company and REB are being paid by the respective organizations.

Even with the bottleneck of no manpower, the BERC has delivered praiseworthy jobs by finalizing the Licensing Regulation, which is the basic document for the BERC to move with the assignments given by the Act. This Licensing regulation is a document, which outlines the procedure of awarding a license to the energy operators and describe in details about the interactions that will take place between the Commission and the energy operators. But, it will only be effective when it is published in the Gazette. Again, as the publication needs a SRO number, it is stuck in the Ministry of Law for the same since December 2005; not withstanding the fact that BERC took all steps of soliciting critical review on the draft from the stake holders, Government agencies, Ministries, besides the public hearing on the draft through advertisement in the news papers and then finalized the Licensing Regulation

Another achievement of BERC is the award of provisional License to 13 Industrial enterprises for generation of electricity as captive power source. The total generation capacities of these units add to about 150 MW, which suggests that the equivalent capacity of electricity has been added through replacement thanks to the efforts of BERC.

In addition to the Licensing regulation, a few other draft regulations like meeting and public hearing, statistics, dispute resolutions, consumers complaints, tariff etc have been prepared by the two members of the Commission in association with the consultant. These are being processed for soliciting stakeholders` and public opinion.

BERC is however fortunate to have a technical assistance from the USAID in the form of provision of consultants. Since the formation of BERC, consultant from NARUC, an American Institute of Regulators, is helping the Commission with technical guidance.

Issues, with reference to BERC, which need immediate attention are:
 Publication of the Licensing Regulation in the official gazette by the Government
 Approval of the organogram of the BERC, enabling the same to recruit adequate manpower.

BERC could be an ideal professional regulatory body, which could alter the present situation in the energy sector and could be a bridge between the investors, operators and the consumers for the capital-intensive energy projects in the country. Sooner the objectives and prospects as embodied in the BERC Act are realized and acted upon by relevant authorities and stakeholders, the better.