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Sabihuddin Ahmed

March 8, 2006

Energy Week at The World Bank

Rural Electrification in Bangladesh

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Origins of RE Program Thana (county) Electrification Scheme

Connected 459 Thana (county HQ) with 33 KV line

Some called it Growth Center

Number of development schemes surrounding Thana (county) headquarters

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Institutional Model Adopted Bangladesh adopted “Area Coverage RE

Program”

– United States model from 1930’s

– Recently in the Philippines

Formation of (PBS) Rural Electric Society (instead of the RE coop) in each area

13 separate contiguous areas selected

–13 PBSs established to implement program

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Financial Model: To Solve High Startup Cost REB obtained loan from GOB

– 2% interest

– 7 year grace period

– repayment in 30 years REB on-lends to PBS (Rural Electric Society)

– 3% interest

– 7 year grace period

– repayment in 30 years No other subsidy, other than preferential form of

loan

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Financial Model (2)

Areas for electrification

– required to meet minimum financial criteria set forth in lending terms

Minimum criteria set for each mile of line approved for construction

Tariff for each PBS calculated independently

PBSs penalized (higher tariff) for undue systems losses

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Political Dimensions Political interference in planning process and

how they were managed

–Nomination of non-political board of directors

–Only PBS-nominated board of directors involved in initial development of each PBS

–Board of Directors election held only after switching on electrical energy

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System Design Issues Engineering model of REA USA was

adopted

REB did not consider any low cost alternative for the program

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Growth of Program: Number of Connections – Year Wise

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Consumer Connections: Cumulative thru Dec ‘05 MIS Rpt.

Consumer Category

Cumulative Consumer Connection

Domestic 5,548,881

Commercial 713,607

Irrigation 165,964

Industry 110,236

Others 13,472

Total 6,552,160

Category-wise Consumer Connection

84%

11%3%

2%0%

Domestic

Comm.

Irrigation

Industry

Others

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Annual Power Consumption: FY 04-05 June MIS Rpt.

Consumer Category

Annual Power

Consumption (MWH)

Domestic 2,757,540

Commercial 361,379

Irrigation 594,615

Industry 2,730,118

Others 13,481

Total 6,457,136

Power Consumption (MWH)

43%

6%9%

42%

0%

Domestic

Comm.

Irrigation

Industry

Others

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Issues Related To Bill Collection

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Recommendation for Africa Establish independent institution

– similar to one adopted by REB Develop tariff

– Based on specific index of purchasing power in rural areas

Involve donor agencies to closely supervise–Selection of project areas–Recruitment of personnel–Training–Management of project areas

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Obstacles & ChallengesTo RE Program

Maintaining quality with rapid growth Inadequate power supply Poor “consumer mix” – impacts revenue Keep Program from being politicized Consultancy for both tech/management areas

still needed at appropriate levels given rapid growth and operational complexities