Power: The Bhutan Power corporation (BPC) bears a cost of about Nu 3.3M (million) for providing free rural electricity after the supply exceeded the requirement.

In giving free electricity to the rural homes as pledged, the government has allotted 54MU (million units) of electricity from its total royalty energy of 1,049MU.

However, BPC’s managing director, Dasho Bharat Tamang, said the actual consumption was 57MU and that the company was bearing the loss for the difference.  Each rural home receives 100 units of free electricity.

But the usage of royalty energy for free electricity covers only the energy charges.  The cost of billing, operation and maintenance and investments for rural homes is included into the tariff, which all consumers pay.

This means that urban users actually pay for the 100 units of free rural electricity, another BPC official said, although the government does subsidise the urban low voltage users between Nu 3.16 to Nu 4.14 a unit.

This is because the tariff determination is based on the cost plus methodology, which is a pricing strategy that would take into account all direct, indirect and fixed costs, whether related to production and sale of the product or service or not.

“We may have to consider this Nu 3.3M loss for the next tariff revision” Dasho Bharat Tamang said.

The government has the authority to either monetise or use 15 percent of the expected generation from Kurichu, Basochu, Tala and Chukha hydropower plants as royalty.

When the tariff revision took place in 2013, the government fully used its royalty energy to subsidise the low and medium voltage consumers.  It is because of this subsidy component that urban low voltage user will be paying only Nu 1.12 from next month.  Otherwise, the BPC’s cost of supply works out to Nu 5.26 a unit and the government is paying Nu 4.14 a unit from the royalty energy.

The government receives Nu 1.45B worth of electricity as royalty in total and, of this, Nu 1.27B was allocated for low voltage consumers, including the free electricity.  The remaining Nu 186M is provided to medium voltage consumers.

By Tshering Dorji