Electricity tariff likely to go up as BPC and DGPC propose increases

2026-02-20 - 07:34

The domestic power tariff is supposed to be reviewed every three years and usually goes up due to higher cost of generation, cost of operation and maintenance, cost of power supply and inflation. The last revision was supposed to happen by July 2025, but at the time the National Energy Policy was being framed which would impact the Tariff Determination Regulations which is used by the Electricity Regulatory Authority (ERA) to determine the tariff. The usual practice is that the Bhutan Power Corporation (BPC) and the Druk Green Power Corporation (DGPC) submit their tariff expectation to the ERA, and the ERA rechecks their data and does a final tariff. The tariff rate by the ERA will usually be lower than what BPC or DGPC is asking for, but even so, at this point it will be quite high, especially for Low Voltage users (homes, offices, businesses), as it is not subsidized. After this, the tariff is handed over to the Ministry of Energy and Natural Resources (MoENR) which will normally take it to the Cabinet which will use the 13 percent Royalty Power of free power from each project to subsidize the final tariff to a lower rate which is what comes on our electric bills. BPC The BPC whose tariff is what finally comes on your bill has proposed an unsubsidized tariff rate of Nu 5.73 per unit for Low Voltage (LV) users who are households, offices and small businesses, which is the vast majority of the population but use up only around 10 percent of the power. The next category is Medium Voltage (MV) proposed tariff at Nu 5.24 for outlets like cottage industries and small manufacturing outlets. The proposed tariff for High Voltage (HV) like big industries is Nu 2.80 which is a decrease from the current rate. The current tariff rate for LV is Nu 1.28 for the first 100 units (free for rural areas and 200 units free for highlands) and Nu 2.66 per unit for anything above 100 units. This is what households, businesses and offices get. The current MV and HV tariff is Nu 2.93 per unit which is a combination of the tariff and demand charge. BPC has based its proposed tariff rate on its estimation that the cost of purchasing power from DGPC will be Nu 2.14 per unit inclusive Chukha, Tala, Chukha, Kurichu, Basochu, Mangdechu and Punatsangchu II. The BPC says that around 75 percent of its total expenses is decided by this purchase cost from DGPC. However, DGPC in its proposal estimates a higher power generation tariff of Nu 2.48 per unit not including Punatsangchu II for which it has estimated a higher Nu 4.28 per unit. The above means that BPC’s proposed tariff will be even higher as it underestimated DGPC’s power generation tariff. The BPC, in its rationale for tariff revision, said that it will be investing Nu 40.719 billion (bn) in five years to build up power infrastructure for reliable and quality services, and these would include replacing and upgrading the current system to meet increasing domestic consumer load, automation, increased industrial load, relocation of industrial area, upcoming national plans, Gelephu Mindfulness City, etc. It also says this is part of its cost of supply which includes operation and maintenance, deprecation, return on equity, cost of debt, power purchase from DGPC, energy losses, working capital, system operator charges and regulatory fees. It is expecting a return on equity of 15 percent, which is allowed under the new Tariff Determination Regulations. Its Operation and Maintenance cost in 2024 was Nu 2.249 bn. BPC has also factored in inflation in its tariff proposal. DGPC DGPC said that under the TDR 2025, the tariff determination methodology for generation utilities has been revised. The return allowance framework has shifted from a net asset–based approach to an equity-based return, calculated on actual equity infusion and actual debt. DGPC has accordingly prepared its tariff revision proposal for the period July 2025 to June 2028. The cost of supply of DGPC is largely similar to BPC except for power purchases. DGPC like BPC has proposed a 15% return on equity. Its cost of debt is for Mangdechu, Suchhu, Yungichhu and Burgangchu coming to Nu 31 bn in debt by 2027. In terms of investment, DGPC plans to spend Nu 5 bn from 2025 to 2028 mostly in Chukha and Tala for upgradation and replacements. Its Operation and Maintenance Cost in 2024 was Nu 2.280 bn. DGPC also calculated inflation in its costing. DGPC said its generation tariff of Nu 2.48 per unit is determined based on the total cost of the existing hydropower plants: Basochu, Kurichu, Chukha, Tala, Mangdechu, Suchhu and the upcoming projects Yungichhu, Burgangchu, cost to completion and the average annual generation. The generation tariff for DGPC for domestic supply has been arrived at by using a cost of equity as 15 percent, cost of debt of 10.59 percent, gearing ratio of 70 percent, and net annual energy of 9,369 GWh. It said the domestic tariff proposal has been prepared to reflect the actual cost of efficiently operating the DGPC Hydropower Plants. The generation tariff proposal is structured to recover the cost of generation while ensuring operational efficiency. On P II, DGPC put up a separate proposal. It said the total project cost considered for the tariff is the total generation cost to completion which is Nu 133.976 bn. The debt equity ratio of 70:30 has been considered on the project hard cost of Nu 90.475 bn. The other cost parameters, such as inventory and O&M cost, has been considered as per the tariff determination regulation 2025. The project has the design annual generation of 4,575 million units and the royalty energy of 13 percent. It said based on the above, the proposed domestic generation tariff of Nu 4.28 per unit for the project has been arrived at by using the total project cost of Nu 133.976 bn. DGPC said the proposal for generation tariff is based on the recovery of the cost of generation reflecting the cost of efficient business operation. It said the proposed tariff has been worked out based on the provisions of the Energy Policy to enable the recovery of permissible costs as per the regulatory framework. Difference this Time and Feedback An official said that what is different this time around is that under the TDR 2025 BPC and DGPC can ask for return on equity between 13 to 15 percent. Earlier, this return was calculated using the average bank lending rate with the ERA having the option to add 2.5 percent additional interest rate or not. The higher return on equity is expected to make investments more attractive in hydropower and also bring it in line with regional norms. Another change in TDR 2025 is that earlier the Royalty Power or free power to be given to the government was 15 percent of the generation, which has been reduced to 13 percent. It is hoped that reduction on Royalty Power will reduce power tariff, but also give a means to the government to bring down tariff using the Royalty Power as a subsidy. The tariff for HV users has come down as there are more HV users, which means a lower cost of distribution and higher revenue from them. LV tariff is always the highest, given the high distribution cost like remote villages or mountaintops across 20 dzongkhags to households, offices and institutions. There was public feedback taken on 17th February 2026 to the BPC and DGPC proposals, and here, industries requested for a lower tariff rate saying that cheap power is the main thing that keeps Bhutanese industries competitive. They also highlighted that the power sector may generate revenue, but it is only through the use of affordable power by businesses that jobs can be generated. Ultimately, the ERA and its Commission will set the tariff rate and the Cabinet will issue subsidy from the Royalty Power and give a subsidized power rate, especially for LV users.