Gas and Electricity Crisis: Where Is the Problem, and What Is the Solution?

Why does one disruption plunge an entire country into crisis—and how can Bangladesh break out of this cycle?

The Crisis Keeps Returning

Every few months, Bangladesh seems to face the same headlines about gas and electricity: gas pressure drops somewhere, load-shedding intensifies elsewhere, factories suspend production, and long queues form at CNG stations. The explanations are familiar—LNG imports have fallen, a terminal has suffered a technical failure, or conflict in the Middle East has disrupted shipping.

These explanations are not necessarily wrong. But they raise a more important question: why should the failure of a single terminal destabilize the gas and electricity system of an entire country?

Is the real problem simply a shortage of fuel, or does it expose a deeper structural weakness in the way Bangladesh manages its energy sector?

What Caused the Recent Crisis?

In July this year, a fire caused major damage to one of the floating LNG terminals at Maheshkhali, cutting gas supply by roughly 450 million cubic feet per day. Bangladesh normally needs around 3.5 to 4 billion cubic feet of gas a day, while supply was already running below demand.

Reduced imports from Qatar, combined with instability in the Middle East, made the situation worse. In many homes cooking became difficult, factories had to suspend operations, and power plants could not obtain enough gas to generate electricity.

The episode exposed a basic weakness: Bangladesh’s energy system depends too heavily on a small number of supply sources. When one of them fails, the entire country begins to feel the shock.

Why Must the Government Buy Almost All Electricity?

Private companies generate electricity in Bangladesh, but they generally cannot sell that electricity directly to factories or households. The Bangladesh Power Development Board, or BPDB, purchases the power first, and electricity then reaches consumers through distribution companies.

In effect, the government remains the dominant single buyer.

Electricity is an essential public service, so government will always have an important role. But that role should primarily be to set policy, maintain the national grid framework, ensure energy security and protect consumers—not necessarily to purchase electricity from every power plant itself.

When the government becomes the sole major buyer, decisions over which companies receive contracts, at what price, and under what terms become concentrated in a small number of hands. That creates greater opportunities for political influence, favouritism and poor contracting.

How Do Other Countries Do It?

Many countries separate four functions: electricity generation, supply, grid operation and regulation. Government does not necessarily have to act as the principal commercial buyer.

In France, consumers can choose their electricity supplier. By March 2026, around 77 percent of electricity consumption was being purchased under market-based pricing arrangements. Yet grid charges and consumer protection remain regulated.

The United Kingdom also allows competing electricity suppliers, while price caps provide protection for ordinary households. Competition therefore does not have to mean uncontrolled prices.

In India, reforms introduced through the Electricity Act of 2003 allow large industrial consumers, under certain conditions, to purchase electricity directly from generators instead of relying entirely on their local distribution company. They pay the necessary charges for using the grid. A similar arrangement could be particularly relevant to Bangladesh’s industrial sector.

Canada demonstrates that there is no single model.

Alberta operates a competitive electricity market. Independent institutions administer the wholesale market, regulate the grid and prices, and monitor possible manipulation.

Quebec, on the other hand, relies heavily on the publicly owned Hydro-Québec for generation, transmission and distribution. Yet rate increases have historically required approval by the independent regulator, the Régie de l’énergie, with public hearings. New generation can also involve competitive procurement.

The lesson is important: public ownership itself does not necessarily create inefficiency, provided pricing is transparent and regulation is protected from political interference.

However, changes introduced in Quebec in 2025 increased the influence of the government and Hydro-Québec’s leadership over pricing and reduced some of the regulator’s independence, drawing criticism. Bangladesh’s own experience with the weakening of BERC carries a similar warning.

Regulatory independence is not something that can simply be created once and forgotten. It must continuously be protected.

Bangladesh Has Already Begun Considering This Direction

This is no longer merely a theoretical idea.

In 2025, Bangladesh’s energy adviser discussed a merchant power policy under which private generators could negotiate directly with customers and sell electricity to them while paying charges for the use of the national grid. Government would purchase only a limited portion of the electricity, while the rest could be sold through the market.

Imagine, for example, that a solar power producer in Cumilla signs a 10- or 15-year agreement with a garment factory in Gazipur. The electricity could still travel through the national grid, with the appropriate transmission charges being paid. BPDB would no longer need to buy the electricity first and then resell it.

Such an arrangement could also reduce the government’s financial burden.

But for this model to succeed, BERC must become stronger and genuinely independent, capable of determining fair grid-use charges and protecting ordinary and low-income consumers.

What the Quick Rental Experience Should Teach Us

During the severe electricity shortage of 2010, quick-rental power plants were introduced as an emergency response. Using temporary emergency measures at that time was not necessarily unreasonable.

The problem was that an emergency arrangement gradually became a long-term system. Numerous contracts continued for years, many without open competitive bidding.

This brings us to the issue of capacity charges.

A power plant has certain fixed costs simply to remain ready for operation. Therefore, paying some amount even when it is not generating electricity is not inherently abnormal.

But if we need one house and rent three houses—and continue paying rent for all three—that is no longer prudent planning.

A government-appointed review committee reported in January 2026 that Bangladesh had accumulated roughly 7,700 to 9,500 megawatts of excess or idle generation capacity. Keeping that capacity available was costing approximately $90 million to $150 million annually. Over the past two decades, total payments to power plants had increased roughly elevenfold, while capacity payments had risen by around twenty times.

Many contracts guaranteed payment even when electricity was not being produced, backed by government guarantees that shifted much of the private investor’s risk onto the state.

Whether any individual or company is legally guilty of corruption or misappropriation is a matter for the courts. But one conclusion is increasingly difficult to dispute: the contracting structure failed to protect the country’s financial interest adequately.

Why BERC Became Weak—and What Is Changing

The Bangladesh Energy Regulatory Commission, BERC, was established in 2003 as an independent regulatory institution, but its authority was repeatedly weakened.

Under the special power-sector law introduced in 2010, the government obtained broad authority to award contracts without normal competitive procedures. Later legal changes also allowed the government itself to increase electricity and gas prices without going through the usual BERC public-hearing process.

After the political change of August 2024, the interim government led by Professor Muhammad Yunus suspended those provisions and restored BERC’s authority to determine tariffs through public hearings.

Following the February 2026 election, the BNP-led government came to office, with Tarique Rahman as prime minister and Iqbal Hasan Mahmud Tuku taking responsibility for the Ministry of Power, Energy and Mineral Resources. The government announced in its 2026–27 budget that capacity charges and power-purchase agreements would be reviewed.

BERC has also reduced the approved return for BPDB-affiliated generation companies from 12 percent to 6 percent. Plans have been announced for 10,000 MW of solar power over five years, as well as a new offshore bidding round in the Bay of Bengal.

These are positive steps. But the underlying single-buyer structure remains largely intact.

Reducing capacity charges and adjusting guaranteed returns are necessary, but they address the symptoms. The deeper structural reform would be to gradually reduce BPDB’s role as the monopoly buyer, open the grid to qualified producers and consumers, and establish BERC as a legally protected independent regulator outside the administrative and political control of the Energy Ministry.

What Should Be Done Now?

The answer to Bangladesh’s energy crisis is not simply more LNG or more power plants. The structure itself needs reform.

1. Gradually move BPDB away from its monopoly-buyer role. Large industries should be allowed to enter into long-term power-purchase agreements directly with qualified producers.
2. Make the national grid an open and neutral platform. Producers and eligible consumers should be able to use it under the same transparent rules and charges.
3. Make BERC genuinely independent. It should not function as an administrative extension of the Energy Ministry. The ministry should make national policy, while BERC independently oversees tariffs, licensing, grid charges, market competition and consumer protection.
4. Require open competitive bidding for major new power-generation contracts.
5. Publish power-purchase agreements, pricing calculations and capacity-payment information. Public money requires public accountability.
6. End blanket government guarantees for private investors, except where there is a compelling and transparent public-interest justification.
7. Expand domestic gas exploration and diversify supply sources, terminals and strategic fuel reserves, so that the failure of one terminal cannot push the entire country into crisis.
8. Gradually move industry away from dependence on captive gas-fired generation toward reliable grid electricity, solar power and battery storage.

Government Should Set the Rules—BERC Should Be the Referee

Perhaps the most important lesson from the past is this: when government simultaneously becomes policymaker, regulator, dominant buyer, contract negotiator, guarantor and subsidy provider, conflicts of interest and opportunities for misuse inevitably increase.

Bangladesh needs a different structure—one in which producers produce, consumers buy, the national grid carries the electricity, and an independent regulator sets and enforces the rules.

The quick-rental experience demonstrated that even after spending enormous sums on power plants, a flawed structure cannot guarantee reliable electricity. Instead, the public may end up paying the bills for plants that sit idle.

The present crisis should therefore be seen not only as a hardship, but also as an opportunity to reform an outdated system.

Bangladesh’s first priority should not simply be to build more power plants. It should be to develop better planning, a competitive market, diversified energy supplies and accountable institutions.

Under such a system, the government’s responsibility would be to establish the country’s long-term energy policy and ensure national energy security. BERC, meanwhile, should remain outside the administrative and political control of the Energy Ministry as a legally protected independent regulator, overseeing tariffs, licences, grid-use charges, market competition and consumer interests impartially.

In other words, the government should be the policymaker—and BERC should be the referee.