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Electricity tariff hike: CEB awaits Cabinet approval

05 Mar 2022

By Maheesha Mudugamuwa The State-run power utility, the Ceylon Electricity Board (CEB) is awaiting the green light from the Cabinet to go ahead with an electricity tariff hike in order to minimise the losses incurred by the Board due to the steadily rising global oil price, The Sunday Morning learns. As confirmed by CEB Chairman M.M.C. Ferdinando, the CEB’s General Manager has already submitted the proposal to Power Ministry Secretary Wasantha Perera and the Board is now waiting for the Ministry to submit the proposal to Cabinet. The CPC last December increased prices of petrol by Rs. 20 to Rs. 177 a litre and auto diesel by Rs. 10 to Rs. 121 while petrol 95 octane was raised up by Rs. 23 to Rs. 203 a litre. Super diesel was raised by Rs. 15 a litre to Rs. 159. Kerosene has been raised by Rs. 10 to Rs. 87 a litre. While CPC maintains fuel prices at the rates announced last December, the Lanka Indian Oil Company (LIOC) has carried out two price revisions. According to the price revision early last month, the price of a litre of 92 octane petrol rose by Rs. 7 from Rs. 177 to Rs. 184 and the price of auto diesel by Rs. 3, from Rs. 121 to Rs. 124. The last price revision carried out at the end of last month saw the price of petrol increase by Rs. 20 a litre to a record Rs. 204 and diesel by Rs. 15 to Rs. 139. It is in such a backdrop that the CEB has called for a tariff hike as the increase in fuel prices has directly affected electricity generating capacity in the diesel-powered power plants, which are now being used extensively due to declining hydropower generation caused by the shortage of water in hydro-power reservoirs. The proposal to increase electricity tariffs was criticised by the JVP- affiliated trade union, the Lanka Viduli Sevaka Sangamaya (LVSS), which claimed that electricity consumers should not suffer the losses incurred as a result of management failures and corruption.  However, the CEB engineers stressed that a tariff hike was inevitable as the prices had not been revised since 2014 despite the increase in fuel prices as well as all other costs related to electricity production, including the operational and transformation costs, which had increased drastically. Speaking to The Sunday Morning, a senior electrical engineer attached to the CEB who wished to remain anonymous said the CEB had no option but to increase the tariff in order to avoid incurring heavy losses. According to him, one of the main reasons for the current capacity shortages as well as high costs attached to electricity generation is the delay in commissioning power plants in the country. Highlighting the cancelling of the commissioning of coal power plants including Sampur and the fourth extension to the Norochcholai Power Plant, the engineer stressed that the proposals made by them to commission low-cost coal power plants had been abandoned by successive governments and as a result the entire country was now suffering. As per the CEB’s generation statistics, a total of 45.71% of the total energy generation of the country is produced by the Norochcholai Power Plant while the rest is produced by hydro, wind, and thermal oil. Hydropower generation, which saw a drastic reduction last month, is now back on track, producing 34.75% of total energy generation. It is learnt that the power crisis will prevail until a major power plant is commissioned in the country, which will most probably be the proposed 300 MW of Liquefied Natural Gas (LNG) power plants for which Cabinet approval has already been granted. However, since the Power Purchasing Agreements (PPA) have not been signed between Lakdhanavi and CEB, the power plant is yet to be commissioned.   Furthermore, none of the major solar power plants that were predicted to be added to the national grid by this year have been commissioned yet and therefore energy experts opine that renewable energy hopes are also fading. LVSS President Ranjan Jayalal stressed that the CEB was incurring losses at present due to its own failures and therefore the burden should not be passed onto the already-burdened consumers who were now facing a terrible economic crisis. “If the tariffs are increased, yet again the poor will be affected. The consumers have never failed to pay the electricity bills. Therefore it is clear that the issue is not because of the consumers but because of the bad policy decisions taken by the management as well as successive governments,” Jayalal stressed. He went on to say that if the CEB were to take the necessary actions to expand the grid to absorb more solar power at least to run the system during day time, the Board would not have incurred losses. “We are totally dependent on coal and diesel at present. Only a small percentage is added to the system by hydro and renewable. This is the reason why we are experiencing power cuts and why the CEB is incurring losses,” he added. However, the proposed tariff hike would have to be carried out in line with the Public Utilities Commission of Sri Lanka (PUCSL) approved tariff methodology. The PUCSL meanwhile has stated it was not aware of the request for a tariff hike and that it was yet to receive the proposal submitted by the CEB on a tariff hike. When contacted by The Sunday Morning, PUCSL Chairman Ratnayake said the CEB could not increase tariffs and it could at least consider doing so only after restoration of 24-hour power supply. He stressed that no such request to increase the tariffs had been submitted to the commission and the tariffs could only be increased by the PUCSL. Ratnayake went on to say that the CEB could not even talk about a tariff hike at present when the entire public was suffering due to the power cuts spanning many hours.  Responding to a query, the CEB Chairman said that he was not aware whether his General Manager had submitted the proposal to the PUCSL.  According to Section 30 of the Sri Lanka Electricity Act No 20 of 2009, the tariff is set by the relevant licensee in accordance with a cost-reflective methodology approved by the PUCSL and permits the relevant licensee to recover all reasonable costs incurred in carrying out activities authorised by its licence on an efficient basis and be approved by the commission in accordance with the policy guideline approved by the Cabinet of Ministers. The PUCSL established the tariff methodology and a roadmap for tariff reforms and rebalancing in 2011, with four tariff filings conducted and tariff determinations announced (January 2011, January 2012, January 2013, and January 2016). Again in 2012, PUCSL implemented a fuel adjustment charge for most customer categories, outside the tariff methodology. Other regulatory interventions for customer service, supply quality, grid and distribution codes, and disclosure of plans are in progress, but the degree and speed of implementation is slow. DSM regulations were issued in 2016. As per the latest Fiscal Management Report of the Finance Ministry, the CEB revenue from the sale of electricity has increased by 4% to Rs. 143 billion in the first seven months of 2021, compared to Rs. 137 billion in the same period of 2020, owing to resumption of economic activities following relaxation of mobility restrictions. As highlighted in the report, CEB’s operating loss has considerably declined by 96% year-on-year to around Rs. 1 billion for the first seven months of 2021 compared to the operating loss of Rs. 23 billion for the same period of 2020. The report had also highlighted that the CEB’s borrowings from State banks for working capital requirements had declined by 41% to Rs. 24.5 billion at the end of July 2021 from Rs. 41.5 billion recorded at the end of 2020. However, the total outstanding obligations to the State banks, including project loans, as at the end of July 2021 stood at Rs. 365.5 billion compared to Rs. 371.9 billion at the end of 2020.  Moreover, trade payables to the Ceylon Petroleum Corporation (CPC) and Independent Power Producers (IPPs) had decreased to Rs. 128 billion at the end of July 2021 from Rs. 136 billion recorded as at end 2020.  


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