- Tariff cut by 20%
- Ministry expects to reduce tariff by over 30% within 3 years
- CEB’s initial proposal suggested 1.02% reduction
The Public Utilities Commission of Sri Lanka (PUCSL) has reviewed and revised the Ceylon Electricity Board’s (CEB) revenue difference for the period from January to June 2024 as part of its analysis leading to the reduction of electricity tariffs.
Originally, the CEB submitted a revenue difference of Rs. 33,755 million. However, after a detailed review, the PUCSL has recalculated the figure to Rs. 51,098 million, according to the commission’s ‘Electricity Tariff Decision – 2025’ report.
The PUCSL has pointed out that the CEB’s original calculation was too simple, only considering the difference between approved and actual costs.
This approach had not taken into account important factors such as higher-than-expected demand for energy and capacity.
It also overlooked the extra revenue earned by the Transmission Licensee from selling energy and capacity beyond the approved amounts.
In its revised calculation, the PUCSL followed the tariff methodology outlined in Clauses 2.5.3 and 2.5.4.
The revised revenue difference includes Rs. 16,337.80 million from the Energy Rate, Rs. 23,466.93 million from the Capacity Rate, and an additional Rs. 11,293.49 million surplus from Distribution Licensees, which will be transferred to the Transmission Licensee.
This total of Rs. 51,098 million will be factored into the tariff revision for January this year.
A senior official from the CEB, speaking anonymously to The Sunday Morning, expressed concerns that the PUCSL’s revised calculations could jeopardise the financial stability of the CEB and its main creditor, People’s Bank.
The official warned that if the CEB failed to maintain sufficient cash flow, it may need to resort to overdrafts, which would accumulate interest and eventually be passed on to consumers.
Meanwhile, on Friday (17), the PUCSL recommended a 20% reduction in electricity tariffs for the first half of 2025.
This reduction, which came into effect at midnight, affects various consumer categories.
For domestic users, rates for the first 30 units have dropped by 29%, while rates for 31-60 units have been reduced by 28%.
For higher consumption categories (61-90, 91-180, and over 180 units), reductions range from 18-19%. Fixed charges for these categories remain unchanged.
Other sectors, including places of worship, hotels, and industries, have also seen significant reductions in their tariffs.
Minister of Energy Kumara Jayakody confirmed these tariff changes and announced that the Government planned to further reduce electricity tariffs by more than 30% over the next three years.
The CEB submitted its tariff proposal for the first tariff revision of 2025 by the deadline of 6 December 2024, as per the Sri Lanka Electricity Act and the Tariff Methodology 2021. The proposal forecast a marginal revenue surplus, suggesting a 1.02% tariff reduction.
However, the CEB opted to maintain the existing tariff, citing that the forecast surplus was within the margin of error.
The PUCSL initiated a stakeholder consultation on the tariff revision starting 17 December 2024, which concluded on 10 January.
The consultation saw participation from over 300 stakeholders across all provinces. Following the consultation, the PUCSL reviewed the submissions, comments, legal provisions, and policy guidelines before making its decision.
The PUCSL revised the end-user tariffs for both CEB and Lanka Electricity Company (LECO) consumers on Friday (17), with the new rates taking effect yesterday (18).
Ministry of Energy Secretary Prof. Udayanga Hemapala, commenting on the tariff reduction announced by Minister Jayakody said that the Ministry of Energy would be transitioning to a cost-reflective electricity tariff system, aiming to eliminate the CEB’s financial losses.
“The tariffs are now designed to be cost-reflective, with the ultimate goal of achieving zero losses,” said Prof. Hemapala. “Although the calculation methods of the PUCSL and the CEB may vary, the overarching objective remains the same: financial sustainability without compromising on consumer accessibility.”
Prof. Hemapala claimed that the ministry was considering moving the review and revision of tariffs from its current six-month cycle to a three-month cycle in compliance with International Monetary Fund (IMF) recommendations.
“The Cabinet has approved the transition to a three-month cycle and the regulations have been successfully amended. However, the PUCSL still continues to follow the six-month cycle. The ultimate goal is to make tariffs sustainable without additional subsidies.”