• Utility regulator insists only it can draft and approve tariff methodology
• Warns Energy Ministry ‘cannot act as both owner and regulator’
• Says existing tariff system already based on PUCSL formula
• Govt. mulls annual revisions to replace current quarterly system

In the wake of reports that the Energy Ministry and the Finance Ministry are in the process of introducing a new electricity tariff formula, the Public Utilities Commission of Sri Lanka (PUCSL) stated that any tariff methodology has to be prepared and approved by the PUCSL to ensure reasonable costs and fair profits within the electricity sector.

When contacted by The Daily Morning, PUCSL Director - Communication, Jayanat Herat said that electricity tariffs are determined based on the principle of reasonable cost and fair profit, and that this responsibility has been entrusted to the PUCSL under both the previous and current legal framework.

He stressed that fulfilling this responsibility requires an approved tariff formula prepared by the regulator itself. “We cannot ensure reasonable cost and profit without a tariff formula. We also cannot do that using a formula that is prepared by another party. So, our stance is that the methodology should be prepared and approved by the PUCSL.”

Herat also pointed out that the Energy Ministry functions as the owner of the utility, and therefore should not be involved in drafting the tariff methodology. “The Ministry is the utility’s owner, so the owner cannot do it.”

He further explained that the tariff methodology currently in use was developed by the PUCSL and has been the basis for all previous tariff revisions. “The previous tariff methodology is what is being used now. It was prepared by the PUCSL. It is based on the fact that all previous tariff revisions were done,” it said.

However, he acknowledged that related policy decisions — such as determining how frequently tariffs should be revised a year — fall within the purview of the Government. “The Energy Ministry can decide on policies such as how many times they are going to revise tariffs in a year. That is done by the Cabinet of Ministers. However, the tariff formula is prepared and approved by the PUCSL.”

Recent reports stated that the Energy Ministry and the Finance Ministry are currently engaged in discussions to introduce a new electricity tariff formula under which revisions would take place only once a year, instead of the present system where tariffs are reviewed four times within the year. According to the reports, the proposed mechanism is expected to take into account seasonal weather patterns when determining tariffs, with the intention of reducing frequent price fluctuations faced by consumers.