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Power crisis: Planned power outages unlikely: CEB Chair

a year ago

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By Asiri Fernando Planned power cuts in the first half of this year are unlikely, subject to the uninterrupted supply of furnace oil needed to fire some thermal power plants, the Ceylon Electricity Board (CEB) told The Sunday Morning. The CEB expressed this view in the backdrop of a recent discussion between the Energy Ministry and the Power Ministry on ensuring an adequate supply of fuel needed to fire thermal power plants if the need arose. Concerns about the possible drop in expected rainfall early this year, the Energy Ministry’s reluctance to supply fuel directly to the CEB due to debts owed, and the temporary shutdown of the only oil refinery are all likely to challenge the island nation’s fragile power generation and supply capability. The Energy Ministry issued a statement last week announcing the temporary shutdown of the ageing Sapugaskanda Oil Refinery beginning tomorrow (3), citing the ongoing foreign currency crisis as a reason. According to Energy Minister Udaya Gammanpila, the Ceylon Petroleum Corporation (CPC) plans to recommence refinery operations by the end of this month. In the event of a significant and rapid drop in rainfall, as expected in the first quarter of this year, the CEB will not be able to rely on nearly 40-45% of electricity supply which is generated by hydropower, forcing the State to bank on the troubled 900 megawatt (MW) Norochcholai coal-fired power station and emergency power purchasing from private sector generation companies. While there have been many allegations over the years regarding corruption and collusion between state and private entities in relation to lucrative emergency power purchases in the past, today the burning question on backup power from such sources is how the Government will provide the required furnace oil to the private generators with the national refinery shut down and forex constraints preventing fuel imports. ‘No disruptions’ CEB Chairman M.M.C. Ferdinando told The Sunday Morning that in a meeting held last Thursday (30 December) between the Power Ministry and Energy Ministry, the CEB had been given a guarantee that the required furnace oil would be provided from existing stocks or through imports. “We had a meeting chaired by Power Minister Gamini Lokuge with the Energy Ministry and CPC. Unfortunately, the Energy Minister couldn’t attend the meeting. They guaranteed the continued supply of naphtha or fuel oil, either from what they have or from procurement from outside (overseas). Then we (CEB) will have no problem (in power generation),” Ferdinando told The Sunday Morning. Last month, Power Minister Gamini Lokuge told The Sunday Morning that the Government was trying to negotiate short-term emergency power purchases to plug generation gaps in the event hydropower were to drop significantly. “If necessary, we will go for emergency power purchases. We are currently negotiating with the suppliers. We want to enter into short-term contracts, maybe of three to four-month duration. However, the suppliers are seeking contracts for two to three years. A three-year contract will not benefit the country. It is a loss. What we want to do is to take the minimum of emergency power purchasing as the need arises (thermal power) and expedite bringing in renewable energy sources. I am confident that we can negotiate short-term contracts which will be beneficial to the country,” Lokuge said last month. As for the status of coal shipments needed to keep the Norochcholai Plant operational, Lokuge said that shipments were arriving each week and would continue to arrive in Sri Lanka until the unloading window ends in April. The CEB needs $ 331.2 million to pay for the coal that is on order till April. The consignment will be sufficient to keep the Norochcholai Plant running, barring any breakdowns, till December this year. Meanwhile, Minister Lokuge acknowledged that finding the necessary dollars for the payments was challenging. “The foreign currency situation makes importation of coal challenging. Sometimes there are slight delays due to this, but there is no disruption of supply. Up to now, the Government has provided the necessary dollars needed for the CEB and the CPC. The dollars are provided with difficulty, but they are provided,” Lokuge said. Negotiating fuel price hike Commenting on the continued supply of coal, Ferdinando said that the Central Bank had given the CEB special authorisation to open US dollar Letters of Credit (LCs) to import coal. “We have that confidence, the Central Bank and the Bank of Ceylon have been very helpful in the process,” he said. According to Ferdinando, the Power Ministry had also requested the Energy Ministry not to implement a proposed price hike for furnace oil and diesel used for power generation. “If the prices are pushed up, we as the CEB will have no choice but to contemplate an electricity cost revision. Under the present circumstances where the public is under strain, we do not want to go for a revision. Therefore, we have requested the Energy Minister not to go ahead with a price hike for fuels used in power generation,” Ferdinando said. The CEB Chair stated that the utility provider had not changed the electricity tariff from 2013, despite changes in generation cost. Ferdinando said that from this month, coal price fluctuations would push coal-fired power generation to approximately Rs. 25 per unit, due to the amount of fuel the CEB would consume and the market price of coal. However, he pointed out that the cost per unit included power wasted. “A question we need to answer is how we are going to reduce the generation cost to a sizeable level with an efficient cost and not pass on an inefficient cost? People should not be subjected to paying the inefficient cost,” Ferdinando stressed, adding that the CEB was now evaluating how they could recover “a reasonable cost” from the consumer. He emphasised that Sri Lanka needed to look at updating the electricity tariff system, to a modern and adjustable format. Responding to a query by The Sunday Morning on a possible fuel shortage due to the shutdown of the refinery, Energy Ministry Secretary K.D.R. Olga stated: “We have already taken action to fill the gap created by the shutting down of the refinery through a process of importing finished petroleum products. There will not be a risk of a fuel shortage due to the refinery being shut down. “We have also awarded a contract to a registered supplier to supply crude oil for a six-month period, which will commence by the last week of January,” Olga explained, opining that the refinery was likely to be closed only for a period of around two to three weeks. According to the Energy Ministry, crude oil supplies to the national refinery will commence between the 21 and 23 January. Meanwhile, responding to a query, CEB General Manager R. Ranathunga said that the furnace oil stock currently held by the CPC would be adequate to fire thermal power plants till end of January if the need arose, adding that the CPC would import fuel needed for use after January if necessary.

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