The restructuring of the Ceylon Electricity Board (CEB) is scheduled to commence by July this year, following the completion of legal and policy amendments that are currently underway, according to CEB Chairman Nalinda Ilangakoon.
He told The Sunday Morning that the CEB was awaiting approvals from higher authorities on several key changes to commence the restructuring process, including approvals from the Cabinet and the necessary amendments to the CEB Act.
“The bill has to be presented to Parliament and passed. This process will be completed within the next four months and once it is done, the operational and physical restructuring of the board will commence,” he noted.
The CEB owns and operates around 70% of the country’s electricity generation capacity while the remainder is sourced from privately-owned energy producers (a few large oil-fired thermal plants and over 3,000 small renewable energy-based producers). The CEB currently serves around 6.8 million retail customers while LECO services around 608,000 customers.
The process of reforming the CEB commenced last year with the appointment of a committee after considering the Cabinet Memorandums dated 29 July 2022, 15 August 2022, and 2 September 2022, which were submitted with the intention of making institutional reforms to the power sector.
The committee was appointed to study and review the ‘scope’ and ‘institutional framework’ laid down in Chapter VI of the Electricity Reform Act No.28 of 2002, in the context of present day social, economic, and governance needs of the country and to recommend a more dynamic, vibrant, effective, and efficient institutional framework for the CEB, including the Lanka Electricity Company (LECO).
Accordingly, the committee submitted its final report on 20 August 2022.
Reform sequence
In what are among the major suggestions stated in its report, the committee has proposed to form independent companies (successor entities) under the Companies Act No.7 of 2007 to take over the business of the CEB, to discontinue the single buyer provision in the current structure (which restricts the sale of energy by the generations licensees only to the transmission licensee), to provide for future introduction of wholesale competition and open access, and to enact new legislation to provide for the proposed restructuring of the electricity supply industry, which includes two acts – the Electricity Sector Reforms Act (ESRA) and the new consolidated Electricity Act.
As per the proposed sequence for the reform process suggested by the committee, it is recommended to pursue an overall ‘reforms package’ and not engage in stand-alone ad hoc changes to address the immediate current crisis.
As highlighted in the report, the committee has proposed that the Government consider a four-pronged approach, but within a stated timeline of not more than three months.
Accordingly, it has first suggested enacting the ESRA to reorganise the electricity industry by setting up successor entities to become operational. At the same time, the Sri Lanka Electricity Act No.20 of 2009 should be suitably amended to synchronise with the provisions contained in the ESRA.
After the proposed reforms are achieved under ESRA, a new Electricity Act should be enacted as a single legislation that will deal with all aspects of the electricity sector.
When enacting the new Electricity Act, a dedicated independent regulator should be established for the electricity sector, possibly by reassigning the Public Utilities Commission of Sri Lanka’s (PUCSL) mandate. At that stage, to ensure legislative integrity, the provisions relating to the functioning of this regulator can be incorporated into the new Electricity Act as a separate section instead of having multiple acts.
In the interim, immediate measures should be taken to deal with the cash flow crisis of the sector and treat the accumulated debt in a way that such debt will not be a hindrance to the envisaged reforms. The committee has recommended reducing the exposure to fluctuating coal and fuel prices, which would lead to some degree of tariff reduction on behalf of the public.
Nevertheless, the CEB has a statutory monopoly in transmission, is the single buyer, owns a high share of generation capacity, and is operated by the CEB’s generation licensee. In the CEB, there are six Strategic Business Units (SBUs), each headed by an additional general manager. They are under the administrative control of CEB’s general manager and the board.
The committee, however, in its report, has said that the lack of legal and financial autonomy and separation impacts the accountability and transparency of the SBUs.
Bill to Parliament
Meanwhile, Power and Energy Minister Kanchana Wijesekera told Parliament during the last session that the Government would bring a bill to Parliament within a month to restructure the CEB.
“We expect the Opposition to support this bill, which will stop malpractices carried out within the CEB by certain groups. The main reason for the CEB to suffer losses are the actions of certain groups. These persons have pushed the CEB administration against the wall and these actions actually lead to losses in the CEB,” he stressed, highlighting that the CEB had incurred a total loss of Rs. 167 billion in 2022, but would be able to avoid losses with the power tariff hike.
“One of the main issues people had with the CEB was its inability to provide an uninterrupted power supply. Many people have forgotten that last year, by this time, we were suffering a 16-hour long power cut. Also, during the past several months, we had nearly one to two hours of power cuts everyday. Many people suffered as a result. Many industries suffered. The country suffered a huge economic loss,” Wijesekera said.
He further said: “Many businessmen had to spend a huge sum of money to operate diesel generators. The poor too have suffered. They had to spend on other sources of energy such as candles. Nowadays, a candle costs about Rs. 70 and can last only around one hour and 30 minutes. For a month, a poor family had to spend nearly Rs. 2,100, but now with the new tariff revision, they only have to pay Rs. 1,300, because electricity users whose consumption is between 0-30 units per month only have to pay Rs. 1,300. This is with an uninterrupted power supply.”
Meeting the Minister
Meanwhile, another discussion regarding the restructuring of the CEB was held on Sunday (12) between unions representing the CEB and Minister Wijesekera. It was reported that the Minister had made a lengthy explanation to the trade union representatives regarding the restructuring process of the CEB during the discussion.
Speaking to the media following the discussion, CEB Engineers’ Union (CEBEU) Vice President Dhanushka Parakramasinghe said they had been informed about the restructuring process and the stance of the Government and that the union had requested an opportunity to participate in the restructuring process. “The Minister promised us that they will get us involved in the restructuring process in the future. What we ask is to do the right thing for the CEB and we are not against any restructuring,” he said.
Lanka Viduli Sevaka Sangamaya (LVSS) General Secretary Ranjan Jayalal also said: “The Minister promised to discuss with us on a daily, weekly, or monthly basis regarding the restructuring process, even though they had failed to do so up to date. We agreed. However, we have no confidence at all. The Minister says they are not selling the CEB, but we have no faith in this. When he says they are not selling the CEB, we don’t want to fight with the Minister, but we are watching and waiting to see what is happening.”