The Ceylon Electricity Board (CEB) is facing an increasingly dire financial crisis, with mounting losses and a delayed tariff revision proposal that has set the stage for an intense clash with the Public Utilities Commission of Sri Lanka (PUCSL).
Sources within the CEB and the PUCSL suggest that the failure to submit timely tariff proposals is exacerbating an already precarious situation, as the utility’s cash flow continues to decline.
CEB Chairman Dr. Tilak Siyambalapitiya confirmed to The Sunday Morning that the board was yet to submit its tariff revision proposal to the PUCSL.
As the CEB faces mounting financial difficulties, engineers within the organisation have openly criticised the PUCSL over what they describe as an “irresponsible” and “technically deficient” approach to tariff adjustments.
They argue that the PUCSL’s stance has contributed to the utility’s cash flow falling well below the industry’s average benchmark, pushing the organisation into an increasingly precarious financial position.
Therefore, as reliably learnt, before the scheduled tariff revision date of 1 July, the CEB will be forced to implement an immediate 10% price hike in order to mitigate its ongoing financial strain. It is further learnt that this decision, expected to be enacted sooner rather than later, comes as the utility grapples with a widening financial deficit.
The CEB’s financial woes, primarily stemming from the mismatch between the cost of electricity generation and the regulated retail price, have reached a critical point.
In February 2025, the utility reported a shocking net loss of Rs. 11.37 billion. Internal documents show that the average cost of electricity generation during this period was Rs. 34.06 per unit, while the retail selling price was only Rs. 22.55 per unit. This massive loss per unit was compounded by system losses of 158 GWh – approximately 12% of total generation – further undermining the utility’s financial stability.
Despite these growing losses, The Sunday Morning learns that the CEB is yet to submit its tariff revision proposal to the PUCSL, even though the deadline for filing the proposal falls on 15 May.
The CEB has repeatedly stated that the tariff hike will be necessary to maintain financial viability, with insiders suggesting that the increase could be as high as 40%. Yet the PUCSL’s resistance to immediate and drastic price hikes, along with its insistence on adhering to a tariff reduction policy, has led to a stand-off between the two organisations.
Growing rift between CEB and PUCSL
A senior official from the CEB, speaking on condition of anonymity, revealed to The Sunday Morning that internal frustrations within the organisation were reaching a boiling point.
Sources close to the situation have indicated that the PUCSL’s decision to reduce tariffs by 20% for the first half of 2025 in January was a significant blow to the utility’s already fragile finances. This decision to cut tariffs was made despite the CEB’s warnings that such a reduction would not allow it to cover its operational costs.
A leaked internal memo from the CEB stated: “The PUCSL’s tariff cuts are based on unrealistic projections and fail to account for the rising costs of thermal generation, fuel prices, and the financial strain the CEB is under. The decision will force the CEB into deeper financial distress.”
“The PUCSL is no longer serving as an independent regulator, but rather as a tool for fulfilling the Government’s political objectives. It is clear that the PUCSL’s recent actions, particularly in approving unsustainable tariff cuts, have been made under pressure from political forces that are more concerned with public optics than the long-term stability of the electricity sector.
“By disregarding the technical realities and operational needs of the CEB, the PUCSL has put the organisation at significant financial risk, and we, as engineers, are left to pick up the pieces. The PUCSL’s failure to adopt a cost-reflective pricing model and its disregard for the CEB’s financial health is not only irresponsible but also a direct threat to the stability of the national grid,” a senior CEB Engineers’ Union (CEBEU) member who wished to remain anonymous told The Sunday Morning.
The root of the conflict appears to lie in differing perspectives on how the CEB’s financial health should be managed. While the board insists that the tariff must reflect the true cost of electricity generation, including the costs of coal and thermal power, the PUCSL has maintained that the need to reduce the financial burden on the public outweighs the utility’s financial considerations.
From a technical standpoint, the generation mix used by the CEB continues to be heavily reliant on coal and thermal power, both of which are costly.
In February, coal accounted for 33% of the total electricity generation, but its per unit cost was Rs. 19.02, a far cry from the Rs. 2.32 per unit for hydropower. Even more expensive were the Independent Power Producers (IPPs) that contributed 10% of the power generation, with a per unit cost of Rs. 70.45.
The burden is not just limited to generation costs; transmission and distribution costs further strain the CEB’s finances, with the total selling point cost amounting to Rs. 39,579 million, while revenue from electricity sales in February stood at just Rs. 26,211 million.
“The PUCSL’s new commissioners lack the technical expertise to understand the full implications of tariff reductions on the utility’s operations. They have failed to consider the rising fuel costs, generation inefficiencies, and increasing system losses.
“The recent decisions by the PUCSL, including the 20% tariff reduction, were based on flawed data, and have now led to the financial haemorrhaging of the CEB. These are not just theoretical losses; they are real and they threaten the viability of the national electricity grid,” the CEBEU member alleged.
PUCSL’s defence
In contrast, the PUCSL has defended its actions, arguing that the tariff reductions were a necessary step to alleviate the financial burden on consumers during a period of severe economic hardship.
A statement from the PUCSL emphasised that the tariff cuts followed extensive consultations and were designed to ensure that electricity remained affordable for all segments of society, particularly those struggling amid Sri Lanka’s broader economic crisis.
PUCSL Director of Corporate Communications Jayanath Herath commented: “The PUCSL has a dedicated team of experts responsible for analysing data submitted by the CEB and providing recommendations to the commission. The final decisions are made by the commissioners after carefully considering these expert recommendations.
“Every past electricity tariff revision has been approved only after a comprehensive review of all relevant data and through consultations with all stakeholders, including the general public.”
He further stressed that the appointment of commission members had been carried out in accordance with the provisions of the PUCSL Act. While the commissioners represent diverse fields of expertise, a separate technical team is specifically assigned to assess statistical and technical details related to regulatory matters.
According to sources within the CEB, the regulators have been accused of acting in haste and disregarding the detailed financial data presented by the CEB. In addition, the PUCSL’s insistence on reducing tariffs without fully understanding long-term consequences has led to accusations that the regulator is more concerned with political appeasement than the sustainable management of the electricity sector.
The PUCSL’s position also faces external scrutiny from international bodies such as the International Monetary Fund (IMF), which has repeatedly warned that the electricity sector must adopt a cost-reflective pricing model to remain financially stable.
IMF representatives have voiced concerns that Sri Lanka’s electricity tariffs, especially after the recent reduction, still fail to reflect the true cost of generation, transmission, and distribution. IMF officials have pointed to the risk that continued losses in the CEB could lead to further debt accumulation, ultimately becoming a liability for the Government.
A senior IMF official recently commented: “The CEB’s financial sustainability hinges on implementing tariffs that fully cover the costs of generation. While we understand the need to reduce the financial burden on consumers, a balance must be struck to ensure that the utility does not slip back into the same debt spiral it was in just a few years ago.”
Government’s stance
In such a backdrop, Deputy Minister of Economic Development Prof. Anil Jayantha Fernando addressed these ongoing issues during a recent media briefing last week.
He acknowledged the difficulties the CEB faced but reiterated the Government’s commitment to ensuring that the country’s electricity pricing remained cost-reflective while also protecting consumers from excessive increases.
Fernando also noted that the CEB’s tariff proposal, which is expected to be submitted by 15 May, would undergo rigorous evaluation before it was approved.
“The delay in submitting the tariff proposal is not due to negligence but the complex and volatile factors at play in the electricity sector,” Fernando explained. “We are working closely with the CEB and PUCSL to ensure that all factors, including fuel costs, demand projections, and financial stability, are accounted for. The situation is not as simple as adjusting tariffs on a whim. It’s a balancing act.”
Fernando also took the opportunity to highlight the Government’s broader goal of achieving energy sector reforms, including improving the transparency and effectiveness of the PUCSL. “The regulatory framework must evolve to ensure that tariff decisions are based on accurate data and long-term sustainability, not just political expediency,” he stated.
Nevertheless, all attempts made to contact Energy Ministry Secretary Prof. Udayanga Hemapala were futile.