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Electricity tariffs: CEB-PUCSL clash threatens more blackouts?

Electricity tariffs: CEB-PUCSL clash threatens more blackouts?

7 days ago | By Maheesha Mudugamuwa

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Controversy continues to build over the proposed electricity tariff hikes as the Public Utilities Commission of Sri Lanka (PUCSL) denied approving retrospective tariffs as well as interim revisions requested by the utility provider until the commission completes its review process.

The PUCSL last week stressed that it could not accelerate the process of reviewing the proposed new electricity tariffs for this year, despite the extreme urgency shown by the Ceylon Electricity Board (CEB).

When contacted by The Sunday Morning, CEB Chairman Nalinda Ilangakoon said that they had not yet been officially informed of the PUCSL’s decision and it was the Cabinet that had requested the review and study of the CEB’s proposal, as per the requirements under the law.

“We have already explained the CEB’s stance on the current electricity supply and generation capacities, laying out a plan to go for zero power cuts. Now it is up to the line Ministry and the Cabinet to take the policy decision as to whether we should go ahead with the plan for zero power cuts,” he stressed.

The CEB Chairman noted that if the PUCSL refused to approve the proposal given by the CEB, it would first inform them of the situation and the technical reasons behind the inability to meet the demand with existing resources, and if it failed to cooperate, the only solution would be to impose power cuts.

“We need the tariffs we have suggested. We have clearly communicated this to all parties,” he stressed.  

According to the CEB’s new tariff proposal, it expects a budgeted expenditure of Rs. 722 billion for this year and a revenue of Rs. 434 billion on the prevailing tariff, and a forecasted revenue increase requirement of Rs. 287 billion (66%). From the proposed tariff, the CEB is expected to achieve this 66% revenue enhancement for an estimated 14,920 GWh of sales demand for 2023 (16,520 GWh gross generation requirements).

According to the CEB, the total forecast generation demand is 8,553.7 GWh (January-June 2023) which corresponds to approximately 17,250 GWh for 2023. However, the resubmitted dispatch forecast contains a 399.6 GWh deficit (load shedding) for the six-month period. The forecast dispatch also contains use of 100 MW furnace oil-fired power plants (217.4 GWh for six months), which are yet to be contracted.

A proposal to revise the existing electricity tariffs to reflect the current costs, submitted by Power and Energy Minister Kanchana Wijesekera together with President Ranil Wickremesinghe as the Minister of Finance, was recently approved by the Cabinet with instructions given to the PUCSL to study the proposal and if any revision was required, to submit the same on or before 15 February.

In its decision, the Cabinet also instructed the CEB and the PUCSL to jointly take necessary measures to implement the electricity tariff revision proposed by the board with effect from 1 January as an interim measure, in accordance with the amendments to the Public Policy Guidelines currently in force regarding the power industry.

It is further stated in the Cabinet decision that if the regulator submits any amendments, the CEB would take steps to implement those amendments and make the necessary adjustments to future electricity bills.

PUCSL to follow due process 

Nevertheless, PUCSL Chairman Janaka Ratnayake said the commission would follow due process as stipulated by the related rules and regulations of the electricity sector.

He told The Sunday Morning that the PUCSL had clearly informed the respective authorities that it would not give permission to apply tariff revisions if any were suggested retrospectively following the reviewing process and that it would also not suggest any interim revisions as proposed by the Cabinet in its decision approving the electricity tariff hike.

“The CEB needs to manage its present cash flow. Otherwise, it won’t be able to manage even if the cash flow is doubled. Those who have been managing a cash flow of around Rs. 10 billion in revenue are now managing Rs. 35 billion in revenue. It needs to talk to its banks. We started discussions with the banks and they are very positive. Banks will have their own conditions but the CEB should negotiate with them and get what it wants. The CEB is providing over Rs. 35 billion in turnover every month to a bank, which is a huge amount,” Ratnayake explained.  

PUCSL begins review of tariff proposal

However, in responding to the instructions given by the Cabinet, the PUCSL last week said the commission was in receipt of the tariff proposal bearing No. DGM (CS&RA)/TRF/trf.2023 dated 5 January, which had been submitted to the commission by the CEB under Section 30 of the Sri Lanka Electricity Act No. 20 of 2009. 

In a letter written to Cabinet Secretary W.M.D.J. Fernando, PUCSL Chairman Ratnayake had noted that the tariff proposal would be open for stakeholder consultation as required by the Sri Lanka Electricity Act and Electricity (Procedure for Review and Adjustment of Tariff) Rules No. 3 of 2016, prescribed under Section 30(3) (electricity tariff rules) from 16 January.

The letter further stated that the electricity tariff decision of the commission was governed by Sections 3(1)(d) an 4(1)(a), read in conjunction with Section 4(2)(a) and Section 30 of the Sri Lanka Electricity Act and the electricity tariff rules and the cost-reflective tariff methodology approved by the commission under Section 30(2)(a) of the Sri Lanka Electricity Act.

The process to review tariff is governed by the Sri Lanka Electricity Act and subsidiary legislations which shall be adhered to by the commission unless it amounts to a violation of law. The commission is not in a position to violate the Sri Lanka Electricity Act. Hence the commission has decided to review the CEB tariff submission under Section 30 of the Sri Lanka Electricity Act according to the provisions of the act, the PUCSL stated in the letter.  

PUCSL against retrospective tariffs 

Responding to the Cabinet’s suggestion of applying tariffs retrospectively, the PUCSL has stated that there were no provisions in the Sri Lanka Electricity Act to provide for an interim tariff and to apply it with retrospective effect as requested by the Cabinet of Ministers. 

“The procedure for the tariff revision is governed by the Sri Lanka Electricity Act, electricity tariff rules, and the cost-reflective tariff methodology approved by the commission as aforesaid and the commission shall comply with the said statutory provisions with regard to the tariff revision,” it is stated in the letter.  

It has also noted that the electricity tariff rules prescribed under Section 30(3) of the Sri Lanka Electricity Act had clearly recognised biannual tariff revision. Therefore, biannual tariff revision can be performed upon receipt of tariff proposals from CEB biannually. 

Highlighting the suggested interim revisions, the PUCSL has said that the interim revisions are governed by the Sri Lanka Electricity Act, Rules of Tariff Review Process, and the tariff methodology issued under the act. Therefore, there are no provisions in Sri Lanka Electricity Act to provide specific tariffs through a general policy guideline. This clause in the general policy guideline is in violation of Section 30 of the Sri Lanka Electricity Act and the commission is not in a position to implement a tariff violating the Sri Lanka Electricity Act, it has said.