• CEB alleges PUCSL misapplication of claw-back to OpEx, not just CapEx
• Fuel prices soar; diesel at Rs. 274/l, furnace oil at Rs. 167/l, exchange rate Rs. 303.33/USD

The Ceylon Electricity Board (CEB) has submitted a tariff revision proposal to the Public Utilities Commission of Sri Lanka (PUCSL), seeking an 18.3% increase in electricity tariffs for the last seven months of this year.

This significant hike is aimed at addressing a forecasted revenue shortfall of Rs. 42.2 billion, equivalent to 18.3% of the total estimated revenue for this period.

As stated by the CEB, the shortfall is driven by rising operational costs, legacy debt, and regulatory challenges, threatening the financial and operational stability of the national power sector.

In a letter written to the PUCSL, CEB Acting General Manager Eng. Wasantha Edussuriya has stated that for the period from June to December, total estimated expenditures for the CEB and Lanka Electricity Company (LECO) are projected at Rs. 276.5 billion.

These costs include energy expenses amounting to Rs. 156.6 billion, capacity costs of Rs. 45 billion, transmission revenue requirements of approximately Rs. 13 billion, finance costs estimated at Rs. 14.1 billion, and distribution revenue needs of about Rs. 47.9 billion. In comparison, the expected revenue from the existing tariff structure stands at Rs. 230.7 billion. 

An additional positive adjustment of Rs. 11.9 billion has been added to the CEB’s revenue in line with the PUCSL’s tariff methodology, compensating for deviations between forecasted and actual Bulk Supply Tariffs (BST) from the second half of 2024.

As stated, a negative adjustment of Rs. 8.3 billion has also been included, reflecting financial losses incurred in the first quarter of 2025, largely due to a 20% tariff reduction imposed by the PUCSL without the CEB’s formal request.

Also, the Acting General Manager has stated that the proposed tariff revision reflects updated fuel prices, exchange rates, and Value-Added Tax (VAT) adjustments based on the latest information from the Ceylon Petroleum Corporation (CPC) and invoices from Independent Power Producers (IPPs).

Approved fuel prices used in the calculation include Rs. 274 per litre of auto diesel, Rs. 167 per litre of furnace oil, Rs. 131 per litre of naphtha, and Rs. 45.41 per kg of coal, with an exchange rate of Rs. 303.33 per US Dollar. 

In the CEB’s thermal plants, energy prices cover startup costs, variable Operations and Maintenance (O&M), and fuel consumption, while hydro and wind plants are considered to have zero energy costs. 

Capacity costs for CEB-owned plants, including fixed O&M and Generation Headquarters services, are allocated proportionally based on installed capacity, while IPPs and Small Power Producers (SPPs) recover capacity costs under their respective Power Purchase Agreements (PPAs).

The tariff proposal has also addressed ongoing issues in transmission revenue reporting, where unresolved discrepancies led to the approval of transmission revenue based on outdated expenditure data in 2024. To correct this, the transmission allowed revenue for the last seven months of 2025 has been revised to Rs. 12,989 million.

Furthermore, the CEB has raised concerns over the claw-back mechanism applied by the PUCSL, which, contrary to the tariff methodology limiting claw-back to capital expenditure (CapEx), was extended to operational expenditure (OpEx) in the January 2025 tariff revision. 

As a result, a portion of curtailed OpEx for distribution licensees DL1 and DL3 has been reinstated in the 2025 allowed revenue. Revised distribution variable revenue caps for the second half of 2025 have been set at Rs. 5,571 million (DL1), Rs. 10,962 million (DL2), Rs. 5,102 million (DL3), and Rs. 5,793 million (DL4), with retail service caps ranging between Rs. 2,449 and Rs. 4,608 per customer.

It has also been stated in the letter that from 2014 to 2022, the CEB had maintained constant electricity tariffs despite rising operational costs, leading to significant borrowing and delayed payments to suppliers, which have accumulated into substantial legacy debt.

Under Sri Lanka’s Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF), the Cabinet approved debt management measures on 9 February. These include extending loan repayment periods, debt swaps, restructuring debentures, issuing new debentures, and exploring syndicated financing arrangements to stabilise the financial health of the electricity sector. 

Additionally, the CEB finances major CapEx through structured monthly bank loans, a strategy adopted in the 2024 tariff decision that spreads repayment obligations over time to reduce tariff shocks.

The finance cost for the June-December 2025 period has been updated based on the latest Average Weighted Prime Lending Rate (AWPLR) of 8.45%, with estimated finance costs of Rs. 14,062.1 million. The tariff proposal also incorporates the bulk sales transfer price from the CEB to LECO, set by PUCSL at Rs. 23.84 per kWh for June 2025 and Rs. 23.87 per kWh for the second half of the year.

Meanwhile, the PUCSL has acknowledged receipt of the proposal and announced that its consultation paper will be published on Tuesday (20).