• Final PUCSL ruling on tariffs due 9–10 May
• Govt. subsidy cuts deficit to Rs. 23 b?
• No load shedding expected despite coal issues and supply concerns
• NSO plans long-term shift to renewables and battery storage within months
• Coal to remain at ~40% of generation as transition to green energy unfolds
• Tariff structure targets high users, low-to-medium consumers largely protected
• Public consultations open ahead of final tariff revision decision

In the wake of multiple energy crises and controversies, the recently unbundled State-owned Ceylon Electricity Board (CEB), in its new iteration, says it is planning to move towards a transformation where generation, storage, and distribution of electricity within the island will be restructured.

This, while the paying customers of the utility supplier remain uncertain if another tariff hike will be thrust upon them – the cost of negligence and poor policy – as the State scrambles to undertake damage control over its shortcomings over substandard coal supplies and alleged procurement of fuel used for thermal power generation at a higher cost from the global markets.

National Systems Operator (NSO) Chairman Dr. Pradeep Perera outlined the primary objectives and timeline for this newly initiated policy direction for the planned transformation. “We are in the process of preparing a long-term power development plan, which will be finalised in the next three to four months. It will feature a substantial increase in the allocation for renewable energy and battery storage,” Dr. Perera told The Sunday Morning.

Managing hydro resources and thermal dispatch

The daily operation of the national power grid requires a delicate balancing act, particularly during periods of environmental strain. 

Sri Lanka has historically relied heavily on its network of hydro reservoirs, but a persistent drought has forced authorities to reconsider their dispatch strategies. To counter the reduced hydro capacity, the NSO has implemented a rigorous prioritisation protocol that favours the most cost-effective and environmentally friendly sources available on any given day.

“We utilise renewable solar and wind power to the maximum possible extent during the daytime. During the holiday season, there was a drop in the load, and we could not accommodate all the solar power that was being generated during the Sinhala and Tamil New Year period,” Dr. Perera stated.

The management of national water resources is arguably the most critical component of the current optimisation strategy. Hydroelectric power is essentially the most affordable energy source available, but it is heavily dependent on unpredictable rainfall. Consequently, the authorities must act with extreme caution to prevent the complete depletion of the reservoirs while still meeting the nighttime electricity demand. The mathematics of reservoir management dictates the entire national dispatch strategy, establishing clear thresholds to monitor the health of the system. 

“We are basically using hydro power during the nighttime peak. We need to preserve water to ensure we do not run out of water in our reservoirs. We are using around six gigawatt hours of water on a net basis daily. The idea is to maintain the hydro reservoirs’ water level around the current capacity, which is around 500 gigawatt hours. If it drops below 300 gigawatt hours, we will face a problem. We must be conservative because we do not know when the rains will arrive,” Dr. Perera noted. 

When renewable generation and hydro resources are insufficient to meet the total electricity demand, the grid must inevitably turn to thermal power plants. He explained that these facilities ran on imported fossil fuels, making them inherently more expensive and susceptible to global market fluctuations. To mitigate the financial impact, the dispatch order is strictly regulated based on the cost of the specific fuel type required.

“First, we try to use the heavy fuel oil power plants because it is cheaper than diesel. When that is not sufficient, we go for diesel plants to fill the gap,” Dr. Perera said.

Public scrutiny has recently intensified regarding the procurement of fuel, particularly following complications with substandard shipments. However, the regulatory framework clearly separates the dispatch of power from the actual purchasing of the fuel.

“Fuel procurement does not come under the NSO. It is being done by Lanka Coal Company and Electricity Generation Lanka (EGL),” Dr. Perera clarified. The Sunday Morning attempted to reach the Chairman of Lanka Coal Company and EGL, but failed to establish contact.

Addressing short-term supply chain disruptions

The recent controversies surrounding the quality of coal delivered to the Norochcholai power plant have raised public concerns regarding potential load shedding. The disruption in the standard supply chain occasionally requires authorities to implement rapid contingency plans. These emergency measures are necessary to prevent catastrophic grid failures. However, the authorities view these hurdles as temporary roadblocks rather than permanent systemic failures.

“The coal issue is a short-term problem that will not persist beyond this season. The current supplier’s contract is coming to an end and we expect the next supplier to provide good quality coal from September onwards,” Dr. Perera opined.

Plans for a green energy transition

While technical operators focus on the immediate balancing of the grid, the Ministry of Energy is responsible for the overarching policy directives that will shape the sector’s future.

Ministry of Energy Secretary G.M.R.D. Aponsu acknowledged that the sector had historically suffered from a lack of comprehensive foresight. The Government is now actively working to rectify these systemic vulnerabilities by instituting robust policy frameworks that account for a wider range of variables and industrial needs.

“Not only the demand side, but for the entire energy sector, there were no pre-prepared roadmaps. The Cabinet has already appointed a committee to initiate discussions regarding the energy needs of emerging industries,” Aponsu stated.

One of the most pressing challenges facing modern power grids worldwide is the rapid expansion of digital infrastructure. As the global economy becomes increasingly reliant on advanced computing technologies, the corresponding demand for electricity is projected to surge exponentially. Sri Lanka must proactively prepare its grid to accommodate these energy-intensive developments to remain competitive in the region.

“When we discuss Artificial Intelligence, the data centre is a new concept Sri Lanka was previously unfamiliar with. A data centre requires significant electrical inputs. Likewise, there are many other emerging industries that require additional energy in terms of electricity, fuel, and green energy,” Aponsu highlighted.

To facilitate this massive transition, multiple State agencies are collaborating to draft comprehensive guidelines. The shift towards renewable energy requires not only technological investment but also significant regulatory adjustments regarding how State resources are utilised and allocated for future projects.

“The ministry has already prepared the energy strategy and energy policies are currently under discussion. The Sri Lanka Sustainable Energy Authority (SLSEA) has already prepared guidelines on how the demand for electricity will be supplied, how we will deviate from traditional methods to renewable energy, and how we will implement land policy and land allocation,” Aponsu claimed.

Grid vulnerability 

Despite the ambitious plans for a green energy transition, the reality of the current infrastructure necessitates a continued reliance on coal power. The Norochcholai power plant remains a crucial asset for providing the stable baseload required to keep the national grid operational without interruptions.

“Approximately 40% of the power supply is generated using coal. To maintain that level, we know the coal requirement and the Government is continuing the procurement process for supplying coal for the next year,” Aponsu emphasised.

Addressing the public outcry and the subsequent administrative responses regarding recent coal shipments, he outlined the ongoing investigative procedures and emergency procurement steps.

“We have already initiated the bidding process. There were some issues raised by the general public and the Opposition regarding recent shipments and the Government has taken action by appointing a commission. There are some delays in supply, and we have already undertaken spot purchasing to address this. There is no issue with the continuation of supply from the Norochcholai power station at its current 690 megawatt capacity, so there is no risk of load shedding in the near future,” he stated.

A specific point of contention has been the involvement of Trident Chemphar Ltd. in the coal supply chain. Questions have been raised regarding the verification of coal quality prior to unloading and the mechanisms used to select the supplier.

“Trident Chemphar was selected through the standard procurement process. A commission has been appointed to investigate whether there is any corruption or what exactly occurred regarding the quality of the coal. Therefore, I cannot comment on the matter amid investigations,” Aponsu said. 

The sheer scale of the energy required to prevent power cuts highlights the vulnerability of the national grid. The loss of even a single major generation unit can throw the entire system into chaos, necessitating immediate and costly interventions. “If we consider the demand for power at the peak time, we need roughly 240 to 300 megawatts. That simply means we need the capacity of one full power plant to ensure there are no power cuts,” he said.

Financial deficits and subsidised tariff adjustments

The combination of emergency thermal generation, volatile global markets, and necessary infrastructure upgrades has placed an immense financial strain on the energy sector. Global conflicts have driven up the cost of imported fossil fuels, directly impacting the operational expenses of the domestic power plants.

In response to these escalating costs, the regulatory authorities have been compelled to review the existing electricity pricing structures. Public Utilities Commission of Sri Lanka (PUCSL) Chairman Prof. Lalith Chandralal confirmed that a formal request for a tariff adjustment had been received and was currently under review.

“The NSO has submitted new cost estimations taking into account the increased fuel prices due to volatile global conditions and the war. They are expecting a tariff increase to cover an additional Rs. 38 billion deficit,” Prof. Chandralal said. 

Recognising the severe economic hardship that a massive tariff hike would inflict on the general populace, the Government has intervened with a direct financial injection. This subsidy is designed to absorb a significant portion of the deficit, shielding the most vulnerable consumers from the brunt of the global price shocks.

“The Government has already announced that Rs. 15 billion will be given as a subsidy. We are going to take all these factors into account and announce our final decision on 9 or 10 May,” Prof. Chandralal said.

The primary concern for the public remains the possibility of recurring power cuts. The economic stability of the country relies heavily on a consistent power supply, and any disruption could have cascading effects across all sectors. “There is not going to be any load shedding. The remaining deficit will be charged from the consumer, but 95% of consumers will be exempted due to the Government subsidy,” the PUCSL Chairman said.

Consumer protection and regulatory accountability

The calculation of electricity tariffs is a complex process governed by strict regulatory frameworks designed to ensure fairness and transparency. The PUCSL operates as an independent arbiter, analysing the generation data submitted by the operating entities and determining the appropriate consumer pricing. PUCSL Corporate Communications Director Jayanath Herath provided a precise timeline of the recent administrative filings.

“By a letter dated 27 April 2026, the NSO submitted its forecasted electricity generation cost for the second and third quarters. Based on these estimates, the PUCSL calculated a deficit of Rs. 38 billion if the existing tariff continues,” Herath explained.

The application of the Government subsidy drastically alters the financial landscape. By injecting State funds directly into the system, the regulatory commission can significantly reduce the overall percentage increase required to balance the books. “With the Government’s announcement of a Rs. 15 billion subsidy, the deficit will be reduced to Rs. 23 billion. The tariff increase will be limited to somewhere around 18%,” Herath calculated.

The architecture of the proposed tariff revision is highly targeted. Rather than applying a blanket increase across all users, the regulatory commission has structured the pricing tiers to protect low-to-medium consumers, thereby ensuring that essential services and households are not financially crippled.

“According to our calculations, 95% of electricity consumers will have no tariff revision. This includes the majority of domestic and religious consumers, as well as general purpose, Government institutions, and hotel and industrial sectors consuming less than 180 units per month,” he outlined.

A critical principle of the regulatory framework is that consumers should only pay for reasonable and justified operational expenses. The recent controversies regarding poor quality coal has raised fears that the public would be forced to foot the bill for administrative incompetence or procurement errors.

“Due to the quality issue of the coal, any additional expenditure incurred will not be passed to the electricity tariff. We have used a cost-reflective tariff methodology since 2011, which acts as a pricing formula covering all reasonable costs of generation, transmission, and distribution,” Herath said.

Consultation and retrospective auditing

Because electricity tariffs are often set based on projected future costs, discrepancies can occasionally arise between the estimates and the actual expenditures. The regulatory commission utilises sophisticated reconciliation tools to ensure that the final accounting is entirely accurate and fair to the consumer. 

“The electricity tariff is calculated based on future generation and sales estimates. We utilise a clawback procedure where we calculate the actual cost of electricity supply once we have the actual data. If we have a surplus, it is passed to the consumers by reducing the tariff. If there is a deficit, it is passed to the consumers as a tariff hike, which ensures the filed data is correct,” Herath said.

The final component of the regulatory process involves direct engagement with the public. The commission is mandated to solicit feedback from all relevant stakeholders before implementing any changes to the national pricing structure. This ensures that the voices of consumers, industry leaders, and civil society organisations are heard and considered prior to the final ruling on 9 May.

“We will receive written comments until 6 May and we will hold an oral session at the Bandaranaike Memorial International Conference Hall (BMICH) in Colombo on that day. Stakeholders can join the session by getting a prior registration through calling or sending a WhatsApp message to 076 427 1030,” Herath added.