PUCSL knew of power crisis since 2016: Janaka Ratnayake

• Warned about impending power crisis well in advance
• Failure to build long-term power generation capacity enabled crisis
• December power outage could be due to sabotage
• CEB needs reforms, good leadership, and business plan

By Asiri Fernando

INTRO

Sri Lanka is desperately trying to sustain uninterrupted power supply, with hydropower water levels at a critical 47% last week. According to the Public Utilities Commission of Sri Lanka (PUCSL), Sri Lanka needed to conserve hydropower to ensure uninterrupted supply during the coming months when rains are not expected. The drop is due to the inability of the current generation system to support peak demand on a daily basis without a significant contribution made by hydropower.

The electricity regulator last week issued strict directives to the power utility, relevant ministries, departments, and owners of private back-up power generators to follow a plan drafted by the PUCSL in order to avoid proposed load shedding. The plan includes State institutions cutting usage significantly and private and public entities with backup power generators using them to meet their demand for at least four hours each day. The proposed plan also works on the assumption that the Government can ensure uninterrupted fuel and coal supply to the thermal power plants – a proposition that will be challenged by the ongoing forex crisis.

In an interview with The Sunday Morning, the PUCSL Chairman Janaka Ratnayake stated that the State-owned power utility, the Ceylon Electricity Board (CEB), was in need of reforms and called for strong and able leadership with a robust business plan to move the CEB out of over Rs. 200 billion in debt and into a profit-making entity.

A public hearing, where stakeholders will be called on to give evidence under oath, is scheduled for 3 March by the PUCSL to investigate the sudden island-wide power outage which occurred in early December last year when two of the three coal power generators at Norochcholai Power Plant broke down. PUCSL plans to submit its findings to the Judiciary to enforce the law on any person or persons found responsible.

Following are excerpts of the interview:

What is the role and task performed by the PUCSL?

The PUCSL is the economic, technical, and safety regulator of the electricity industry in Sri Lanka. We are the designated regulator for petroleum and water services industries. PUCSL also has been assigned as the shadow regulator for the lubricant market in Sri Lanka.

Is the PUCSL adequately resourced to carry out its role effectively?

The PUCSL is empowered by law to hire any expert needed to carry out its duties. We can recruit from any specialisation as needed. Therefore, as needed, we can get the best minds – experts from industry, academia, or the State sector – to help analyse and draft recommendations to the relevant agencies and the Government.  

We are an independent commission; we raise our own funding and are not dependent on the Treasury. The PUCSL decides the budget it will require to perform its duties and we raise funds from the licensees. We have adequate finances while keeping our independence as a regulatory commission. Further, we hold broad public consultations on regulatory matters. Public opinion is very important. Even in the process of reviewing tariffs, we seek public consultation.

How does the PUCSL plan to manage and mitigate the impact of the current power crisis in Sri Lanka?

PUCSL has been aware of this issue since 2016. We have been writing to the relevant ministries and the CEB requesting them to mitigate the impact of this issue which we had anticipated six years ago that we would face in 2022 and ’23.  The PUCSL identified that large-scale power generation plants were not built by successive governments due to influence. There has been a lot of pressure from different segments of the country which stopped some of these large-scale plants from being implemented over the last decade. Some of that influence may have been political, commercial, public, or vested interest.

One example is the Sampur Power Plant, which was to be constructed from 2015 onwards but was withdrawn overnight via a decision by the political hierarchy due to some pressure. It was a coal power plant; a feasibility study had been done, the finances were arranged, and it was to deliver 500 MW of power once operational. I feel that not going ahead with it was a major setback to our long-term power generation plans. If we had that 500 MW capability, today we would have been able to supply nearly 50% of the daily power demand by coal and we may not have had to face a decision about having power cuts today. 

Likewise, many projects in the long-term generation plan have not been implemented due to many reasons. The PUCSL as the regulator has informed key stakeholders on a number of occasions that the long-term plan must be carried out to meet demand.

Two weeks ago, the PUCSL said that consultation with private and public entities which maintain electricity generators was ongoing to explore the possibility of them being used to plug the supply gap. What progress has been made in this regard?

We are no longer requesting it. We have made it mandatory to use standby generators by synchronising them for a few hours from this week. This has been communicated to them as a directive and we (PUCSL) will make sure that the owners will use them.

We have identified close to 300 MW of generation capacity held in reserve on standby generators and have tasked the CEB to connect them to the grid. The private generator owners will also benefit to an extent as the CEB has a scheme where if you use the generators for your own use and contribute to the national grid, you will be paid Rs. 36 per unit given to the grid. This amount may be increased in the future. I don’t think the generator owners will be at a loss. Also, this is now a national crisis; everybody needs to play their part to overcome it.  

If power cuts/load shedding is unavoidable, for how long and in what frequency will there be planned power cuts?

At present load shedding is avoidable, because the PUCSL has given the CEB directives to implement while saving valuable hydropower water levels in the reservoirs. It is of paramount importance that we manage our water reservoir levels, which are now at 47%, for efficient use in the next three months – the dry season. Therefore, the PUCSL has directed the CEB to reduce the production of 12 million power units from hydropower to five million units (5 GW hours) from 17 February. This is one of the conditions we have specified in our directive that the CEB has to comply with. Due to this, there may be small and short-lived power shedding in some parts of the country, not island-wide, in order to balance the grid.

The PUCSL in consultation with other stakeholders is trying to find a solution to a technical issue with the power grid in the Southern Province aimed at connecting nearly 100 MW of private and State owned backup power generation capacity to the national grid.

Given that the CEB has been running at a loss for years and has incurred debt running into billions of rupees as of January this year, is an electricity tariff revision in the making and if so when will the change be made?

The CEB has incurred debts of over Rs. 210 billion by the end of January. It owes Rs. 130 billion to People’s Bank alone. In 2014, there was a 25% reduction of the electricity tariff. If you look at the production cost and the devaluation of the rupee over the last two years, the tariff we have now is less than Rs. 6 per unit. Production cost is Rs. 23 per unit. However, it is sold to the customer at Rs. 17 per unit.

The situation worsened last year and will continue to worsen this year as the price of coal has shot up from $ 70 per MT to $ 160-170 and crude oil is going up almost daily – now it is almost $ 100 a barrel. The CEB also has other commitments to pay back in dollars to lenders. For the last few years the CEB has been making huge losses.

We have to ensure that either the Government gives fuel subsidies to the CEB, which is unlikely to happen, or a tariff revision is implemented. Therefore, the PUCSL is awaiting the CEB’s request to look into a tariff revision.    

The current power crisis was predicted to impact Sri Lanka in 2019-2020 according to some energy experts. As the regulator, didn’t the PUCSL take measures to use the time afforded by Covid-19 to prevent the crisis occurring in the last quarter of 2021?

The PUCSL identified the crisis to arrive in 2022-’23. The Covid-19 pandemic is an additional burden which triggered a financial and forex crisis. At present we find it hard to find the necessary forex to buy fuel, coal, and other products we need for power generation.

The problems started when we had an island-wide power outage on 3 December 2021, which led to an island-wide blackout when two units of the Norochcholai Power Plant went out of order. I feel the units going out of order was deliberate. ‘Forced action’ – I think it was sabotage. The PUCSL has now triggered a public hearing. We want to find out what exactly happened and if there is wrongdoing, to find the culprits.

One of the two plants went out of service from 3 December to 3 February. During this period, to bridge that gap in supply provided by coal power, the CEB used hydropower – almost twice the normal usage. Therefore, we are today facing this crisis with hydropower down to 47%. It is a man-made problem. We must ensure that such a situation never happens again. It cripples the country and the economy and causes so much loss. 

Both the Energy Ministry and the CEB Chairman have expressed concern about the power crisis being ‘man-made’ and an act of sabotage. The PUCSL has planned to hold a public hearing on the December power outage. What powers does the PUCSL have to investigate the issue and what penalties can the PUCSL apply?

We are empowered under the PUCSL Act to conduct public hearings. As the Chairman I can summon anyone to give evidence under oath, so I am sure that the truth will surface. I am confident that through the public hearing we can find out what or who is behind this crisis.

Based on the information gathered at the public hearing, the PUCSL can make recommendations to the Courts to begin legal action and punish those responsible.

Serious allegations have been made regarding officials at the CEB about ulterior motives and corruption. As the regulator what can the PUCSL do to address these concerns?

Our mandate is to ensure uninterrupted power supply at the least cost to the customer, but if there is corruption ongoing within the CEB, it is not within our preview to deal with that. Such issues should be dealt with by the CEB, the Ministry of Power, and the authorities investigating corruption.

I have been saying that the CEB is engaged in the biggest business in Sri Lanka. By supplying electricity, it is connected to almost 99% of the public, to every industry, State and private enterprise and service. Without electricity, no part of the economy will move. Therefore, the CEB needs proper leadership.

What we have now is, if you look at the last year, every three months or so, the CEB gets a new general manager. This is at a time the sector is facing a crisis and has technical issues. I feel that persons in leadership roles need to be given time – at least two to three years to be able to plan and enact changes needed to improve the situation.

The CEB is a billion-dollar business, which runs 24 hours with generation, transmission, and distribution sectors; you can’t close even one for a few hours. Fuel distribution can be stopped in Sri Lanka for one day without major issue. But electricity, we can’t stop it even for one hour. Therefore, I feel that we need a competent person to be placed in the leadership role with strong business sense at the CEB. The CEB has good and qualified engineers who want to do better for the country, except for a few who don’t. The CEB has not been managed well.

What is the PUCSL doing to improve the reliability of power supply and the quality of service offered to paying customers?

We are planning to create benchmarks, in order to create competition among players in the industry. We must improve the standards and service quality of the power industry. This is why the PUCSL has moved to standardise 13-amp plugs, regulating appliances. We are also working with technical schools and institutions to certify technicians so that the services, installation, and maintenance of electricity systems is improved. This is part of our mandate. 

Do you think that the power sector – and the CEB in particular – needs to be reformed?

Yes, I think reforms are needed. They have been discussed for almost a decade. There have been complaints of different ‘mafias,’ corruption, malpractices, and lethargy within the CEB, so the time is right for reforms.

I think some of the CEB units (transmission, distribution) need to be made independent and seek some profits, like the Lanka Electricity Company (LECO). The electricity supply business should not be done at a loss. I think the current business model of the CEB needs reforms. 

Do you think that the reluctance of some in the CEB to move towards renewable energy is based on legitimate concerns about the right energy balance and infrastructure changes?

Regarding renewable energy, even though the policy decision was made, we have been struggling for nine months to get it published through a gazette.

The PUCSL has informed the CEB to make its long-term generation plan in accordance with the new renewable energy target of 70%, with 30% coming from other sources. We have given them enough time as this is not a simple task and serious analysis – calculation is needed to draw up plans. That process is ongoing. There are some who may not be satisfied with the pace at which it is taking place; nevertheless, the process is moving ahead.

We plan to bring in 2,000-3,000 MW of new renewable power generation online in the next two to three years. With such an addition, in the coming years we will be able to manage the daytime demand better with renewables, which will have lesser generation cost, unlike some of the thermal generation plants which are nearly three decades old and work with a poor efficiency of nearly Rs. 55-65 per unit generation cost.

The concerns about the right energy balance and infrastructure changes are due to teething issues. What we are doing is a paradigm shift from conventional fossil energy to renewable energy. It is a major change in the power sector. Some people may object, but I think we can do it and reach the desired change. Any capacity growth in the renewable sector is welcome. I believe we need to maintain a balance of hydropower, renewable power, and thermal power. A combination power system may help us mitigate power supply issues.

Is the PUCSL supporting the Sustainable Energy Authority (SEA) in streamlining the renewable energy drive? If so, what is being done?

We support every stakeholder in the power sector in the country as it is our mandate to ensure uninterrupted power supply and quality service at the least cost. We support organic growth and will ensure that we have enough energy to meet demand in the future.

Is the PUCSL the designated regulator for the petroleum and water services industries? 

When the PUCSL was established through an act of law in 2002, three utility areas we should focus on were recognised – water, electricity, and petroleum. In 2005, we were made the shadow regulator for the lubricant industry in the county. Later in 2009, with the approval of the Electricity Act, the PUCSL was empowered to be the regulator for electricity supply.

We are yet to get the mandate from the Cabinet of Ministers to be the regulator for petroleum products and water. I feel that there is a need for a regulator for these two sectors. There are many products that need a regulatory framework and a regulator. We have had some issues related to LPG cylinders. PUCSL has volunteered to carry out the regulator role for LPG as well. If we are given these tasks, we are capable and ready to carry them out.