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March 26, 2023

Is ‘tariff revisions’ ONLY answer for Minister & CEB?

Last Updated on December 11, 2022 by Lankae Cast

The primary objective of the energy policy is to ensure energy security through supplies that are cleaner, secure, economical and reliable, to provide convenient, affordable energy services to support socially equitable development of Sri Lanka.” (National Energy Policy & Strategies of Sri Lanka – 2019 / valid till 2050)

“The prevailing two-hour and 20-minute daily power cuts are despite hydro and coal generation running at maximum capacity. Fuel and furnace oil must simply be used to meet the remaining demand” was how the “Daily FT” on 07 December 2022 quoted Power and Energy Minister Kanchana Wijesekera’s explanation to parliament the previous day. He was also quoted as having said, “Ceylon Electricity Board will be compelled to impose six to eight-hour-long power cuts daily if the proposed tariff hike is not approved.”

A “cloud in the sky” argument in urban middleclass that backs tariff hike says, a substantial increase in the bill would reduce electricity consumption and that in turn would pave for lesser consumption of fuel and furnace oil for power generation.

This is no valid argument except on paper. Latest UNICEF survey says “41.8 per cent (in adult society) spend over 75 per cent of their income purchasing food.” Over half of them, equal to around 03.2 million consumers on minister’s numbers consume less than 30 and 60 units per month. Tariff hikes would have nothing more to cut down on their consumption. Nor can they shoulder anymore tariff hikes when they cannot even afford a square meal.

Heavy consumers of electricity in the 90 to 180 unit category are urban middleclass. With air-conditioners, air-coolers, computers and all modern electronic appliances considered no more luxuries, night-time lighting with them are comparatively low. Electricity for them is a necessity for daily routine work and was reason for them to come on the streets when power cuts were imposed.

Minister’s concern was the cost of generation and selling price. “Last year’s generation cost was Rs. 800 billion, but the PUCSL approved a tariff revision that covered only Rs. 500 billion of it ─ again, after nine years.” Minister Wijesekera blamed the PUCSL. He gave figures to say, though the CEB sells a “Unit” at Rs.29.14 to the consumer, its production cost is around Rs.56.90. “…..there is a gap of Rs. 27, which amounts to Rs. 423.5 billion loss for the CEB” he had told parliament.

This Rs.423.5 billion loss without doubt include mega corruption and waste too. It is also about maintaining an over privileged staff that has strong influence on decision making. Reason to have information on all aspects of CEB operations in public domain is to have an idea on corrupt pampering of its “Staff” as well. When the PUCSL called for a sham public consultation in June-July this year for the tariff hike imposed from August (2022), one allegation was, “CEB/PUCSL has not proven the costs that are to be recovered are reasonable/fair. It is unfair to revise tariffs to cover costs that arise as a result of inaction by CEB.” (No.04 – Summary of the Comments Received at the Stakeholder Consultation and the Response of the Commission) The PUCSL then accepted “information requirements are not fully fulfilled by CEB”. That situation and that allegation remains unchanged.

Post 2009 the CEB director board had decided to provide numerous allowances to the staff in violation of Management Circular No.36 of 2009, pressured by CEB trade unions. In 2020, total thus paid had been Rs.1,544.4 million and in 2021, had increased to Rs.2134.9 million according to CEB sources. Meanwhile their PAYE tax had also been paid by CEB funds. Are they included in CEB loss of Rs. 423.5 billion?

On mega corruption, 30 MW Mampuri wind power project the first private sector project commissioned in 2010 March was blown out with allegations of corruption involving Sustainable Energy Authority (SEA) and CEB high command. Allegations are there on purchase of electricity even after heavy rains with sluice gates opened to release stocked water. Norochcholai (Lakvijaya) coal power plant continuously “under repair” is wrapped in many scandals. Manipulated approvals, sub-standard machinery, commissions at high level are common allegations though refuted by the contracting Chinese company, the CMEC.  

Vice-president of CMEC Li Chaoyang as quoted in Sunday Times (ST) by Namini Wijedasa in February 2014 had written to M.M.C Ferdinando then Secretary of the Ministry, asserting all negotiations and signing of the agreement were done “strictly as per the official procedures”. It was also stressed the project was on a “government to government” agreement signed in 2004. Interestingly ST report also quoted an email letter from Li Chaoyang to Eshana de Silva the commission agent of the project on 10 June 2005 that said, “According to my calculation, your comm. is $25.4Mn, including: A. $13.2Mn and B. $12.2Mn. Please check and contact me if any questions.” What ‘A’ and ‘B’ stand for had no explanation.

Heavy corruption overlooked in pricing, minister should publicly justify or state the present status of “total exemptions on electricity usage charges” allowed for massive profit-making businesses despite other concessions and benefits available to them. The list of exemptions includes,

on Extraordinary Gazette – No. 1725/14 of 28 September 2011
1.     MAS Fabric Park (Private) Limited  
2.     Overseas Realty (Ceylon) PLC
3.     Mireka Capital Land (Private) Limited

on General Gazette – No. 1744, 3 February 2012
4.     Asian Hotels and Properties PLC 
5.     BOC Property Development & Management (Private) Limited
6.     Millenium Development (Private) Limited
7.     Property Finance and Investments Kandy (Private) Limited
8.     Whittall Boustead (Private) Limited

on Extraordinary Gazette – No. 1749/8, 12 March 2012
9.     Ceylon Carriers (Private) Limited

on Extraordinary Gazette – No. 1757/19, 11 May 2012
10.  JayKay Marketing Services (Private) Limited
11.  Platinum Realty Investments (Private) Limited
12.  Union Residencies (Private) Limited
13.  Pelwatte Sugar Industries PLC

on Extraordinary Gazette – No. 1759/31, 23 May 2012
14.  Tokyo Cement Power (Lanka) Limited

These luxury exemptions completely ignored, the ordinary consumer is forced to carry the burden of mismanagement, negligence, waste, and mega corruption without any remedial measures proposed. For people to fund the loss making CEB, they should know how such heavy losses accumulate. How “production” of a unit reached that ridiculously high cost of Rs.56.90. Does this figure include all power generating sources and both CEB and private generation? Who decides pricing anyway and how?

There are also many distortions in providing information that keeps the “consumer” confused and out of any serious probing into the chaos that is CEB. Its Engineers’ trade union proudly claim in their official website, “The CEBEU’s struggle to introduce Coal Power generation to the country is part of history.” At what advantage to the People? Apart from the very negative environmental impact in its located area going unaccounted for, coal is no cheap source of power.

PUCSL’s “Electricity Generation Cost” sheet based on CEB estimates as per latest (2017) tender prices confirms, even compared to LNG, coal is expensive. Apart from wind and solar power that is extremely low, the new 300 MW Kerawalapitiya natural gas fired combined cycle plant would cost less than Rs.14.99 per KwH when coal power generation cost is Rs.18.66 at Lakvijaya, notes the PUCSL power generation cost sheet. That without any cost calculated on environmental damage, disposal of ‘ash’ and the cost of connecting Lakvijaya generation to the national grid.

Concluding, the PUCSL says, “…..Hence adding more wind, solar or Natural Gas fired plants, at the prices quoted, will lower the cost to the consumers, and provide relief for the financial burden of the utility/Government. Despite identification of large capacity requirements (635 MW Solar, 485 MW Wind and 1,350 MW of Natural Gas) between 2018 -2025, in approved Least Cost Generation Expansion Plan (LCGEP), there is very little progress in tendering these plants.”

There is nevertheless an issue with LCGEP contradicting the “National Energy Policy & Strategies of Sri Lanka – 2019” that promises cleaner, secure, economical and reliable power generation for energy security. It is not about mere “least cost” power generation.    

CEB has often messed up in meeting their responsibility to serve the public. Seethawaka hydropower project was one among long term power generation projects of 2018. It was to be operational in 2020. A feasibility report on it was carried out with CEB engineers participating at a cost of Rs.301.19 million. Despite the feasibility report, the project had been abandoned in 2020 as the Mampuri wind power project was shutdown. Can the minister explain those shutdowns? And also say why the Broadlands power generation project begun in 2013 and scheduled to start operations in 2020 is still on hold? Can the Minister also say whether the cost of such shutdowns and delays are included in this loss of Rs. 423.5 billion?   

To sum up this issue of electricity tariff hike that comes with IMF conditions on price revisions even the President is determined to push through, will the Minister provide details and explanations on the following before decisions are made on tariff hikes?

01  01. Mega corruption, waste and neglect that add to CEB losses and on approved cadre for years 2020 and 2023
02.  Cost of maintaining an over privileged high-profile staff and annual recurrent budget of CEB including salaries, allowances and other benefits for staff in year 2020 and 2022
03.  Impact of suspended and of delayed power generation projects planned decades ago 
04.  Total electricity purchase from private entities in 2020 and in 2022 and how they were priced and by whom
05.  Measures other than the IMF privatisation proposal the ministry has looked into in running the CEB without loss hereafter 

Minister of Power and Energy should know he is responsible to the People and not to the IMF.

-Kusal Perera, senior journalist/political analyst