Connect with us

Features

Electricity tariff: Rational approach needed

Published

on

By Eng Parakrama Jayasinghe
parajayasinghe@gmail.com

The Ceylon Electricity Board (CEB) and the Ministry of Power and Energy have called for a further 66% increase in the electricity tariff, citing an increased cost of generation in the year 2023. This coming on top of the 75% increase already granted in august 2022 can hardly be logical or warranted. While the previous increase may be justified due to lack of any attempts by the CEB to seek a revision of tariff for many years since the last tariff declaration in 2014, a further claim for tariff cannot be accepted unless the claim and the supporting documentation are clearly evaluated and verified.

The Electricity Act of 2009 and the subsequent amendments as well as the PUCSL Act provide clear guidelines on the procedure to be adopted for such an evaluation process. Accordingly, the PUCSL (Public Utilites Commission of Sri Lanka) has called for public comments on the proposed increase in tariff by public announcements, which is part of the set down procedure. There is no provision in either of the above Acts to bypass this procedure. As such, attempts by the Minister and the Cabinet of Ministers to bypass this procedure and declare increased tariff as well as to back date such an increase is illegal.

The comments below are provided for the PUCSL to consider carefully the data provided by the CEB in support of their claim of increased costs and the lack of justification of the assumptions made.

The following comments take precedence in addressing the sales and generation forecasts, as it is the fundamental issue which would support or debunk the claim for a tariff increase.

Basis for claim for increased

cost of generation

It is pertinent to note that the calculations offered in support of the proposed increase in tariff purportedly to dig the CEB out of the financial hole that they dug for themselves over the years, needs to be evaluated carefully. The data submitted by the CEB cannot be accepted without independent review by those with wider and in-depth insights to the national economic issues, not merely limited to the ill-conceived forecasts of the Utility.

Predictions from CEB Generation Requirements for 202

Many different numbers have been quoted by the CEB on the forecast demand for electricity in the year 2023 as noted below as per the submission by CEB.

However, the PUCSL has published the actual demand for electricity for the year 2022 as 13301.12 GWh which with the transmission and distribution loss of 9.7% requires a generation of only 14578.02 GWh. As such the forecast of an increase of 16,520 GWh even excluding the power cuts which is 13% increase over the demand in 2022 is highly questionable in view of the continually depressed state of Sri Lanka Economy.

As the CEB is fond of declaring, there is a direct correlation between the Electricity Demand and the GDP growth as shown in the graph below. (See Figure 1)

The slight gain of 3.6% seen in year 2021 has been more than offset by the 9.3 % contraction of the GDP in 2022. This is expected to reduce further by 4.2 % in the year 2023. The equivalent reduction in electricity demand in 2023 Vs 2022 already seen over the first few weeks is shown below. (See Figure 2)

The CEB has proven time and again its inability to correctly forecast the generation needs as proven in the several LTEGP plans and shown below.

Such assumptions make one wonder if these planners are living in Sri Lanka or in some mythical land. This is not surprising considering the kind of assumptions made in preparing their latest long-term generation plan. This document submitted for review to the PUCSL in July is based on the dollar parity and other financial parameters prevailing in December 2021. Obviously, the financial tsunami which submerged Sri Lanka in March 2022 has escaped their attention.

As such, the CEB projection of an electricity demand of over 16520 GWH leading to an estimated cost of Rs 722 Billion for the year 2023 is highly overrated. Hence the call for the 66% escalation of the consumer tariff is clearly not acceptable.

In contrast, the PUCSL has recommended the reality of downturn in demand seen during the year 2022, needs to be accepted as the reality for the year 2023 as well driven by both the continued downturn in the economy coupled with the reduced demand electricity caused by the already heavy tariff imposed in August 2022. These are data readily available and cannot be ignored.

The Power Cuts Cannot be avoided.

The unpalatable truth of the severe shortage of forex to pay for coal and oil imports cannot be ignored. Any amount of increase of tariff in rupees is not going to solve this problem. As such some degree of power cuts will be inevitable until the rains set in after April. This will further reduce the actual generation using the expensive coal and oil and thereby the total cost to the CEB. While each unit generated with coal at Rs 70.00 and oil at Rs 120.00 means a loss of Rs 41.00 and Rs 91.00 respectively, all the RE based power generation would result in a substantial surplus.

Even though the use of coal with whatever funds allocated cannot be avoided in the dry months of the year to limit the number of hours of power cuts, no such justification can be made for continued use of oi for power generation. It may be recalled that Sri Lanka managed to do without any oil on a number of days in the past year aided by good rain fall.

The consumers will however reluctantly accept the reality and discomfort of the extended power cuts, if they recognise that the authorities are taking reliable action to prevent such being a continued problem over the years. This is what is not happening now by the continued over dependence on imported fossil fuels, the cost of which is totally outside the control of Sri Lanka and is a severe drain on the forex reserves and the economy. There is no longer any question that any type of resources available abundantly in Sri Lanka are much cheaper and more importantly does not drain the scarce forex.

Of course, in contrast, there are attempts already underway to bridge the generation deficit using Emergency Power running on oil at an enormous cost. This option which also requires dollars to import the oil in addition to rupees to pay the generation companies is fraught with the danger of reactivating the dreaded fuel queues an experience best forgotten. The gain made by the introduction of the QR system for which the Minister should be congratulated, will fly out of the window.

Recent history has shown that we can do without oil for power generation, even if it means the continued power cuts, provided that positive action is taken to ensure the rapid expansion of renewable resource based power generation, particularly roof top solar PV to remove such power cuts at the earliest possible date.

We have demonstrated this possibility on many days during 2022, one example of which is shown below. (See Figure 3)

This is a trend that should have been accepted as the way forward by planning for alternative sources even during the dry months such as the rapidly growing Solar PV on rooftops, which are implementable in a very short time with no cost to the state or the CEB and does not require continued drain on Dollars.

The CEB and the Ministry lacked the perspicacity and the vision or the mere competence to understand this reality. They were also obdurate to reject the many proposals made by those who have the vision and the ability to accelerate this change. The consumers cannot be burdened with the unnecessary expenditure on continued use of oil, both in rupee terms and forex. The standard ruse of awarding contracts for use of emergency power is being repeated this year as well and cannot be allowed.

The installation of rooftop Solar PV is the fastest option and has shown remarkable progress over the years presently at 700 MW. There would be even more interest by consumers to increase this penetration which can and should be promoted most aggressively leading to further reduction in the demand. While the CEB has made some relaxation of the barriers for this industry in recent times and have declared various targets, there is still no concerted effort to make use of the opportunity which will make significant impacts in a short time. The Ministry, which can play an even bigger role by policy level interventions, does not seem to understand this opportunity.

Role of Demand Side Management and Energy Conservation

The importance of reducing the demand by avoiding waste of energy as well as other means of efficient use of electricity cannot be overemphasised. The Ministry and the Sustainable Energy Authority have abdicated their responsibility in this regard. The mere replacement of all incandescent bulbs and even the CFL bulbs presently in use, can result in a reduction of demand of over 782 GWh annually. The SLSEA has adequate data and experience in making much greater impact, instead of watching from the sidelines.

The market price of LEDS is about Rs 1,000 whereas the fair price should be below Rs 300, which the state has failed to establish. Other countries including India have provided consumers with LED bulbs at prices well below the cost to encourage this change. (See Figure 4)

What is the demand to be expected in year 2023?

The charts below which appeared in the media few weeks back, are most revealing. (See Figure 5)

Figure 5

The need for a cost reflective consumer tariff.

There is no argument on this requirement.

The provisions of the Electricity Act are quite clear on the procedure for processing any requests by the Utility for tariff revisions. The PUCSL is obliged to follow such procedure and award any justifiable claims, after following such procedures. No one including the Cabinet or the President has the legal right to bypass such procedures. However, the PUCSL is not obliged to accept any cost declared by the transmission licensee, unless it is proven to be the Least Economic Cost of generation using efficient use of resources and systems as provided in the Clauses 3 (1) d, 4(1)a , and 4(1)d of the Electricity Act No 20 of 2009 and subsequent amendments.

The PUCSL has already initiated this process and should be allowed to continue same. The outcome will determine if an increase in consumer tariff is justifiable, taking into account the national interests in addition to maintaining the state monopoly utility in a viable state.

The acceptability of the predicted demand forecast

The information made available in public media point to many doubtful deals on import of coal and oil. It is clear that there is no transparency in these deals, which is also leading to greater cost of generation being forced on the consumers. The Auditor Generals reports themselves provide the evidence.

However, this kind of corrupt practices are perpetuated mainly due to the continued dependence on imported fossil fuels. While Sri Lanka cannot completely avoid their use in the short term, the reality is that none of the RE sources, the feasibility of such is without question, are either devoid of use of any fuels such as Solar and Wind, or only require the use of locally available fuels such as fuel wood and agricultural waste, which also do not open the path for corrupt practices. This reality is being ignored continually placing the country in continued economic problems as well and the financial pressure on consumers.

Even in the present dire circumstances when much greater transparency and due diligence are required, they seem to be totally lacking. The PUCSL has already published some data on the unacceptability of the fuel costs submitted by the CEB. The ministry which is expected to over see these transactions has failed completely in their duty to the consumers, raising doubts of their own complicity in such corrupt practices.

CEB Proposed Tariff Structure

This may be a moot point, if the above issues on the need for a tariff adjustment based on a false prediction of demand forecast are resolved. As stated above there are many ways where by the demand can be maintained at 2022 level or even lower for the year 2023. If such is the case the PUCSL has already demonstrated that the income levels of CEB after the tariff increase in Aug 2022 are adequate to cover the reasonable costs of the CEB. It is known by data over many years and supported by many reports by the Auditor General and other agencies that there are many ways the accountability and efficiency of the CEB can be improved. These could lead to substantial surplus of income for the CEB to cover their past dues and be profitable.

While the long-delayed tariff adjustment did make some changes in the level of tariff for different strata of consumers, it has now reduced the purported, heavy subsidies on the lower end consumers and religious institutions. This will be and incentive for such consumers to engage in energy conservation and even to install roof top solar systems. These are some positive outcomes of the last tariff revision which is now in place.

The level of tariff payable by each segment is a national issue and the concept of an average paid by all segments is not acceptable, in the light of the huge difference in cost of generation. Sri Lanka as a whole paid for the installation of the large number of major hydro system using national funds. Such costs have now been recovered many time over. As such the benefits should accrue to the vast majority of the low-end consumers, up to a reasonable limit of consumption. This is already reflected in the last revision and there is no call for any further changes.

It is already stated the increased cost if any, are due to the use on now vastly increased cost of fossil fuels. The increased generation in the margin if any, are to serve the high-end consumers. As such if any such cost recovery is needed such costs should be recovered from those consumers only. The present arguments on competitiveness of industries vis a vis the neighboring countries due to cost of electricity has been debunked, with Sri Lanka even now subsidizing the industries and commercial establishments.

The declared commitment that access to clean energy at affordable prices is an SDG Goal (Goal No 7) ratified by Sri Lanka, is being ignored. Sri Lankan economy is driven by the SMEs and individuals and it is they who should receive such affordable energy to contribute more to the economy. As stated above they have already paid for such low-cost systems and have all the rights to enjoy the benefits. As such the notion that they are being subsidized cannot be accepted.

Who should decide the Electricity Tariff?

It must be accepted that the decision on final consumer tariff must necessarily be a national economic issue and thus cannot be left to the Public Utilities Commission of Sri Lanka or even the Ministry of Power, both of which address it from a narrow financial view point pertaining to the institutions under them only. Neither of them is competent to do so and have proved to be a total failure over many years subjecting the national economy to such grave crisis in many ways.

At least now, there should be a pragmatic approach by competent individuals and agencies with the necessary back ground and insights and the ability to appreciate the wider impact on the national economy.



Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Features

‘Lord Edgware Dies’

Published

on

It has been some time since I read an Agatha Christie, the plot of which I cannot remember. So, I was delighted to find on the shelves of a friend Lord Edgware Dies, which I had a vague memory of, but no certainty about who had done it.

When I read it, I found that my memory of who was probably the killer was correct, but I could not be certain and the red herrings Christie threw in were so diverting that until almost the very end I wondered if I had been wrong.

The plot is very simple. Jane Wilkinson, who is married to Lord Edgware, tells him that she is desperate for a divorce since she is in love with a very proper Anglo-Catholic peer, Lord Melton, but Edgware refuses to divorce her. She asks Poirot to talk to him, which he does, and is surprised to find that Edgware has told Jane he is prepared to give her a divorce. This was, after he had categorically refused, through a letter, which Jane said she had not received.

That night Edgware is murdered, after Jane had been to see him, or so the butler said, and also Edgware’s secretary. But Jane had been that evening at a grand dinner many miles away, where a dozen fellow guests could swear to her presence.

There was a solution however to the mystery of two Jane Wilkinsons, namely a skilful impersonator called Carlotta Adams who, in the opening chapter had impersonated Jane Wilkinson, who had also been at the performance. But when Poirot goes to see her, he finds that she had been found dead on the morning after Edgware had been killed, of an overdose. And in her bag was a gold case, with a strange inscription, that contained the drug, along with a pair of pince-nez.

Her maid said she had written a letter to her sister in America and posted it the previous night. Poirot asks Inspector Japp to get the letter, and a transcript is received from America, and in it the name of Edgware’s nephew Ronald Marsh is mentioned; he had taken Carlotta to dinner after her performance, with which the book opens, and had then set her a challenge. Japp arrests Marsh, but Poirot is not happy and asks for the original of the letter, which the sister sends him. That shows that a page is missing, and the tear is obvious, though that raises the question as to why it had not simply been cut.

Matters are further complicated by the fact that Marsh had gone in a taxi to the Edgware house, along with Edgware’s daughter Geraldine, in the interval of an opera which had previously seemed to provide them with cast iron alibis. Geraldine had gone in to fetch her pearls so that Marsh could raise money he needed, and thus had an opportunity to kill Edgware, as did Marsh, for the driver said he had got out of the taxi while waiting and gone into the house.

Agatha Christie

Marsh explained why he had gone to the house on the night of the murder as having followed Bryan Martin, an American actor, who had been in love with Jane, whom he saw go into the house with a key. But there was no one visible when he entered, and Geraldine almost immediately came down and they left together. And Martin too has become an object of suspicion to Poirot, for he had been to see him before the murders were discovered with a story of being followed by a man with a gold tooth – a story Poirot immediately realized was false when he was asked how old the man was, and was told he was young, for young people did not have gold teeth.

A heap of French money Edgware had got for a trip to Paris was missing, but since Marsh had no need for it after his cousin’s offer of help, Poirot deduces that it must have been taken by the butler, who has disappeared. Christie has stressed that he is astonishingly handsome, unusual in a butler, and Poirot notes a resemblance to Martin, so he thinks the mysterious man going into the house must have been him.

Incidentally, later Poirot assumes that Edgware’s change of mind was because he was involved in some scandal, and I believe Christie intends us to see the cause of this in his handsome butler, though this is not specified.

Meanwhile, Poirot has asked Japp to find out the provenance of the case found in Carlotta’s handbag, and it turns out to have been made in Paris, specially commissioned, and collected by a woman with pince-nez.

But then another murder occurs—that of another guest at the grand dinner, which provided Jane with her alibi. The victim is an actor who had been bemused when Jane, at a lunch, thought the Judgment of Paris referred to the city. He told Hastings he wanted to see Poirot, but was killed before he could get to the appointment. Poirot had rushed there when told about his request, but it was too late.

Meanwhile, Poirot has tried out the pince-nez on Edgware’s secretary, but she could not see through these. It was only a chance remark heard outside the theatre that led him to try them out on Wilkinson’s maid Ellis, a spare pair that had been appropriated for the night of the murders.

Poirot then lays things out, having summoned Martin and told him that he probably suppressed Edgware’s letter, as he had been dropped by then and he did not want Jane to marry another. But after teasing Martin, Poirot says that Jane was in fact the murderer, and she got Carlotta to impersonate her at the dinner while she went to the house and killed her husband. After meeting Carlotta later and checking with her through a call that she had not been rumbled, Jane had gone ahead with the murder – she put veronal into her drink and the case with veronal into the handbag. She forgot to take out the pince-nez she had used earlier to imitate an American. Carlotta had registered as the American in a hotel and Jane had gone to see her, and there they exchanged identities. After seen the letter, she made use of it by tearing off the page that referred to her, and the S of She, so that the person who had challenged Carlotta to impersonate her seemed to be a man.

There is a coda in which Jane, condemned to death, writes to Hastings, still full of pride at her ingenuity hoping she will be remembered.

Continue Reading

Features

Desilt reservoirs, learn from our ancient irrigation systems

Published

on

Polgolla

by Prof. O. A. Ileperuma

Silting of reservoirs is a major problem today affecting our hydropower production and irrigation systems. The main Mahaweli reservoirs are silted to a considerable extent reducing the water holding capacity of them. Due to poor soil management practices, floodwaters deposit large amounts of silt in these reservoirs. When the Polgolla reservoir was fully drained about two years back, one could see mountains of silt in the lower reaches of the reservoir. A rough estimate is that 50% of the total capacity of these reservoirs has been lost to siltation. This is a serious issue which affects not only power and agriculture but also flood control.

Our ancient irrigation systems ensured that desilting of reservoirs took place under royal decree where all users of the reservoirs were ordered to carry out desilting of reservoirs during the dry season. The clay thus collected was used in making bricks for the construction of great stupas which dot the landscape of our ancient kingdoms. This ensured that the reservoirs had their full capacity filled with water for the next cultivating season. Our ancient kings were clever enough not to construct reservoirs by blocking main rivers such as the Mahaweli. A classic example is the Minipe left canal where they tapped only the surface water of Mahaweli. Even the bigger tanks such as Nuwara Wewa and Parakrama Samudraya were fed with minor rivulets. There were also other ingenious features in the cascade irrigation systems built by the ancient kings, such as mud sluice canals and forest reservations between the reservoirs in the cascade system. These reservations helped trap silt and remove excess nutrients, which could otherwise contribute to increasing salinity as water flowed from one reservoir to another.

Victoria

Moragahakanda

A classic engineering marvel is the former Yoda Ela, which carries water from Kalawewa to Nuwara Wewa and Tissa Wewa. It is 87 km long although the straight distance between these points is only about 40 km. The gradient of this canal is about 10 cm per km or 6 inches per mile. Yodha Ela functions as a moving reservoir and feeds about 4,600 hectares of paddy lands. It is a winding canal with about 120 smaller reservoirs on its way. It was constructed during the reign of King Dhatusena around 459 AD and later expanded by King Parakramabahu by connecting more reservoirs to the network. Unfortunately, during the Mahaweli project our modern-day engineers constructed a concrete canal replacing the winding path of this Yoda Ela also called Jaya Ganga. This effectively removed the ability of the old Yoda Ela to remove silt and nutrients. The bank of this Ela has wet zone trees such as jak and areca nut growing well. They take up the nutrients from the flowing stream making the water suitable for irrigation later.

Ancient Mesopotamian civilisations depended on dams constructed along the two main rivers, Euphrates and Tigris. After continuous irrigation of their fields over several thousand years, salinity of the irrigated lands increased making them unsuitable for agriculture. People died due to famine and this clearly illustrates the danger of blocking main rivers for agriculture. There is scientific evidence that the salinity of paddy soils in the Mahaweli C area is increasing.

We saw the devastation caused by Cyclone Ditwah. The sluice gates of the Kotmale Reservoir were opened, and Kandy and Peradeniya were flooded. If the reservoir had had greater storage capacity, couldn’t the opening of the gates have been delayed? This may not be an argument that modern-day engineers would readily accept, and I am not an irrigation expert. These ideas may well be naïve. But most of us tend to think of reservoirs mainly in terms of hydropower generation and irrigation, while their role in flood control receives much less attention. The question therefore deserves serious consideration. Could restoring lost reservoir capacity through desilting help improve our ability to manage extreme rainfall and reduce flood risks?

Desilting our reservoirs should be considered a national priority.

Continue Reading

Features

Losing out to Ethiopia

Published

on

From Trailblazer to Tailender

Export diversification – Missing the wood for the trees – Part III

by Gomi Senadhira

In Sri Lanka, the word “Ethiopia” is often used as disparaging slang to describe individuals or areas experiencing extreme poverty, starvation, or severe economic hardship. This linguistic habit originated in the 1980s with the Western media coverage of the devastating Ethiopian famine of 1983-85. That media coverage shocked the world but also left an outdated and offensive global stereotype that the country is permanently starving. Much has changed since then. By now, with an annual growth rate of around 9%, it is the fastest-growing economy in sub-Saharan Africa. Ethiopia has also emerged as a highly competitive exporter and is challenging not only its competitors in the region but also countries like Sri Lanka. This article is on how Sri Lanka has lost ground to Ethiopia (and a few other countries) in the GCC markets for agricultural and floricultural products.

Sri Lanka – A Pioneer in the Agriculture and Floricultural Market in the GCC

As discussed in Part II of this article, by the mid-1980s Sri Lanka had established a strong foothold in the GCC’s fruit, vegetable, and floricultural market. Geographical proximity and well-established shipping and air links gave Sri Lanka a strong comparative advantage over Southeast Asian and African nations. Thailand, Vietnam, and Kenya were not even in the market. At that time, Ethiopia was experiencing (as BBC news reports described) “a biblical famine”.

The market was not very large, but it was lucrative and growing. Trade Minister Lalith Athulathmudali as well as the Chairman of the Export Development Board, Victor Santiapillai, who visited Kuwait (and the GCC countries), recognised the market potential for these products and encouraged us to continue with our work. The minister was particularly keen to further develop links between the market for these products, exporters, and his Export Production Villages (EPVs). So, it was becoming a successful case not only for export diversification but also for transferring gains from exports directly to rural households.

From Trailblazer to Tailender

As a result, even by the beginning of this century Sri Lanka had a larger market share than most of its competitors from Asia or Africa. But since then, our competitiveness has weakened significantly. The tables below provide a comparative snapshot of Sri Lanka’s performance vis-à-vis Thailand, Vietnam, Kenya and Ethiopia in the GCC market for vegetables, fruits and floricultural products. As illustrated therein, in 2001 Sri Lanka was ahead of Thailand, Kenya and Ethiopia in this small but rapidly growing market. Since then, we have fallen behind Thailand, Kenya and many other countries in that lucrative market. If this trend continues, Sri Lanka will fall behind Ethiopia within the next few years. (See Table 1)

In the GCC market for vegetables (covered in HS chapter 07), Sri Lanka was ahead of most other competitors in 2001. As illustrated in Table 1 , Sri Lanka had failed to develop this market, while Thailand, Kenya, and even Ethiopia had very efficiently increased their market shares. The GCC is a market to which Sri Lanka can supply some vegetables, like cabbages, by sea. It appears Sri Lanka had also failed to exploit this mode of supply.

We can see a similar trend in the market for fruits. Vietnam, Kenya, and Thailand have emerged as major players, while exports from Sri Lanka have staggered on slowly. In this segment, Vietnam has emerged as a leading player during the last twenty years and the GCC imports from Viet Nam have shot up from US$44 thousand in 2001 to US$346 million by 2024. In part one of these articles, I discussed the remarkable increase of jackfruit exports from Vietnam “…just $3 million in 2015 to an impressive $236.8 million in 2023” while most of our jackfruit production rots under the trees. This explains how countries develop their markets, geographically and product-wise. (See Table 2)

Sri Lanka’s performance has been weakest in the market for floricultural products (HS Chapter 06), which groups live trees, cut flowers, and ornamental foliage. When we first entered the market in the 1980s, the market was dominated by the Netherlands, and Kenya and Ethiopia were not even in the market. At that time, we identified the Gulf states as a market where Sri Lanka could have a dominant presence due to geographical proximity. Even in 2001, Sri Lanka was ahead of Kenya, Ethiopia, and Thailand. But by now, Kenya has emerged as the dominant supplier. Ethiopia is also expanding its market share and is the third-largest exporter. (See Table 3)

Missing the Wood for the Trees

In the mid-1980s, Sri Lanka first established its foothold in the GCC market. Since then, Thailand, Vietnam, Kenya, and even Ethiopia have moved well ahead of us and have become leading players. Why did we lag behind in our export diversification efforts in general and, more particularly, in the GCC market?

The reasons are very clear. After the initial attempts in the 1980s and early 1990s, Sri Lanka has not been proactively involved in identifying, developing, and promoting new products and markets, or protecting and further developing new markets already established. The focus has simply been on traditional exports: tea, coconut, cinnamon, and garments, while other products were almost ignored. In essence, we have been and continue to focus intensely on a narrow group of products and markets, and we have lost sight of the bigger picture.

(The writer can be reached at senadhiragomi@gmail.com)

Continue Reading

Trending