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.