Sri Lanka Electricity tariff revision navigates in troubled waters

Sri Lanka will be introducing another electricity tariff revision following the Public Utilities Commission of Sri Lanka (PUCSL) announcement of the date considering stakeholder consultations held on 15 in a chaotic situation.

The Electricity Consumers’ Association (ECA) has demanded the PUCSL not to consider the alleged arbitrary expenses incurred by the Ceylon Electricity Board (CEB) in approving the proposed electricity tariff revision.
In a letter addressed to the Commission, the ECA has claimed that the CEB has paid high prices for emergency power purchases in violation of the approved prices.

“They have paid a high price of Rs. 120 per electricity unit after obtaining the relevant approval, indicating that they will pay only Rs. 56 per unit. More than Rs. 3 billion has been misused through this. It is not possible to consider such expenses as expenses of the CEB,” the letter read.

The letter further revealed that the CEB has allocated more than Rs. 5 billion for unlicensed power plants this year (2024), which the ECA stated is also not an expense that can be considered in determining electricity tariffs.

“In addition, more than Rs. 14 billion has been allocated for the construction of power plants and Rs. 53 billion for interest payments for this year. These expenses have been included with the aim of misleading the relevant institutions.”

Further noting that a Parliamentarian representing the Government has said that an additional tax of Rs. 9 billion has been imposed on fuel every month, the ECA stated that the PUCSL should take into account the matter when approving the electricity tariff revision.

Meanwhile Electricity demand fell by 22 percent to 4,516 Gwh during the first four months of the year 2023 from 4,935 Gwh in the corresponding period of the year 2022.

Nonetheless, the revenue generated from electricity sales for the respective period was more than doubled primarily due to the second upward price revision that took place with effect from February 15, 2023, with an average increase of 66 percent reflecting cost recovery adjustments.

Accordingly, the revenue generated from electricity sales was recorded as Rs.180,117 million for the first four months period of the year 2023.

In the future, CEB will implement a regular, bi-annual end-user tariff modification based on a forward-looking cost recovery basis in order to make CEB financially viable and minimize the budgetary burden on the government.

However, as a result of higher fuel and coal prices in the rupee terms, the direct generation cost was increased by 55 percent to Rs. 177,468 million in the first four months of 2023 compared to Rs. 114,460 million in the same period in 2022.

Further, due to the increase in interest rates on the bank borrowings for the working capital requirements, the finance cost has increased to Rs. 23,264 million in the first four months of 2023 compared to Rs. 5,876 million in the same period of 2022.