By Maheesha Mudugamuwa The Committee on Public Enterprises (COPE) has revealed a costly deal reached between the Ceylon Electricity Board (CEB) and a private power plant where, at the end of three years, the cost of power purchased will be higher than if the CEB had purchased the power plant. The CEB had reached a deal to purchase power from ACE Power Embiliptiya for three years starting from April 2018. According to the COPE report tabled in Parliament last week by COPE Chairman MP Sunil Handunnetti, Rs. 76 million is being paid monthly by the CEB to ACE Power at the rate of Rs. 1.29 per unit as the capacity charge. As a result, the CEB would pay Rs. 2,736 million to ACE Power for three years – the duration of the agreement. The COPE report has revealed that ACE Power had offered to sell the power plant to the CEB for Rs. 2,635 million but the offer was shot down. COPE had questioned as to why the CEB did not purchase the private power plant when the cost would have been less than what the CEB would end up paying to purchase power for three years. The report noted that Ministry of Power and Renewable Energy Secretary Dr. Suren Batagoda had told the Committee that initially, an agreement had been signed for the purchase of electricity from the Embilipitiya power plant for a period of 10 years, which expired in 2015, and as the plant could be used for a further period of time, approval of the Government was received for further purchases. Accordingly, a valuation was obtained from the government valuer and the valuation was given at Rs. 2,370 million while the value submitted by the owner of the plant was $ 17 million (Rs. 2,635 million). It was also noted that, though negotiations were held, the owner had not agreed to transfer the plant for the valuation made by the government valuer. As a result, temporary approval had been granted by Cabinet for the purchase of electricity for a period of six months until action was taken to acquire the said plant, taking into account the electricity requirement at the time. Following discussions with the owner, the agreement was renewed on two occasions, initially for one year up to 2016 and subsequently, up to 2017. During this period, the policy of the Government was to halt any move to purchase power plants and instead purchase only electricity from private suppliers. As a result, the agreement between CEB and Ace Power was extended by another three years with effect from April 2018. The Committee had stated that the annual report of the institution which owns the plant had revealed that it had posted a profit of Rs. 1.1 billion in 2016/2017 through the sale of electricity of the Embilipitiya plant. However, Power and Energy Ministry Spokesman and Director (Development) Sulakshana Jayawardena told The Sunday Morning that the actual cost to operate a power plant would be higher than the cost of the government valuer. He said that apart from the cost of the power plant, more would need to be paid for fuel to operate the plant. “Whether it is run by the CEB or a private party, the cost of fuel needs to be paid to the Ceylon Petroleum Corporation (CPC). At the outset, we have to pay the cost of the plant and apart from that, we have to pay whatever the cost is for fuel to the CPC. The issue is the capital cost. If you consider the capital cost of ACE, it is around Rs. 1.30 per unit. That is all we have to pay to the owner,” Jayawardena explained.