The recent heavy rainfall has helped the State-run Ceylon Electricity Board (CEB) record massive profits last month, compared to the heavy losses incurred in September due to diesel power generation needed to meet the country’s power demand.
As a result, the CEB is preparing to reduce electricity tariffs in January. However, the percentage of the tariff revision is yet to be finalised.
As per CEB statistics, it had incurred a loss of around Rs. 16.8 billion in September; however, in November, it earned a profit of Rs. 31.8 billion.
CEB Spokesman Deputy General Manager Noel Priyantha said the board would pass on the benefit of the hydropower boost to the people in January: “The CEB is committed to providing concessions to electricity consumers. It is not a profit-oriented institution. Therefore, whatever benefit is earned by the board will be passed on to the public.”
He noted that the CEB would commence the new year with overfilled hydropower reservoirs: “At present, we have 1,200 GWh of hydro available. In previous years, we started the year with around 800 GWh of hydropower. This year, however, we received heavy rain, which filled almost all reservoirs.”
When asked about the upcoming drought predicted by the Meteorology Department, Priyantha said that since the reservoir capacities had reached their maximum levels, the water would be managed accordingly.
“There are water committees comprising the CEB, Water Board, and agriculture sector representatives. The decisions on how water will be released will be taken by the committee,” he stressed, adding that the CEB was currently at a satisfactory financial status and, therefore, there was hope for the upcoming year.
Three months ago, the CEB estimated a loss of Rs. 31 billion for the current year, prompting the need for adjustments in electricity charges. Nevertheless, with the last tariff increase, the CEB expected an overall decrease in expected losses for the year.
Sri Lanka experienced its third electricity tariff revision for 2023 on 21 October, with an imposing 18% increase. This comes on top of the previous 66% rise in electricity tariffs enforced since 15 February and an additional 14% increase put into effect since 1 July. The CEB was granted a significant tariff revision amounting to 75% in August 2022.
At present, CEB statistics reveal that it generates more than 50% of electricity through hydropower – the least costly energy source owned by the CEB.
As per the latest statistics, a total of 60.8% of the country’s energy requirement on Thursday (21) had been fulfilled by hydropower, while coal’s contribution was at 13.8%. The thermal oil contribution was 6.6%.
Past losses
Power and Energy Ministry statistics reveal that the CEB had accumulated losses of Rs. 565 billion between 2014 and 2022. During the same period, the Government had provided a working capital subsidy of Rs. 257 billion.
The CEB incurred a loss of Rs. 272 billion in 2022 and as of the end of September 2023 the loss stood at Rs. 29 billion. From 2013 up until September last year, the CEB had accumulated a loss of Rs. 447.5 billion. It had incurred a loss of Rs. 30.7 billion in January and February 2023.
Due to the absence of a cost-reflective tariff for more than 10 years until 15 February 2023, the CEB had been operating with continuous financial losses until then.
To address the financial challenges, a Government policy established in January 2023 introduced biannual electricity price revisions with provision for emergency tariff adjustments in extraordinary circumstances.
In this backdrop, Power and Energy Minister Kanchana Wijesekera recently announced that a proposal would be submitted for quarterly tariff revisions from 2024.
Meanwhile, the CEB Spokesman said that once the tariff was revised in January, another revision would most probably be expected in March.
However, CEB Chairman Nalinda Ilangakoon noted that the upcoming VAT revisions would not affect the CEB as the board was already paying VAT for coal imports. “There won’t be any significant impact from the VAT revision on the electricity sector.”
He emphasised on the importance of cost reduction, advocating for a shift away from diesel-powered plants in favour of more affordable and sustainable options like hydropower. Ilangakoon also stressed on the need for a scientific analysis to determine the viability of increasing hydropower generation.
He added: “85% of the electricity tariff is determined by generation costs, making it a critical factor in tariff decisions. The CEB is considering the introduction of a quarterly adjusting tariff mechanism based on generation considerations.”
2024’s tariff revisions
Meanwhile, the Public Utilities Commission of Sri Lanka (PUCSL) announced that the CEB would submit proposals for electricity tariff reduction by 15 January 2024. Public opinions will be sought and the PUCSL will provide recommendations.
Accordingly, approval of the tariff reduction is expected by the second week of February.
The CEB is undergoing independent audits, scheduled for completion by April 2024.
Meanwhile, Power and Energy Minister Wijesekera assured that the Government planned to lower electricity prices in the January 2024 tariff revision, citing increased hydropower generation due to rainy weather. He mentioned a previous tariff hike in October linked to higher thermal power generation.
The decision on tariff reduction would be based on the CEB’s December balance sheet, with hydropower contributing 60% to the national power supply, he added.