• CEB expects year-end losses surpassing Rs. 30 b due to tariffs
• Need reinstatement of tariffs initially proposed by CEB: Ilangakoon

 The Ceylon Electricity Board (CEB) is in the midst of a deepening financial crisis and has made an urgent appeal to the Ministry of Power and Energy for an immediate increase in electricity tariffs. This plea comes as the CEB anticipates year-end losses surpassing Rs. 30 billion, primarily attributed to tariff revisions implemented in June.

The situation has deteriorated rapidly following daily losses resulting from tariff revisions mandated by the Public Utilities Commission of Sri Lanka (PUCSL) on 1 July. The CEB’s heavy reliance on costly diesel-powered power plants, exacerbated by the unexpected absence of rainfall, is at the heart of this crisis.

The issue highlights long-term discrepancies in State policies and CEB action to improve Sri Lanka’s energy security and energy diversification. Successive governments, the energy regulator PUCSL, and the management of the CEB have long been criticised for not implementing key power generation projects on time, not upgrading the national grid, and failing to add renewable energy to the national energy mix.

Initially, the CEB had forecasted a moderately wet year, but the anticipated rains failed to materialise as expected. Consequently, hydropower generation experienced a significant drop, forcing the board to procure emergency power to meet demand in the southern region. Currently, the CEB is evaluating proposals from private power plants to secure supplementary power.

Adding to the complexity of the situation, the Ceylon Petroleum Corporation (CPC) recently raised diesel prices, placing additional strain on the CEB’s already precarious financial situation.

Appeal for tariff adjustments 

CEB Chairman Nalinda Illangakoon stressed the urgency of the situation, emphasising: “We are not requesting an increase in tariffs but rather the reinstatement of tariffs initially proposed by the CEB, as opposed to the tariffs suggested by the PUCSL.”

The CEB’s appeal for tariff adjustments is an effort to avert an impending financial catastrophe. As the board continues to suffer daily losses, its financial stability and capacity to provide uninterrupted electricity to the public hang in the balance. 

Nevertheless, if the tariffs which the CEB wants are approved, the public will again have to foot the bill for poor planning and implementation on the part of the Government and the CEB.

CEB’s proposed tariff reductions 

In June, the CEB submitted a comprehensive proposal that outlined significant tariff reductions for over 1.7 million domestic electricity consumers within various consumption brackets. Under this proposal, consumers falling within the 0-30 unit category were set to benefit from a substantial tariff reduction of approximately 28%. 

Consumers in the 31-60 unit category were to see a 10% reduction, while those in the 61-90 unit category were expected to experience a 7% reduction. However, consumers in higher unit categories were to see smaller reductions, with those in the 91-120, 121-180, and 181 and above unit categories facing reductions of 5%, 3%, and 2%, respectively.

Beyond unit-based reductions, the CEB also proposed changes to fixed charges. For instance, consumers in the 0-30 unit category would have their fixed charges reduced from the current rates of Rs. 400 to Rs. 250. Similarly, those in the 31-60 unit category would see their fixed charges reduced from Rs. 550 to Rs. 500, and those in the 61-90 unit category would have their fixed charges reduced from Rs. 650 to Rs. 600. 

Furthermore, unit charges were also expected to decrease, with rates dropping from Rs. 30 to Rs. 25 for the 0-30 unit category, Rs. 37 to Rs. 36 for the 31-60 unit category, and Rs. 42 to Rs. 39 for the 61-90 unit category.

PUCSL tariffs 

In contrast to the CEB’s request, the PUCSL had given the green light to a comprehensive overhaul of electricity tariffs. These changes promise substantial savings for consumers across various user categories while imposing several conditions to promote fair billing practices and financial viability for power providers. The approved tariff adjustments guarantee significant reductions in electricity costs for various user categories.

Residential customers stand to gain significantly, with a remarkable 65% reduction for those consuming 0-30 units, a substantial 51.5% decrease for those in the 31-60 unit range, and a 24.5% cut for users in the 61-90 unit category. Commercial and industrial sectors will also benefit, with reductions ranging from 5-26.3%, while religious institutions receive a noteworthy 16% reduction. Government users will experience a slight 0.8% dip in tariffs.

In addition to these tariff reductions, the PUCSL emphasised the importance of accurate billing practices, called for the prudent investment of security deposits with interest paid from returns, and advocated for energy supply agreements to strengthen the power sector.

CEB’s financial struggles 

However, it is worth noting that the CEB had previously received tariff revisions of 75% and 66% in August 2022 and February 2023, respectively, from the PUCSL. Yet, the absence of a cost-reflective tariff for over a decade, until 15 February 2023, has left the CEB operating at a continuous financial loss. In 2022, the recorded loss stood at Rs. 167 billion, and for January and February 2023, it amounted to Rs. 30.7 billion.

The CEB has grappled with negative operating cash flows for more than a decade, forcing it to secure working capital from both Government and private financial institutions. This capital has primarily been used for essential operations such as procuring coal, fuel, materials, and making partial payments to Independent Power Producers (IPPs), Non-Conventional Renewable Energy (NCRE) providers, and the CPC, among others.

Despite recent efforts to make payments to major creditors, the outstanding payable balances remain significantly high, totaling Rs. 516.7 billion as of 30 April 2023, according to the CEB’s financial records.

The latest electricity tariff mechanism stipulates that tariffs are reviewed semi-annually, with adjustments announced on 1 January and 1 July each year. This tariff revision marked the first significant change since the substantial tariff hike introduced in February of this year. The changes aimed to provide relief to domestic electricity consumers and alleviate the financial challenges faced by the CEB.

As the CEB’s financial crisis deepens and the debate over tariff adjustments intensifies, the future of Sri Lanka’s electricity supply and the financial stability of the utility provider hang in the balance. Further discussions and negotiations are expected in the coming weeks to address the pressing challenges facing the nation’s power sector.