With the Cabinet last week approving another round of electricity tariff hikes, questions still remain as to whether the income from the proposed tariff hike will be sufficient to ensure zero power cuts during the upcoming dry season, when electricity generation from hydropower will be extremely limited.
Meanwhile, the country’s power sector claims that it continues to face uncertainty, as the State-run Ceylon Electricity Board (CEB) is yet to receive the green light for the proposed new cost-reflective electricity tariff mechanism to reduce its losses and enable it to purchase supplementary power to meet the demand.
The Cabinet last week approved a proposal submitted by Power and Energy Minister Kanchana Wijesekera, together with President Ranil Wickremesinghe as Minister of Finance, to revise the current electricity tariffs. However, the CEB is awaiting approval from the Public Utilities Commission of Sri Lanka (PUCSL), which claims that the tariff revision cannot be implemented retrospectively.
As per the Cabinet decision, the PUCSL should study the proposed electricity tariff revision submitted by the CEB and if any revision is required, it should submit the same on or before 15 February. Until then, the CEB and the PUCSL should jointly take necessary measures to implement the electricity tariff revision proposed by the board with effect from 1 January as an interim measure in accordance with the amendments to the Public Policy Guidelines currently in force regarding the power sector.
Should the PUCSL submit any amendments, the CEB will take steps to implement said amendments and make the necessary adjustments to future monthly electricity bills, as per the Cabinet decision.
‘Scenario P’
According to ‘scenario P’ suggested by the CEB and finalised by the Cabinet to be implemented this year to avoid power cuts even during the upcoming dry season, the CEB expects the average hydrologic condition to have an annual inflow of around 4,500 GWh and a GDP of 4%, with electricity growth to follow the same.
It also expects that only 30 coal shipments will be available for the Lakvijaya Power Plant in Norochcholai until September while an additional 100 MW of generation will be available for the southern part of the country for the first six months of the year. In addition, the CEB also assumes that the Kelanitissa Combined Cycle Power Station will be operated with naphtha and diesel, with a continuous supply from the Ceylon Petroleum Corporation (CPC).
As per the proposed new tariff mechanism, the estimated average selling price of a unit is Rs. 48.74 and the estimated annual revenue is Rs. 727,212 million. The average selling price in 2021 was Rs. 21.07 per unit and annual revenue Rs. 300,420 million. However, as per the present tariff mechanism, the average selling price in 2023 is Rs. 29.14 and the estimated income is Rs. 455,699 million.
Possibility of zero power cuts
Nevertheless, confirmation is yet to be provided on facilitating zero power cuts during the upcoming dry season.
When contacted by The Sunday Morning, CEB Chairman Nalinda Ilangakoon assured that the suggested tariff mechanism would enable the CEB to secure energy sources it would need to enable zero power cuts.
“We are very confident that the proposed tariff will be sufficient to purchase power to meet the shortage. We are trying to go for least cost power generation and therefore, we limited thermal oil generation. However, we should now save hydropower, so we have no option but to operate thermal oil power plants to meet the hydro gap. For this, we need money to purchase fuel from the CPC and since we were not given funds from the Treasury, we must opt for a tariff hike that reflects the cost,” he stressed.
He explained that the entire income earned from the proposed tariff revision would be utilised for energy purchasing to provide an uninterrupted power supply to the public. “There are allegations of mismanagement that had occurred in the past within the CEB. However, the tariff revision will not be used to pay those debts but to provide an uninterrupted supply,” he added.
Supplementary power
As learnt by The Sunday Morning, the CEB had sought PUCSL approval to publish the tender notice to procure 100 MW of supplementary power to meet the energy shortage in the southern region.
It is reliably learnt that supplementary power will be purchased following all tender procedures and electricity will be purchased from the company that offers the lowest cost.
The CEB Chairman stressed that there was a huge difference between emergency power and supplementary power, as supplementary power purchase followed the usual tender procedure. “We have not extended the previous agreements for the supply of diesel. Instead, we are floating a tender so that those that wish to provide the facility can submit tenders and we will choose the lowest cost supplier. The mechanism is very transparent,” Ilangakoon said, adding that many had mixed up emergency and supplementary power.
However, when asked whether the board would have to shift from supplementary to emergency power given the present situation, he noted that there was no urgency to purchase electricity and that the CEB would require supplementary power by March. “We have sufficient time to follow the tender procedure,” he added.
Meanwhile, engineers attached to the CEB allege that purchasing supplementary power and spending on diesel-powered electricity would further increase the CEB’s debt burden and that the burden of recovering this debt would be passed on to the public. They stressed that diesel power from whichever procurement procedure would come at an additional cost and moreover, there was a risk attached to paying for such power plants even when they were not in use.
NAO’s findings on irregular power purchases
In such a backdrop, a 2019 audit by the National Audit Office (NAO) when the CEB was operating as usual before the demand reduction during Covid-19 has highlighted that the CEB had made emergency power purchases (2,165.51 GWh worth Rs. 59.4 billion) for the period of April 2016 to December 2019 without applying the tender procedure as per the requirement of the Sri Lanka Electricity Act No.20 of 2009, operating the plants without having obtained the generation licence from the regulator.
Accordingly, the CEB had added thermal generation plants from April 2016 to December 2019 under the following two categories – the procurement of supplementary electrical power on a short-term basis following an International Competitive Bidding (ICB) process and an extension of Power Purchase Agreements (PPAs) of retired Independent Power Producer (IPP) thermal power plants.
“Under the procurement of supplementary electrical power on a short-term basis, procurements have been carried out following International Competitive Bidding (ICB) procedures;
(i) Tender no. DGM (EPT) /EmPwr/2016/02 (Supply of 60 MW of Power on Short-Term Basis) added a capacity of 60 MW for six months
(ii) Tender no. DGM (EPT) /EmPwr/2017/01 (Supply of Supplementary Electrical Power to CEB on Short-Term Basis) added a capacity of 56 MW for six months
(iii) Tender no. DGM (EPT) /EmPwr/2019/01 (Supply of Total 100 MW of Supplementary Electrical Power on Short-Term Basis) added a capacity of 100 MW for six months.
All these procurements have been carried out in compliance with Section 43 of Sri Lanka Electricity (Amended) Act No.20 of 2009,” the audit report states.
Under the extension of the PPAs of retired IPP thermal power plants, the following have been extended: 100 MW power plant of Ace Power Embilipitiya (Pvt) Ltd. (one year from 6 April 2016 and one year from 6 April 2017, three years from 6 April 2018), 20 MW power plant of Ace Power Generation Matara (Pvt) Ltd. (one year from 25 March 2017, two years from 8 April 2019), and a 50 MW power plant of Asia Power (Pvt) Ltd. (two years from 12 April 2019).
According to the Long Term Generation Expansion Plan 2018-2037, a new generation of 657 MW which consists of 370 MW from thermal and 287 MW from renewable energy should be added to the national system. However, only 222 MW of thermal power, which was not in the plan, and 25.25 MW of renewable energy had been added to the system in 2019. As a result, 735 GWh, valued at Rs. 22.2 billion, had been purchased as emergency power during 2019, as stated in the audit report.
Remaining thermal oil stocks at CEB
Meanwhile, according to CEB statistics, in addition to the supplementary power sought from private power plants, the CEB has several more thermal oil power plants that require uninterrupted fuel supply to avoid power cuts this year.
Accordingly, the Heavy Fuel Oil (HFO) power plants including Barge, Sapugaskanda A, Sapugaskanda B, Uthuru Janani, and West Coast Plant (diesel) have installed capacities of 60 MW, 64 MW, 72 MW, 23 MW, and 270 MW respectively. Diesel-powered power plants including Kelanitissa Combined Cycle (naphtha – 163 MW) and the Thulhiriya/Mathugama/Kolonnawa plants have installed capacities of 147 MW and 40 MW respectively.
However, as of Thursday (12) morning, the CEB’s thermal oil stocks were at very low levels, with no HFO for 60 MW of Barge, only 1,040 MT of HFO for Sapugaskanda A which will be sufficient for 3.9 days, and 1,131 MT of HFO for Sapugaskanda B which will be sufficient for 3.8 days. The HFO availability for Uthuru Janani Power Station was 73 MT and the power plant can only operate for 0.6 days. Further, available naphtha stocks as at Thursday morning were 757 MT and the plant will have to shut down soon if sufficient stocks are not received on time. For small generators, 2,565 MT of diesel was available.