• CEB achieves tariff target through cost-reflective pricing mechanism
• Rs. 723 b annual and Rs. 55 b monthly collection expected 
• No need to make CEB profitable, surplus can be passed to consumers

The State-run Ceylon Electricity Board (CEB) is no longer incurring losses from the supply of electricity, CEB Chairman Nalinda Illangakoon told The Sunday Morning.

In an exclusive interview with The Sunday Morning last week, Illangakoon said that the CEB had already achieved its tariff target of a cost-reflective pricing mechanism and was currently managing its expenses without incurring losses. 

Commenting on the CEB’s income and expenditure, the CEB Chair said: “We expect our annual collection to be around Rs. 723 billion and the monthly collection to be Rs. 55 billion. We are also anticipating a daily income of over Rs. 2 billion and we received this expected income in April. We expect a similar income for May,” he said.    

“We don’t want to make the CEB a profitable entity, but if we earn any surplus from the new tariff revision, we will adjust those to pass the benefit to the consumers during the first review coming up on 1 July and at the end of the year. As of now, the CEB is managing its expenses and it has already started paying off the dues owed to suppliers, including renewable energy developers,” Illangakoon added.

Following are excerpts of the interview:

Sri Lanka is no longer experiencing hours-long power cuts as the CEB has guaranteed an uninterrupted 24-hour power supply, albeit at a cost of billions of rupees per day. At present, the country’s energy sector is dependent on imports, with almost all the energy required for power production having to be imported. How do you view this?

Power cuts have affected almost all sections of society and have caused a massive negative impact on the country’s economy. We saw how people suffered both economically and socially due to power cuts. As a result, the country incurred a loss of around Rs. 25 billion per month. 

Many businesses collapsed and people lost their income as they had to keep their businesses closed for hours during power cuts. Families lost their peace of mind, since there was no electricity when they returned home after work, causing all their daily routines to be affected. However, we have now ensured an uninterrupted power supply, which is one of the major achievements of the CEB as well as of the Government. 

In order to provide this uninterrupted power supply, we cannot use magic, we can only utilise existing resources. We are currently generating electricity via hydro, coal, Heavy Fuel Oil (HFO), naphtha, and diesel and a small percentage via renewable sources such as solar, wind, and biomass. Around 22% of the total energy requirement is fulfilled by hydropower. The most expensive energy resource is diesel and we operate diesel power plants only when necessary. We always try to use the lowest cost energy resources possible. 

Unfortunately, since there have been no new power plants added to the national grid over the last few years, the CEB has to manage with the existing resources, which, as almost everyone says, are expensive. Economically, it is the only viable solution. 

We were able to manage as we were given a cost-reflective tariff hike. There are many power plants in the pipeline to be added to the national grid, which will be added once the constructions are completed. Regardless, our main target at present is to add more Renewable Energy (RE) to the national grid. 

What is your perspective on the CEB’s current financial status? Has the new tariff mechanism helped the CEB to overcome its financial difficulties?

With the introduction of a new price revision in February, the CEB is currently managing its financial obligations without incurring losses. The current prices are cost-reflective and therefore, the CEB is not incurring losses. However, neither does it earn profits. It is barely managing its financial obligations. 

We expect our annual collection to be around Rs. 723 billion and our monthly collection to be Rs. 55 billion. We are also anticipating a daily income of over Rs. 2 billion and we received this expected income in April. We expect a similar income for May.

We don’t want to make the CEB a profitable entity, but if we earn any surplus from the new tariff revision, we will adjust those to pass the benefit to the consumers during the first review coming up on 1 July and at the end of the year. As of now, the CEB is managing its expenses and it has already started paying off the dues owed to suppliers, including renewable energy developers.

At present we are in a good financial situation owing to the new pricing mechanism. We are managing our costs. This has been a tough journey, but we succeeded with the help of Power and Energy Minister Kanchana Wijesekera and the President, as they helped us take firm decisions with regard to the electricity tariffs. 

We should manage our existing power plants as well as other expenses.

Fuel as well as coal prices have seen a dramatic reduction in the world market during the past few months since the price revision came into effect in February. In parallel to the world market prices, the Ceylon Petroleum Corporation (CPC) too reduced domestic fuel prices on several occasions. Have these factors affected electricity generation costs and if so, what is the CEB’s plan to pass the benefits to the public?

While there has been a reduction in world market prices, those were very marginal reductions. Regardless, we are currently preparing to pass the benefit of those price reductions to the public as previously promised. The current electricity tariffs will be revised on 1 July. 

We have already decided on the percentages by which those tariffs will be revised and we will be applying a scientific formula. If prices drop further, we will reduce the prices in parallel at the review scheduled for the end of this year. 

This is a very transparent mechanism. We are prioritising our consumers and we always try to provide them relief. Therefore, there is no need to pressurise consumers by imposing high tariffs. However, as a State-owned company, the CEB can’t be a burden to the public either. Therefore, it has to operate without incurring losses. From 2013 until September last year, the CEB had accumulated a loss of Rs. 447.5 billion. In 2022 alone, it had incurred a loss of Rs. 167 billion.

When it comes to coal, we have already completed one season and the next season is expected to commence in September. There has been a reduction in coal prices as well; negotiations are underway to obtain coal at the lowest cost. 

We have obtained eight shipments from Coral Energy at a fixed rate and have purchased the shipments from Swiss Singapore and Black Sand Commodities at an index-based rate. Therefore, the price reduction has been reflected for those shipments. Hopefully, from next season onwards, steps will be taken to obtain coal at the lowest rate on an index-based price. 

What steps are needed to improve the financial performance of the CEB? Is restructuring the way forward to reform it?

The CEB is in dire need of restructuring and this process is currently underway. A separate committee is currently formulating relevant legal drafts and the bill will be tabled in Parliament. The restructuring will only reach the CEB once the initial stages are completed. Until then, the CEB is providing the required information when necessary and actively participating in the process. 

There has been much talk about RE development, but very little actual development. What is the place of renewable energy in the pursuit of solutions for Sri Lanka’s power crisis?

Our main focus is on renewable energy. We are planning to reach 70% generation via RE by 2030. A short-term renewable energy development plan from 2023 to 2026 has been issued and we will be absorbing nearly 2,500 MW of RE until 2026. We are planning to do this within the existing grid and transmission lines with small modifications. 

There has been criticism levelled against the CEB, claiming that it is not supporting RE projects. The CEB has evaluated each and every project forwarded to the CEB by the Sustainable Energy Authority of Sri Lanka (SEASL), but ultimately, a majority of these projects have been blocked due to issues related to other authorities.

We have highlighted these issues and are reassessing the projects submitted to the SEASL. To replace the projects that cannot be continued, we will be calling for new projects. As of now, Expressions of Interest (EOIs) have been given for projects worth 100 MW in Batticaloa and 150 MW in Hambantota. 

Further, we have issued a Letter of Intent (LOI) for Adani, which is one of the mega-scale projects. We will receive a comprehensive project proposal from the company, including the tariff proposals. Once everything has been sorted, we will give the green light to go ahead with the project. 

The first 2,500 MW will be added to the existing grid through the existing transmission line. But from 2026 to 2030, there should be aggressive infrastructure development in order to add another 3,000 MW to reach the target of 70%. For that to be achieved, there must be significant new investment. 

Earlier, the achievement of RE targets was considered impossible, but now it has become an easy task given the right investor climate. We have guaranteed a transparent mechanism; those willing to invest can come forward with proposals.

What are your plans for Liquefied Natural Gas (LNG) developments, which have been delayed for many years?

Discussions are currently underway to develop the LNG pipeline and the terminal. Once the discussions are finalised, steps will be taken to implement the finalised proposals. At the same time, one LNG power plant at Kerawalapitiya is now nearing completion. Once it is completed, we will be able to operate on diesel for one year and within that period, there has to be a final decision on the LNG supply as well. 

The national grid reportedly has a deficit which requires the purchasing of emergency power. Does the deficit still exist and if so, how does the CEB manage this? What happened to the supplementary power proposals?

We did not purchase supplementary power, instead we utilised 1 MW of generators to meet the power deficit in the southern region. At present, there is no such deficit. The deficit was in the southern part of the country. 

The CEB engineers and technicians have successfully solved the issue by utilising 30 power plants of 1 MW capacity to provide an uninterrupted supply of power. We were therefore able to save billions of rupees that we were supposed to have paid to the private power plants as capacity charge.

PHOTO PRADEEP DAMBARAGE