• CEB proposes retaining existing rates with no change
• CEB forecasts Rs. 38,917 m deficit despite no tariff increase
• PUCSL critiques CEB’s fuel price assumptions, revenue projections
• PUCSL sees Rs. 27.6 b savings with lower fuel prices

The Public Utilities Commission of Sri Lanka (PUCSL) has proposed an 11% reduction in electricity tariffs, directly opposing the Ceylon Electricity Board’s (CEB) recommendation of no tariff changes.

The PUCSL has outlined its position in a report submitted for public consultation on electricity tariff revisions for January 2025.

According to the commission, the reduction is achievable without jeopardising the energy sector’s financial stability.

The CEB has forecast its total energy costs, encompassing generation, capacity, transmission, and distribution, at Rs. 274,982 million, while projecting total revenue of Rs. 236,065 million, leaving a revenue deficit of Rs. 38,917 million.

Adjustments based on forecasts for Non-Conventional Renewable Energy (NCRE) and hydro generation reduce this deficit to Rs. 16,451 million.

The PUCSL’s analysis, which includes adjustments for fuel prices and a more comprehensive assessment of the revenue gap, aligns with the reduced deficit figure of Rs. 16,451 million. This analysis also supports the feasibility of a tariff reduction of approximately 11.84%.

The tariff review process, mandated under the Sri Lanka Electricity Act No.20 of 2009, commenced with the PUCSL’s call for proposals, leading to the CEB submitting its tariff revision plan on 6 December.

Stakeholders are invited to provide written feedback by 8 January 2025, with oral consultations scheduled from 27 December this year to 10 January 2025 across various provinces. The consultations will focus on the generation mix, fuel costs, hydro and NCRE generation, transmission and distribution costs, and the proposed tariff structure.

The PUCSL has also detailed revenue discrepancies for the first half of 2024 (H1 2024) in accordance with Clauses 2.5.3 and 2.5.4 of the tariff methodology.

During this period, the actual energy generation, adjusted for approved transmission losses, amounted to 7,995.52 GWh. The approved Bulk Supply Tariff (BST) energy rate for H1 2024 was Rs. 21.75/kWh, whereas the actual rate was Rs. 19.54/kWh, resulting in a revenue difference of Rs. 17,670.10 million.

For capacity rates, the average monthly peak demand during H1 2024 was 2,659 MW, with an approved BST capacity rate of Rs. 4,737,913.25/MW/month. The actual rate was Rs. 3,267,001/MW/month, leading to a revenue difference of Rs. 23,466.93 million. Together, the energy and capacity rate discrepancies created a total revenue shortfall of Rs. 41,137.03 million for H1 2024.

The PUCSL has allowed an additional Rs. 8,000 million for generation cost variations in 2024, allocating Rs. 4,000 million for January to June 2024. 

This adjustment is factored into the total cost to be recovered through end-user tariffs but is not reflected in the BST. Consequently, the total revenue difference for H1 2024 increases to Rs. 45,137 million.

The PUCSL has also identified potential reductions in thermal generation costs, estimating that prices for naphtha and furnace oil from the Sapugaskanda Oil Refinery could be lower than the forecasts submitted by the Ceylon Petroleum Corporation (CPC). 

If the CPC provides updated data consistent with the calculation method used in June 2022, adjusted for current crude oil prices and exchange rates, generation energy costs could decrease by approximately Rs. 27.6 billion.

The absence of formal fuel supply agreements between the CEB and CPC remains a critical issue, despite repeated directives from the PUCSL. This lack of agreements allows the CPC to adjust naphtha and furnace oil prices arbitrarily, which the CEB accepts without negotiation. 

Furthermore, Heavy Fuel Oil (HFO), a byproduct of the Sapugaskanda Oil Refinery with minimal commercial value, is being supplied to the Sapugaskanda Power Plant at commercial fuel oil prices of Rs. 179 per litre. 

For January to June 2025, 81 million litres of HFO are scheduled for supply, contingent on sufficient refinery production, as stated by the PUCSL.

The PUCSL has also noted inconsistencies in the CEB’s hydro generation forecasts, observing that seasonal variations deviated from historical trends and that hydro generation was under-forecast.

PUCSL operates with only 3 commissioners

Only three out of five members nominated for the Public Utilities Commission of Sri Lanka (PUCSL) have so far accepted their nominations, The Sunday Morning reliably learns.

PUCSL Corporate Communications Director Jayanat Herath said that despite the omission of two members, the commission could convene meetings and carry out pending work with the three members, as the commission would still have a quorum. 

He stressed that all pending approvals would be submitted to the commission and in its first meeting, to be held next week, they would go through the proposals and make decisions.

Last week, Ceylon Electricity Board (CEB) Spokesman Eng. Dhanushka Parakramasinghe said that several Renewable Energy (RE) projects were also pending approval from the PUCSL. 

Meanwhile, the new tariff proposal submitted by the board is also under the PUCSL’s purview. 

Herath stated that the commission would proceed with the electricity tariff revisions, with the final decision to be announced in January as previously planned. 

As learnt by The Sunday Morning, the PUCSL has not met for over three months.

The PUCSL, which regulates key sectors such as electricity, water, and transport, is mandated to have five members, including experts in engineering, law, and business management, as per the PUCSL Act No.35 of 2002. 

Section 3 of the act specifies the composition of the commission, while Section 5 outlines the procedures for filling vacancies within three months of their occurrence.

As previously reported, the Constitutional Council had approved the appointment of five new members to the PUCSL during a meeting held on 16 November. 

The appointees are Prof. K.P. Lalith Chandralal, Prof. W.B.A. Rodrigo, Dr. M.P.S. Fernando, P. Hennayake, and High Court Judge Vikum Kaluarachchi.

– By Maheesha Mudugamuwa