The Ceylon Electricity Board (CEB) has disbursed Rs. 59.454 billion for the purchase of electricity from the controversial private power supplier Ace Power Embilipitiya, a recent audit report from the National Audit Office (NAO) reveals.

The billions of rupees have been spent to purchase electricity from Ace Power Embilipitiya over a five-year period, spanning from 2016 to 2021. 

The disclosed amount of expenditure for this electricity purchase from Ace Embilipitiya Power Plant stands at a colossal Rs. 59.454 billion, inclusive of interest for delays.

The amount spent on Ace Power has become controversial as it amounts to 32% of the estimated cost of Rs. 183.642 billion, as outlined in the CEB Long-Term Transmission Development Plan 2018-2027. 

This substantial financial allocation has been designated for the expansion and enhancement of the transmission system within the 2018-2027 timeframe. Today, the CEB is struggling to find funding to expand its weak transmission line system.

With the CEB failing to implement the identified permanent solution to the electricity crisis as of 11 April 2016, the Public Utilities Commission of Sri Lanka (PUCSL) had demanded that it explain the manner in which the stability of the system could be improved following the establishment of the power plants on a short-term basis.

The CEB had stated that it was essential to improve the system even though the power plant had been so established on a short-term basis, the audit report reveals.

Accordingly, it had been observed that the main reason for the existing electricity crisis was the imbalance of the transmission system and that the additional power generation was a temporary solution.

This was also confirmed by the Cabinet Memorandum titled ‘Maintaining backup power capacity to face the possible future drought,’ presented to the Cabinet on 22 March 2016.

The report further highlighted that due to the CEB’s failure to meet long-term power generation targets, it had entered into a 10-year agreement to buy electricity from Ace Power Embilipitiya. 

Even after Cabinet approval to purchase the plant, the agreement had been extended for five years and six months, on four occasions, from 6 April 2016 to 8 September 2022. This extension had led to a missed opportunity for Government ownership. 

The purchase had not materialised due to discrepancies between the Government Assessor’s assessment and the owner’s selling price.

The valuation of the power plant by the Government Assessor was Rs. 2,370 million, as per the report.

The Standing Cabinet Appointed Negotiating Committee (SCANC) negotiated a reduction in the capacity charges with the company owners, resulting in a benefit of only $ 1,561,122 over five years.

However, a total of $ 29,085,134 had been paid as capacity charges for the same five-year period. 

Notably, a significant portion of this amount, $ 21,701,362 (equivalent to Rs. 3,650 million), had been paid for the non-escalable portion of the capacity charges, primarily for the benefits to the equity capital. 

This amount represents 127.7% of the bid of $ 17,000,000 (equivalent to Rs. 2,446 million) initially submitted by the power plant owners to sell the plant to the CEB, as revealed in the report.

In such a backdrop, the CEB, which was said to be incurring losses, had to once again purchase costly electricity from the same power plant a few months ago to meet the power demand in the southern region. 

Accordingly, to address the immediate electricity supply gap, the CEB has already procured 120 MW of emergency power from Ace Power Embilipitiya (100 MW) and Matara (20 MW).

When contacted by The Sunday Morning, CEB Chairman Nalinda Ilangakoon acknowledged that delays in constructing power plants had forced the CEB to purchase electricity from private companies.

He further explained that the CEB had initially delayed buying supplementary power and had been managing power requirements using its generators in the southern region. However, he said an emergency situation had ultimately necessitated emergency purchasing.

Ilangakoon also said that the CEB was actively working to reduce expenses while ensuring that its priority remained providing uninterrupted power supply to the nation.