• Scrutiny mounts on proposed NEAC independence

The recently-gazetted Sri Lanka Electricity Bill has stirred discussions surrounding the proposed establishment of the National Electricity Advisory Council (NEAC), designed to advise the Power and Energy Minister on matters pertaining to the electricity industry. 

However, the council’s independence is now under scrutiny, raising questions about its autonomy in influencing crucial decisions in the country’s electricity sector.

The bill that is poised to be presented to Parliament for the repeal of the existing Sri Lanka Electricity Act No.20 of 2009 and the Ceylon Electricity Board Act No.17 of 1969, is aimed at implementing significant reforms within the electricity industry.

Once passed in Parliament, the act will facilitate the establishment of the NEAC. The act is said to empower the Public Utilities Commission of Sri Lanka (PUCSL), established under the Public Utilities Commission of Sri Lanka Act No.35 of 2002, to act as the regulator for the electricity industry.

The act further intends to introduce legislative measures applicable to the incorporation of corporate entities under the Companies Act No.7 of 2007, wherein all activities related to the generation, transmission, distribution, trade, supply, and procurement of electricity shall vest. 

Additionally, the act seeks to specify the processes applicable to all related activities, aiming to bring clarity and coherence to the industry’s operations.

Is the NEAC independent?

Section 3 of Part II of the bill outlines the establishment of the NEAC as a body corporate with perpetual succession and the authority to sue and be sued. While positioned to advise the minister, the NEAC’s independence comes into question, particularly considering its close ties to ministerial control and its influential role in organisational activities.

The bill reads: “(1) There shall be established for the purposes of this act, a council which shall be called and known as the National Electricity Advisory Council. (2) The council shall by the name assigned to it by Subsection (1), be a body corporate and shall have perpetual succession and a common seal and may sue and be sued by such name.”

As stated in Section 3(a) of Part II of the bill, the council shall be charged with the responsibility of advising the minister on all or any of the following matters, including:

1. Matters relating to the electricity industry and formulation of the national electricity policy in terms of Section 4 of the act.
2. Matters relating to the implementation of the electricity industry reforms in accordance with the provisions of the act, relating to the generation, transmission, distribution, trade, supply, and procurement of electricity in Sri Lanka.
3. On the modalities relating to the formulation of proposals and plans for the development of the electricity industry, including the establishment of competitive electricity markets including interconnections with regional markets through the reform process in order to ensure its successful implementation.
4. The coordination of activities of related agencies to ensure the optimal utilisation of indigenous energy resources, including renewable energy, modern technologies, and energy efficiency in the best interests of the national economy.
5. Matters related to the preparation of the Long Term Power System Development Plan in terms of the national electricity policy under the provisions of the act, including additions to the generation and transmission capacity, the ability of private sector investors to provide electricity generation capacity based on a competitive tariff structure, measures for the implementation of the Government’s climate change policies, and decarbonisation and renewable energy integration goals.
6. Matters relating to the formulation and the methodology to be adhered to in fixing the tariffs in terms of the national tariff policy, whilst ensuring a level of financial sustainability and a reasonable return on the investment of the regulated entities.
7. Any other matter connected with or arising out of the national electricity policy as the minister may refer to the council respectively.

As further stated in Section (4), the minister shall, with the approval of the Cabinet of Ministers, appoint five persons to be members of the council, one of whom shall be appointed by the minister as the Chairperson of the council.

Controversial powers

Despite its advisory role, the NEAC operates under the minister’s issued ‘directions,’ providing a framework for the discharge of its duties and functions. This arrangement allows the minister to appoint individuals to the NEAC, enabling the receipt of advisory input from appointed members.

The NEAC’s advisory scope covers the entire electricity industry and power sector, with the ability to ‘coordinate activities’ among related agencies, implying direct intervention beyond mere advisory capacity.

Under the NEAC’s structure stipulated in the bill, the minister retains full control, possessing the authority to appoint and dismiss members at will. Removal of members can occur by merely informing the Cabinet, particularly if they diverge from the minister’s directives or fail to align with his agenda.

Further, the NEAC is empowered to advise on the ‘formulation of proposals’ and ‘plans’ for the development of the electricity industry. Its authority also extends to intervening or influencing the preparation of Long-Term Power System Development Plans, involving aspects such as the addition of generating plants and private sector investors.

In a departure from the regulatory framework, the NEAC assumes a role in ‘fixing’ tariffs, typically a domain regulated by market principles or the designated regulator, based on Government policy advice and subsidies. This includes the determination of tariff ‘methodology,’ a responsibility originally designated to the regulator under the 2009 act (Section 30).

IESL raises concerns

Meanwhile, in a letter to Power and Energy Minister Kanchana Wijesekera, the Institution of Engineers of Sri Lanka (IESL) has noted that if the requirement of National Electricity Advisory Council was justified due to a national objective, including preparation of national electricity policy, issuing of policy guidelines, review of the Long-Term Power System Development Plan and the tariff policy, it should then be an independent council established by obtaining observations of the Constitutional Council for nomination by the minister/president.

Attempts made by The Sunday Morning to contact Minister Wijesekera and Ministry Secretary M.P.D.U.K. Mapa Pathirana proved futile. 

When asked by The Sunday Morning whether the board would submit its observations on the new bill, CEB Spokesman Deputy General Manager Noel Priyantha said the board had been involved in the process from inception and that there were no issues regarding the recently-gazetted bill.  

Attempts made to contact PUCSL Chairman Prof. M.A.R.M. Fernando and Sustainable Energy Authority (SEA) Chairman Eng. Ranjith Sepala proved futile.