• Recent tariff hike not sufficient, CEB still at loss of Rs. 300 b
• CEB needs Rs. 865 b, but only Rs. 505 b approved by PUCSL
• Electricity costs high, but people must pay for what they consume
• Can go for zero power cuts with available fuel and hydro power, but costly
• No base power plants connected to grid after Norochcholai in 2013
• Installed total capacity is 4,300 MW, but demand increases annually
• Kerawalapitiya LNG plant ready; LNG supply has not been finalised yet
• Must increase renewable energy as much as possible, as early as possible
• CEB must be restructured; unbundling should also be done through it

By Maheesha Mudugamuwa Despite the recent electricity tariff hike, the Ceylon Electricity Board (CEB) is still operating at a massive loss, according to CEB Chairman Nalinda Ilangakoon. In August, the CEB introduced a 75% overall hike for electricity bills for the first time in nine years. “We have requested Rs. 865 billion per year to supply an uninterrupted power supply considering the external factors such as dollar rate fluctuations, fuel prices, etc. But the PUCSL has approved only Rs. 505 billion, so we are still at a loss of around more than Rs. 300 billion,” he said in an interview with The Sunday Morning last week.   Ilangakoon said the country could go for zero power cuts with all available sources such as fuel and hydro power, but noted that it would cost the CEB more as well as use up more foreign exchange. “We should supply uninterrupted and least-costly electricity; it is only then that industries can survive. However, we have made very slow progress even from the administrative side as well as from policy-making levels,” the CEB Chairman noted. Following are excerpts of the interview:   Sri Lanka is suffering from an average electricity deficit of 300 MW and as a result the country is facing power cuts of over two hours long daily. What is the extent of Sri Lanka’s power outage problem at the moment and is it likely to get worse?   We have to look at this problem while considering what has happened in the past. We need to understand the capacity of power plants which have been set up for the last so many years. As we all know, after the Norochcholai Power Plant was connected to the grid in 2013, there were no base power plants commissioned except for several megawatts of renewable energy being connected. As you said, the deficit is about 300 MW. That is as of now. The installed capacity total in the country as of now is about 4,300 MW. The yearly increase of power demand is about 5-6%. I will not find fault with anyone, but you have to understand that setting up a base power plant to supply a continuous power supply to the country has not been addressed properly by any of the parties. Therefore, now we have only a few options available.  As I mentioned, we will have to face this problem starting next year. We can go for zero power cuts with all available sources such as fuel and hydro power, but that will cost the CEB more as well as use up more foreign exchange. We have to spend about $ 100 million for fuel for CEB. One option is to go for some Individual Power Plants (IPPs). We need to float tenders instead of buying emergency power. That is the most feasible system for buying power as we don’t have any other system to buy power immediately to solve urgent requirements. Then we need to go for as much renewable energy as possible, as early as possible. However, even if we seek approval for a small renewable energy project such as a solar Photovoltaic (PV), it takes about one-and-a-half years to get approval, so we have to go for a very aggressive plan to do so. Another available option is Liquified Natural Gas (LNG). We have to go for LNG plants. Next year in June we are supposed to get the Kerawalapitiya Power Plant, which can be run with LNG or diesel. However, the problem is from where we are going to get LNG. The plant is ready but the LNG supply has not yet been finalised. We have to make LNG available as early as possible to run that plant.   How effective has the CEB been thus far in helping to solve the existing crisis?   The problem has been there for many years but nobody was worried about it. There has been very slow progress made even though the continuous supply of electricity is one of the most essential tools for the development of the country. We should supply uninterrupted and least-costly electricity, only then can the industries survive. However, as we can see, we have made very slow progress even from the administrative side as well as at policymaking levels. The concept here was that if we have fuel, we will provide electricity and if we don’t, there is no electricity. There was no other plan. We can and should go ahead with renewable energy to overcome the current crisis. The Government introduced a 70% renewable policy; that should not be coming from the Government but from the professionals. It is their responsibility. They should make a plan to provide uninterrupted power supply. There is no plan as such. Even if there were plans, nothing had been implemented. The last power plant came in 2013 – that is Norochcholai – and after that they reduced the tariffs, following which there were no new power plants introduced. Who is responsible for this? Even to resolve the issue, what we see and get are negative responses.   What is the current status of the CEB’s restructuring process? What sort of changes would it bring to the CEB and will it divide the CEB’s generation, transmission, and distribution sectors?   This is what the CEB needs the most at the moment. This is a monopoly. The CEB Act ultimately created a monopolistic system. Generation is from CEB, transmission is from CEB, and distribution is from CEB. None of the other countries have this type of a model that drives the country to a position where customers suffer, because they have no other options as there are no competitors.  We have to unbundle. Generation has to be a separate entity, transmission another, and distribution another, since this is a commercial operation and you have to give it a commercial face. At present this is not a State or semi-State institution. Prices are decided by the Public Utilities Commission of Sri Lanka (PUCSL). Some instructions come through the Government. The Treasury is funding it. For example, even if fuel prices rise, we can’t increase prices and if they drop, we cannot reduce prices. This should be positioned like a commercial organisation. You have to do your costing properly. You have to manage your expenditure properly. You have to sell power at a reasonable price. If you do it as a service, then we should at least go for breakeven prices. Single buying options should be removed and a competitive system should be introduced. If someone can engage in generation by themselves, let it go. If someone can sell electricity at a lower price, they should be able to do that. That type of strategy has to be set up.   Is there any plan to privatise any of these sectors, as alleged by unions?   Unions can come out with their opinions. As of now, as the Chairman of the CEB, I have not been given any indication of how this business model will run. I don’t know why you ask whether they are going to privatise it or not. As per my knowledge, I don’t know about it. What the Government is trying to do by reforming the CEB is to make it one of the most efficient and accountable entities, so the changes have to be made. This situation and the unions have been there for many years. Who has done their part to set up a new power plant, which we need? Policy-level changes, Government-level changes, and other aspects are all things that we need, but nobody has ever succeeded in developing the entity. The unions may say things are at this level now because of their fight, but this would not happen in the private sector. To have unions, we should have institutions. If this is sinking, nobody will survive.   The CEB has recently introduced a new tariff mechanism. Has it helped the CEB to overcome its financial difficulties? Is it still incurring losses and debt?   We have requested Rs. 865 billion per year to supply an uninterrupted power supply considering external factors such as dollar rate fluctuations, fuel prices, etc. However, the PUCSL has approved only Rs. 505 billion, so we are still at a loss of more than Rs. 300 billion.  A unit of electricity which cost at around Rs. 30 was sold at Rs. 18 till September and a unit that cost Rs. 35.80 was sold at Rs. 27.50. We are still selling a unit at a loss of around Rs. 8.50. The CEB is still making a loss. As we have anticipated, this year the loss will be around Rs. 150 billion. Next year, we have forecasted the loss at Rs. 400 billion. This tariff increase is not sufficient. The economy is based on subsidies. People expect subsidies and the Government is preparing to provide them. Until we come towards the actual cost, we can’t bring in new utility companies. Though we don’t like it, we have to provide electricity at a rate that can balance expenditure and revenue. People should support this. We have to pay for what we consume.  Some people challenge that we have mismanagement. We have to accept that. That’s why Norochcholai came into play. I accept the fact that people can’t bear the costs, but people should pay for what they consume. We should all get together and bring in renewable energy at community level. We are there to support them. We should bring the cost to its lowest, but not by subsidising.  The price increase allowed us an opportunity to pay debts. We have requested Rs. 865 billion considering the expenditure for this year. Therefore, we have to use a part of this revenue to pay off the debts. That is why we should have a debt restructuring mechanism. I believe that we should discuss the matter with the People’s Bank and the Ministry of Finance and carry out a debt restructure. We are in debt to IPPs, renewables, and the CPC.   Renewable energy is said to be the only solution the country has for the current severe energy crisis, but the country is yet to reap the full benefits of renewable energy sources. Experts allege that the ongoing economic crisis, triggered by the foreign exchange shortage, is posing a huge threat to the expansion of the renewable energy sector with the newly-suggested tariffs. What is your plan for renewable energy suppliers?   We have settled the bills until last October. We have prepared a plan to pay around Rs. 100 million per day among all these developers, but we have to pay as we earn. The industry is facing difficulties. There is a tariff hike that they have requested as well. We have given around Rs. 33 for solar PV, but developers think that we should pay Rs. 50-60 for rooftop solar. Why did we establish this rooftop solar system? The rooftop concept came in to make electricity bills zero. There are several systems – net metering, net accounting, net plus, and now the latest one is net plus plus.  The concept came to give an advantage to consumers – to install a solar panel on your rooftop and make your electricity bill zero or earn money by generating extra electricity by selling it to the CEB, not to install solar on someone else’s roof, because that person has no profit to gain as a consumer or an installer. For factories or warehouses, it is the same.  However, later on a subculture was created for a business model to install solar PV on other roofs. In that case, they should install ground solar and approach it that way. There was a delay in giving permission for small-scale solar power projects due to an issue in the Act, but the Minister rectified the issue. They had blocked the grid without giving permission and there had been delays. We received 47 projects asking for permission to issue grid connections. We signed with four companies and nine are pending. Provisional approval was given to process it. Then the Act was changed and we went ahead with the change as it was a policy-level decision to remove the barriers and expedite the process. We have already added 100 MW of wind power from the Mannar Wind Power Farm and 35 MW from the Broadlands Dam. We are planning to add another 20 MW from Uma Oya. The base power plant has been cleared and construction is going ahead.   What is the current situation of the LNG adoption plan? Is there an update on the US proposal?   There is a delay in taking a decision on LNG supply, but we should bring LNG to make it a firm base power source in the country as soon as possible. No matter who is taking the decision, somebody must do that.   What is the current situation of Norochcholai? Has the CEB made payments to the Chinese contractors or are they still pending? What about the overhaul plan for other generators and spare parts availability?    We are connecting the Norochcholai Power Plant, which is currently going through a major overhaul. There are no issues with regard to the payments for Norochcholai repairs that have already been conducted.    Is there any plan to sell the plant?   We have to have a look at what business model should be applied for Norochcholai. What was the initial investment and has that been recovered? What is the daily recurrent cost? How many employees are there? How much are we spending? What is the plant factor availability and the net present value? How much can we generate till 2040? What is the cost for sudden breakdowns and scheduled maintenance?  The problem is the people who protest against Norochcholai. Would they let us sell the plant if we want to do so? That is the culture in Sri Lanka that we should change. We owe a huge debt for Norochcholai. We have the asset, but it breaks and we can’t maintain it. When you look at it commercially, we purchase coal and we run the plant. Until recently, the Chinese came down for maintenance. We stopped that. When we do all these things, if we think about the long-term effect while considering the operational costs, why do we need to keep the power plant? We should retire the plant in 2040, but there is no decision to sell the plant as yet.