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Power crisis: ‘Cut consumption or face power cuts’

13 Feb 2022

  • Finance Ministry alleges systemic failures, mismanagement at CEB
  • Claims ECB attempted to deliberately mislead policymakers
  • CEB may have to pay penalty fines for unused LNG in future
  • PUCSL to evaluate CEB 3-month load shedding request
  • Management of hydropower crucial for coming months: Rathnayake
  • CEB not ready to make payments for new fuel supply: CPC Chair
By Asiri Fernando The Public Utilities Commission of Sri Lanka (PUCSL) on Friday (11) issued an ultimatum to the paying electricity consumers that unless they reduce consumption, the regulator may have to grant permission for a request by the Ceylon Electricity Board (CEB) for planned power cuts in the next three months. The announcement by the PUCSL comes as the regulator prepares to conduct Sri Lanka’s first public hearing on energy sector-related allegations on 3 March, with the CEB and other stakeholders summoned to answer questions about the breakdown of the Norochcholai Power Plant in December last year, which resulted in an island-wide black out. The commission is also in the process of taking legal action against the CEB for unplanned power outages in the last few weeks, as no authorisation had been secured for load shedding. The breakdown of the coal power plant and delays in repairs forced the CEB to utilise stored hydropower in reservoirs faster than earlier planned – a decision which may well lead to more power cuts. The move by the energy regulator provides a wake-up call for Sri Lankans and policymakers about the long-term mismanagement of the energy sector while highlighting the lack of accountability of State institutions and consecutive governments in securing the country's energy security. Responding to a question, PUCSL Chairman told journalists that the “regulator has to step forward to take responsibility for the power crisis and manage it as no other State institution has come forward to do so” – a clear indication of the lack of accountability at the Ministry of Power and the CEB regarding the ongoing crisis, one that may well get worse as 2022 progresses. Last week, The Sunday Morning reported on allegations of a ‘man-made’ energy crisis, directed at CEB officials by their own Chairman, while the Minister of Power claimed that a small ring of engineers was following their own agenda and undermining national energy policy. The CEB Chairman blamed CEB officials for not expanding a number of generation projects and for dragging their feet on others, which were later cancelled. Allegations continue to mount about the State-owned utility provider, with the PUCSL Chairman joining the fray by raising concerns about the possibility of sabotage regarding sudden generation breakdowns and power outages. The Sunday Morning also reported that delays in extending servicing agreements with the manufacturers of the Norochcholai plant may have added to the delays in repairs, a shortcoming which resulted in hydropower being used to plug the unanticipated 300MW gap left by Norochcholai, further reducing water levels of the reservoirs. Long-term mismanagement and policy inconsistency has also left the CEB continuing to operate with a large debt, creating a significant burden on State banks and leaving other State entities such as the Ceylon Petroleum Corporation (CPC) unable to pay their bills. The end result of the CEB debt to CPC saw the Ministry of Energy refusing to supply fuel needed for thermal power generation last year. The depth of the national energy crisis became clearer following allegations regarding the CEB made by the Treasury Secretary S.R. Attygalle to the Ministry of Power in a letter (PED/1/CEB/2/11(IV). In it, Attygalle charges that senior CEB officials have taken action bordering on deliberate attempts to disrupt policymakers taking correct decisions. “It must be noted that the mixed and contradictory statements made and actions taken by responsible senior officers needs to be taken seriously with accompanying action taken, given that it appears to be bordering on deliberate attempts to disrupt policymakers from making correct decisions,” Attygalle charged, adding that the CEB had failed to effectively implement the national policy (introduced in 2019) of reaching 70% of power generation via renewable energy by 2030, with only 15 MW of renewable energy added to the national grid since then. Commenting on the financial management or lack of it at the CEB and lack of oversight by the Ministry of Power, Attygalle stated: “…Treasury notes that the CEB’s Cash Flow Statement, the Balance Sheet and the Profit and Loss Accounts reflect financial indiscipline that is the result of a number of reasons, primarily the lack of accountability and oversight by its management. The lackadaisical approach taken with regard to the recent power cuts and breakdowns, including system failures, has amply demonstrated the systematic failure by the CEB to address these issues, and its lack of accountability. This lack of accountability not only has an enormous cost to the economy in terms of rupees and cents, but also has created an environment that makes it difficult to attract investments.” The Treasury also accused the CEB of quoting inaccurate LNG demand prediction, which may result in the CEB having to pay suppliers a fixed annual fee for LNG, even though the quantity of LNG is not used. “…it is noted that in September 2021, the Additional General Manager (Transmission) of CEB has informed the Technical Committee I had appointed to engage with New Fortress Energy (NFE) that the requirement for LNG in 2023 would be only 8.9 MMBtu and the highest demand being 16.1 MMBtu in 2031, for the existing Yugadanavi Power Plant and the Sobadanavi Power Plant currently under construction. (Annexure 01) This assertion by AGM (Transmission) is in direct contrast to the procurement action undertaken so far by the Ministry of Power, including calling for tenders for FSRU and associated infrastructure to supply LNG assuming that the LNG requirement in 2024 to be 38 MMBtu, which would increase to 50 MMBtu/year towards the end of 10-year contract period (based on minimum guaranteed offtake specified in Schedule 6 Volume III of the Request for Proposal). Based on this specification in all probability, the CEB may have to pay a fixed minimum annual fee amounting to millions of dollars regardless of the quantity of LNG processed (re-gasified) in a given year. Accordingly, the terminal charges will increase the cost of RLNG delivered to power plants significantly, possibly making the operation of plants using LNG uneconomical. Please note that at the time of publishing the said RFP in February 2021, the Government policy of achieving 70% power generation by renewable sources was already in place,” Attygalle charged. The appeal by the PUCSL made to the consumers is an effort to better manage hydropower for the next three months, said PUCSL Chairman Janaka Rathnayake. Speaking to the media, Rathnayake stated that while fuel for thermal plants could be imported, the same could be done when it came to rain needed to maintain hydropower, adding that the regulator’s Board would meet with CEB officials to evaluate their request. Meanwhile, the tug-of-war between the Energy Ministry and Power Ministry to supply CEB with fuel continues. Responding to a query about continued fuel supply for power generation, CPC Chairman Sumith Wijesinghe stated that they were providing what they could, adding that as agreed the CEB was paying off some of the debt it owed the CPC.  According to Wijesinghe, the CEB owed the CPC nearly Rs. 98 billion by the end of December 2021, adding that a payment of Rs. 20 billion had been made last month. “However, you must understand that the payments they make do not reflect the rupee depreciation by now. When we bought the fuel and supplied it at a discounted price, we paid for it in dollars to import,” Wijesinghe added. When asked if the CEB was planning to pay for the fuel it needed as the Energy Ministry had earlier advised, he said: “It looks like the CEB is still not ready to make payments for the new shipments.” Attempts to reach the Chairman and the Acting General Manager regarding the allegations made by the PUCSL and the Finance Ministry failed. When contacted, the office of Minister of Power Gamini Lokuge said that he was on an overseas visit. While stakeholders with the State continue to play the blame game, Sri Lanka, battered by the Covid pandemic and economic mismanagement, may have to remain in the dark for some time in the coming months – even after paying the electricity bill.   


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