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Electricity tariff hikes of 25 pc likely
View(s):By Namini Wijedasa
The Ceylon Electricity Board’s cost estimates for this year are being evaluated by the Public Utilities Commission (PUC) with a likely tariff hike of more than 25 per cent.
The CEB has projected that it would cost the board Rs. 268 billion to generate, transmit and distribute electricity this year. Generation alone will amount to Rs. 235 billion. The estimate last year was Rs. 218 billion. Although the PUC had whittled this down to Rs. 186 billion, it still resulted in a 25 per cent increase in electricity prices to consumers.
The revised cost estimates for this year are likely to be approved this week, PUC Director General Damitha Kumarasinghe said. Based on this, the CEB would calculate its tariff proposal. The PUC would evaluate the proposal and open it up for public consultation. It would be six to eight weeks before the new tariffs were decided, Mr. Kumarasinghe said.
Meanwhile, power sector sources said the CEB had submitted two separate estimates to the PUC this time. The first was sent in December, when it had seemed that severe drought conditions would force the CEB to depend extensively on expensive thermal power generation. By September 2012, hydropower reserves were down to 290 gigawatt hours of power, the lowest ever in history. Heavy rains followed and the CEB changed its estimates to reflect the improved hydro situation. Storage levels rose to 1,100 gigawatt hours in December.
But the CEB also learnt that the Ceylon Petroleum Corporation might increase the price of fuel used in thermal power generation— heavy fuel oil, naptha and other power generation fuel. The new estimates, therefore, took into account this “contemplated fuel price hike”.
No such increase in fuel prices has been announced yet. Petroleum Industries Minister Anura Priyadarshana Yapa said the only topic under discussion was whether the CPC should stop selling fuel to the CEB at low prices. But that debate has been going on for several years. The CPC’s biggest client—and largest debtor—is the CEB.
The PUC’s approved tariff methodology states that electricity rates must be adjusted, upwards or downwards, twice a year. Along with other measures and prerequisites, its objective was to bring the loss-making CEB to breakeven point by 2015.
“But the issue is that none of the pricing reforms are being implemented as required by the Commission’s own methodology,” energy expert Dr. Tilak Siyambalapitiya said. “There have been no price increases or no adjustments for inaccuracies. We are back to ad hoc, occasional, uncalculated price increases or no increases.”
“What we are seeing is the good old methodology of electricity pricing where the CEB tells the Treasury it needs so much of a price increase,” he recounted. “The Treasury looks around and says, alright, you can have five per cent. And there’s no talk of what happens to the balance.” In the end, Dr. Siyambalapitiya said, the Treasury steps in to settle part of the CEB’s fuel bill to the CPC.
Mr. Kumarasinghe said the Commission used two parameters when deciding a tariff increase. “One is that the proposed tariff structure does not go beyond the approved cost,” he explained. “The second is we need to ensure that government policy is implemented through this tariff.” “We need to instruct the CEB and the LECO (Lanka Electricity Company) to accommodate that policy. Then, if the price goes down and causes losses to the CEB and the LECO, the Government must come up with additional funds as subsidy.
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