Long-term solutions needed for power crisis
View(s):Sri Lanka’s electricity crisis has in recent days, gripped the attention of the public with the Ceylon Electricity Board’s (CEB) decision to dramatically raise electricity tariffs, triggering a public outcry.
On Wednesday President Mahinda Rajapaksa, during a May Day rally, announced concessions for lower end users of power.
The current power crisis climate is surprisingly similar to a situation in 2008. The CEB in March 2008 increased its tariff rates for the supply of electricity by imposing a mandatory 30 per cent fuel surcharge on consumers using over 90 units of electricity per month, in a move to raise revenue and hopefully depress its colossal loss-making.
In the wake of public anger at the time the Institute of Human Rights (IHR) filed a fundamental rights petition in the Supreme Court on May 2008 requesting the court to order the establishment of an independent electricity price-regulator and for a switch to more cost effective power generation methods.
The petitioners in the 2008 case clearly highlighted that the root cause of Sri Lanka’s electricity issue lay in its power-generation mix with a heavy reliance on thermal power generation being completely unfeasible.
Sri Lanka depends heavily on high -cost thermal power (fuel oil) to supplement approximately 60 per cent of the total power generated, whilst hydro power accounts for the balance 40 per cent, a fact that the petitioners against the 2008 tariff hike clearly indicated.
The dependence on hydro power albeit its low cost is also imprudent due to the inconsistency and uncertainty in weather patterns that can lead to volatility in power generation. This was clearly reflected in 2012 when heavy drought depleted water reservoir levels and caused the CEB to revert to expensive thermal power generation methods and also apparent in 2007 before the 2008 tariff hike when hydropower generation reduced by 8 per cent due to low rainfall.
Moreover the fact that Sri Lanka experiences some of the most costly electricity rates in Asia further explains the case for a change in its power generation mix. The petitioners in 2008 noted that most international economies are using a combination of coal and gas fuel to generate power as in India, Thailand and Vietnam. Accordingly global coal consumption is expected to rise in excess of eight billion metric tons in 2025 with India increasing its share of power generated from coal to 69 per cent in 2004.
The mix of resources utilized for power generation in Sri Lanka is thus totally contrary to those utilized by other energy efficient countries, a systemic issue that the CEB has simply failed to tackle.
In addition the petition in 2008 stressed the importance of “having a competent, independent and powerful regulator” but like the need for a change in the power-generation mix this too has not been addressed as of today. The need for an independent regulator as a watchdog on the industry especially to stem the possibility of corruption is essential to determine and control tariff rates and monitor the efficient distribution of electricity to consumers across Sri Lanka. Furthermore the 2008 petition stated that if the Public Utilities Commission of Sri Lanka (PUSL) is to perform regulatory functions it is imperative that “the PUSL is vested with greater independence and not fettered by state influence or interference”.
Even countries such as Singapore have appointed a statutory authority to regulate matters pertaining to energy utilities such as electricity and gas, but not Sri Lanka, a problem that has been echoed since 2008.
In response to the 2008 tariff hike the petitioners in their submission to the Supreme Court called for the decommissioning of loss-making CEB thermal power plants and for their replacement with coal power plants. The petition also voiced the recommendations of many industry experts calling for the utilization of coal in the expansion of power plant projects in the future.
The proposed reforms suggested by petitioners and energy experts in 2008 would have restored the CEB to profitability approximately six years after the plan being implemented.
The petitioners in 2008 stated that if the CEB follows the power generation plans and tariff structures it relies on, the loss it is likely to incur in 2017 is estimated at approximately Rs. 57 billion, although CEB’s 2012 loss exceeded Rs. 60 billion.
However if coal is used as a replacement to fuel oil within the framework of a 10 year plan the CEB could reduce its losses substantially after four years and could potentially revert to profit-making after six years of implementing the said plan, the petitioners in 2008 said. The petitioners further noted that the rationale for this projection is “very elementary, in that, fuel is purchased by the CEB at very high prices and the price of fuel is constantly increasing in the world market and will continue to rise in the future, whereas in comparison, the increase in the price of coal will not be significant and coal will rise at a much slower rate than fuel oil.”
CEB Chairman W.B. Ganegala has stated that the revised electricity tariffs were introduced as an interim programme. “We expect that through the revised electricity tariffs, we will receive an income of about 45 billion rupees. If we do receive this money, then within this year we are prepared to implement our national plan to move away from high cost fuel-based power sources to cheaper sources like coal. 300 megawatts are generated at present at the Norochcholai Coal Power Plant,” he has said.
The irony is that despite repeated recommendations on the need to reinvigorate the energy sector, the government and the CEB is continuously treading the same path and avoiding the intrinsic problem.
The call for a switch to coal power generation has been echoing ever since the 2008 tariff hike and is still far from being fully implemented.
This brings us straight to the issue-Sri Lanka has experienced electricity tariff hikes in the past, in attempts to curb mounting losses in the CEB and hikes will continue to occur in future unless the government is committed to a strategic, long-term revamp of the energy sector. The tariffs are nothing more than a stop-gap measure with the CEB over the years having failed to address the root causes of its loss-making –heavy reliance on high-cost thermal power generation.
Against the backdrop of the 2013 hike calls for litigation are echoing amongst the public with the main opposition party, The UNP promising legal action against what is being labeled an irrational and insensitive move by the government. Yet like in 2008 it is unlikely that litigation will amount to any substantial difference as it is clear that what is needed to solve Sri Lanka’s severe electricity problem is not interim tariff hikes but rather long-term reform.
(SP)
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