18th February 2001

Power games

By Hiranthi Fernando, Chandani Kirinde and Tania Fernando

Corruption, misman-agement and failure to implement power generation plans on schedule have put the country on the brink of another power crisis with electricity rates expected to sky rocket in the coming months.

The 25 per cent surcharge on electricity bills effective from next month, is likely to be just the start of more shocking increases for the consumer.

While fingers are being pointed in all directions, those holding the top posts in the Ceylon Electricity Board and the Ministry of Power and Energy have maintained a deafening silence on how the present situation came about.

Experts say that the impending power crisis has nothing to do with the water levels in the reservoirs, which has been blamed for all previous power shortages.

According to Dr. Susantha Perera, CEB's Chief Engineer and President of the CEB's Engineers Union (CEBEU) and Dr. Tilak Siyambalapitiya, former Chief Engineer of CEB the present weather patterns were expected.

"No one should blame the weather for the present crisis or high oil prices as the cause for the surcharge," Dr.Siyambalapitiya said."It is the non-implementation of power plant projects on time."

He said the CEB has 50 years of very good weather data and a regular pattern of drought in the catchment areas is foreseen every four years with the first four months being the driest.

Sri Lanka's power generation is heavily dependent on hydro power which generates almost 70 per cent of electricity while the rest is thermal based.

The CEB's Generation Planning Branch, which publishes a 15 year plan for future generating capacity, in its report for 1999-2013 detailed the necessary plants to be implemented so that the country would have a sound energy policy that would put an end to the regular power cuts as well as help stabilize electricity rates.

This rolling plan is updated each year by trained engineers taking into account new technology and the demand for the next 15 years. It is also worked out at the lowest cost to the economy. After Upper Kotmale and Kukule projects, no more major hydro projects that can compete with thermal projects have been envisaged. The future expansion is based on thermal power.

The plan had recommended two combined cycle plants each of 150 MW capacity, to be implemented by the end of 2000. However, these have just begun construction and will be commissioned way behind the scheduled dates. If these two plants were in operation the current crisis may have been averted.

Questions have been asked regarding the delay in implementing decisions and whether the CEB is not being allowed to make the decisions.

According to the Engineer's Union it is the responsibility of the management to ensure that recommendations made in the plan are implemented.

Under the CEB Act of 1969, the Board of Directors have been given enormous powers to make policy decisions.

However all power generations plans have been stalled and instead consumers are being asked to pay higher bills as the Board makes short term power purchases at exorbitant prices.

Ten months ago, CEB hired 60MW of emergency power from a Dutch company, Aggreko. Due to the urgency of the power situation this purchase was not subjected to the usual tender procedure.

In fact the president reprimanded the officials concerned for circumventing the tender procedures. In the past ten months alone it is learnt that the CEB has paid in excess of Rs. 1440 million on rental.

In addition to the heavy rentals, the CEB has to provide fuel, lubricants and running costs. Even when no electricity is purchased, a weekly rental has to be paid for availability.

According to world market prices, these plants could reportedly be purchased outright for Rs.800 million.

The final outcome is that the CEB is purchasing power from short term hired plants for Rs. 12 a unit, while selling it at Rs.4.60. This entails a daily loss of Rs. 11 million.

The surcharge on bills from March to December, 2001 is expected to bring in Rs. 4000 million. However, interest payment alone on short term loans amount to Rs.3000 million.

The Engineer's Union had repeatedly recommended to the CEB hierarchy that short power cuts be imposed during the peak period so that a bigger power crisis could be averted. When cuts are not imposed, the alternative is more short term hired plants for electricity generation which would mean the consumer having to pay more and more for their power supplies.

The union's President Dr.Perera said the 1996 blackouts came to a critical point because even at that time the engineers recommendations for short term cuts were ignored.

The result was the public being subjected to eight hour power cuts daily which caused great inconvenience to them and affected the economy.

The CEB which had a credit bank balance of Rs.3075 million at the end of 1999, is now in the red with an overdraft of Rs. 4000 million.

The overdraft, which is increasing every month is predicted to reach Rs.18 billion by the end of the year.

Sri Lanka's electricity demand upto 1996 was met solely by CEB owned hydro and thermal generating plants, but since then, the private sector too has participated in power generation.

The existing generating system in the country is predominantly owned by the CEB which is about 91 per cent of the total installed capacity while the balance is owned by independent power producers.

The demand for electricity in the country has been growing at an average of 7 per cent per annum in the past 20 years, meaning the demand has doubled every ten years.

The Privatization of power supply has both been a bane and boon. "The Government has adopted a policy that all future thermal power plants will be done by the private sector.

However, the problem is that the private sector is interested in quick pay back projects that are expensive," CEB's former chief engineer Dr.Siyambalapitiya said.

This is the reason that the private sector has shown little interest in the proposed coal power project, which would need four to five years to be in operation. According to Dr. Siyambalapitiya, coal is the only technology that can deliver electricity below the average selling price of Rs.4.60 per unit. Coal can be generated at Rs.3.60 per unit (taking the US $ at Rs.85), while the cheapest oil plant would generate at around Rs. 5.70 per unit.

The awarding of tenders in the CEB is also heavily criticized by the officials of the CEB.

The son-in-law of a top official (NOTE- A G/M/s son-in-law - not for publication) of the Board benefits by being well connected and has been awarded many a tender as well a few selected businessmen who are on good terms with some of the top shots at the Board.

In a recent case, tenders were called to purchase 4000 aluminium rods, a deal worth around Rs. 20 million but allegedly as one of the favourites was unable to clinch the deal, the number of rods purchased was brought down to 1000.

The CEB is also paying nearly Rs15 million monthly for the 497 vehicles it has hired, about 90 per cent of which belong to CEB employees.

This is inspite of the fact that 57 vehicles belonging to the Board including cars, jeeps and double cabs that were given to the Ministry of Power and Energy are yet to be returned.

"When professional bodies are adulterated with political henchmen, obviously this kind of mismanagement will take place", a top official of the Board who wished to remain anonymous said.

He said it was the consumer who had to pay the price for continuous bungling by CEB. He warned that the 25 per cent increase in March would in no way mean the end of price hike in electricity cost. It would reach a 100 per cent in the coming months just to keep the CEB from crashing.

"The CEB has a social responsibility to provide electricity to keep the country's economy going. The people will have to keep paying and if the mismanagement and corruption isn't stopped, things will continue to get worse," he warned.

Meanwhile, numerous attempts to contact the Chairman, Arjun Deraniyagala by The Sunday Times failed. His three secretaries kept saying that he was at "a meeting, at lunch, or busy", and therefore unable to give us an appointment.

It's good living for some

With the CEB asking for austerity from its consumers, it has still proceeded with the construction of a now controversial Bungalow costing Rs. 45 million.

The initial estimate for the approx. 4500 sq. ft was around four million rupees. As to how the budget went through the roof to reach Rs. 45 million is any body's guess. The construction was estimated under the wet blanketing project of Samanalawewa. With three circuit bungalows already existent, CEB unions charge that this venture is an unnecessary expense.

The Japanese contractor who was awarded the contract had sub contracted it to locals who have been paid Rs. 34 million for the period March 1 to March 31, 1999.

Other expenses reportedly include Rs. 2.5 million for electrical and air-conditioning, miscellaneous costs amounting to Rs. 2.8 million and a design fee of Rs. 2 million. With the finishing touches to the bungalow being still underway, the final cost is expected to exceed Rs. 50 million.

Inside the glass house

Editorial/ Opinion Contents