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CEB’s Rs 17.2bn loss from costly naphtha in 2023 passed on to consumers
View(s):By Niranjala Ariyawansha
The Ceylon Electricity Board (CEB) suffered a significant loss of Rs. 17.27 billion in 2023 due to the high cost of purchasing naphtha for the 165 megawatt Kelanitissa Combined Cycle Power Plant.
The CEB bought naphtha from the Ceylon Petroleum Corporation (CPC) at inflated prices, ranging from Rs. 161 to Rs 263 per litre, while the global market price stood at about Rs. 110 per litre, The Sunday Times has reliably learned.
A senior official said, however, that the Rs 17.27b loss was fully recovered through a 3% increase in electricity tariffs.
The Ceylon Electricity Board (above) bought naphtha at inflated prices
“The electricity bill is generated based on a cost recovery method, and as a result, the CEB recovered the amount spent on naphtha through customers’ bills. However, the top management remained silent on this matter, while the CPC profited from the naphtha sales, covering both its profits and losses,” the official alleged.
In 2023, the CEB generated over 660 million units of electricity at the Kelanitissa plant, which relies on naphtha. Despite being established two decades ago to use naphtha as a low-cost by-product from Sapugaskanda Oil Refinery, the plant has been forced to purchase naphtha at prices higher than that in the international market, ultimately driving up the cost of electricity for consumers.
CEB’s total revenue from electricity sales in 2023 was Rs. 606.63b.
President and Minister of Power and Energy, Anura Kumara Dissanayake, has directed the CEB last week to purchase all fuels, including naphtha, diesel, and heavy fuel, through competitive open-market processes. This decision aims to reduce fuel costs. The CEB has started implementing this strategy.
In January 2024, the barge-mounted power plant at the Colombo Port called for an open tender for diesel. As a result, the CEB was able to purchase 39,600 litres of diesel at Rs 5 per litre, below market price, though then political decisions have since limited such competitive tenders, the official further said.
He said, however, a recent 18% Value Added Tax tax imposed by the CPC on naphtha in January 2024, a move not applied to other fuel types, has raised concerns. But naphtha, a by-product of crude oil refining, has not undergone any such value addition by the CPC.
In recent months, the CEB did not purchase naphtha as the plant was not dispatched at that price in the merit order, leading to a stockpile at the CPC. To clear these stocks, the CPC issued two international tenders in September 2024, but international bids came in much lower than the CEB’s offers. While the CEB submitted bids of Rs 154.89 and Rs 143.23 per litre for two tenders, the highest international offers were between Rs. 110 and Rs 115 per litre. As a result, no action has been taken, and the business has been put on hold, the official noted.
The Kelanitissa plant, which typically operates for six to eight months per year, is now running at full capacity due to maintenance work at one unit of the Norochcholai Coal Power Plant. Producing a unit of power at Kelanitissa costs Rs 50, and the plant needs one million litres of naphtha per day to operate at full capacity.
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