International energy specialist, Dr. Tilak Siyambalapitiya, believes that it is hilarious that the Public Utilities Commission of Sri Lanka (PUCSL) and the Ministry of Power, who by not fulfilling their legal obligations, have given Ceylon Electricity Board (CEB) ample room to give excuses for shutting down power plants and was now asking why power plants were shut down!
Dr. Siyambalapitiya, also a Cambridge University PhD Holder and a Chartered Engineer, was also the Chief Engineer in the Generation Planning Division of CEB until 1994. Here, he in conversation with the Sunday Observer.
Q. What is the cost of supplying electricity?
A. Let us go into fundamentals. The last approved cost of the supply of electricity published by the PUCSL was Rs 23.32 per unit of electricity (all inclusive).
This was for the six -month period, January to June 2018. Yes, that was two years ago. This information was available on the PUCSL website, but has now been removed.
Q. What is the income from selling electricity?
A. The present price of electricity was determined by the Prime Minister in September 2014, and subsequently approved by the PUCSL. The Prime Minister’s price structure, endorsed by the independent PUCSL yields an income of Rs 16.29 per unit of electricity.
So the approved cost is Rs 23.32 and the approved price is Rs 16.29, per unit of electricity. The consequence is that the CEB, the purchaser from generation, has to borrow from banks, to meet its expenses. The income from selling electricity meets only about 70 per cent of expenses.
Q. Who is the winner?
A. The People’s Bank, which lends endlessly to CEB, and gets its money back with a good profit. Cannot blame the banks; they are in business, and should make profits.
Q. so Why did CPC stop supplying fuel to the CEB?
A. Obviously, the CEB has a large outstanding bill to be paid to the CPC at any given time. The CEB buys fuel for its own power plants; private power producers buy fuel from CPC, produce electricity, and sell electricity to the CEB.
If the CEB does not pay private power producers, then they cannot pay the CPC. So, the first to lose the fuel supply are the private power plants, because they are private. Not CEB.
Q. How is an electric power system run?
A. It is run as a system, always with equilibrium. It has to produce electricity at the same time customers want electricity.
If at any time this balance is lost, then generators go into a cascading failure, and there will be a total blackout.
So if a power plant, private or CEB, stops for any reason (no fuel, no water, technical fault, sabotage), there must be other power plants to make up for the lost power plant.
If there are no such power plants, customers have to be removed to prevent a total collapse.
Q. Who decides on the cost of the electricity supply?
A. The Public Utilities Commission of Sri Lanka.
Q. Who decides on the price of electricity?
A. The Public Utilities Commission of Sri Lanka (PUCSL), always on paper, based on the wishes of their political masters, irrespective of which colour the Government is.
But on paper and in law, the PUCSL is the most ‘independent, commission on earth!
Q. Who is responsible for the financial predicament of the electricity industry?
A. Obviously, not the customers. They are faithfully paying their bills every month. Sri Lanka’s electricity bill collection rate is more than 99.5 per cent.
Q. Then who is it: Is it the CEB? Can they buy more solar power and resolve this?
A. Solar power is purchased at Rs 22.50 per unit. It has to be backed up with generating capacity (using oil) to meet the night-time demand for electricity, and for cloudy days.
So more solar will not make electricity cheaper. Remember the numbers: Approved cost: 23.32, approved price: 16.29
Q. How can you solve the problem?
A. According to the Electricity Act, and the PUCSL website, Section 30 of the Sri Lanka Electricity Act No 20 of 2009 permits the tariff to be set by the relevant licensee in accordance with a cost reflective methodology approved by the Commission.
This permits the relevant licensee to recover all reasonable costs incurred in the carrying out of the activities authorised by its licensee on an efficient basis.
Q. Is this happening?
A. No. the PUCSL has to answer. Why is the approved cost = 23.32, approved price = 16.29. Where have you asked the CEB to get the money from, to bridge the gap?
Q. What has the Ministry of Power got to do with this?
A. The Ministry of Power and Energy is the policy maker. The PUCSL has to implement the Government policy.
The national energy policy does not state that electricity will be priced 30 per cent below the cost.
Q. Then, what is the situation?
A. The game is the same. The players have changed. The end result cannot be different. ie Run down state institutions, forget key performance indices, live happily ever after! Do you remember the numbers? Cost = 23.32, price = 16.29, both approved by the ‘independent’ Public Utilities Commission.