By: Staff Writer
May 26, Colombo (LNW): The Ceylon Electricity Board (CEB) has put forward a controversial proposal to increase electricity tariffs by 18.3% for the final seven months of 2025, even as hydropower sales—the country’s cheapest and cleanest energy source—have plunged by a staggering 61% in the first quarter of this year compared to 2024.
This move comes amid rising operational costs and a significant revenue shortfall that has deepened the board’s financial challenges.
Government statistics reveal that hydropower sales dropped from Rs. 1,119,999 million in Q1 2024 to Rs. 434,406 million in Q1 2025, marking a decline of Rs. 685,593 million.
The sharp fall has contributed to mounting losses at the CEB, which now seeks tariff revision approval from the Public Utilities Commission of Sri Lanka (PUCSL) to offset an anticipated Rs. 42.2 billion revenue gap.
According to the ‘Report on Financial Performance of the Government up to 1st Quarter Ending 31 March 2025,’ the total estimated expenditure for CEB and the Lanka Electricity Company (LECO) from June to December 2025 is Rs. 276.5 billion.
This includes Rs. 156.6 billion for energy expenses, Rs. 45 billion for capacity costs, and Rs. 14.1 billion in finance charges. However, projected revenue under the current tariff structure stands at only Rs. 230.7 billion, highlighting the scale of the deficit.
The tariff revision proposal accounts for recent fuel price adjustments, including auto diesel at Rs. 274 per litre, furnace oil at Rs. 167, naphtha at Rs. 131, and coal at Rs. 45.41 per kilogram, as well as an exchange rate of Rs. 303.33 per US Dollar. Finance costs have been updated based on the Average Weighted Prime Lending Rate (AWPLR) of 8.45%, estimating Rs. 14.06 billion in finance expenses.
CEB officials have expressed concern over the PUCSL’s clawback mechanism applied to operational expenditures earlier this year and unresolved issues regarding transmission revenue discrepancies. Revised distribution revenue caps for the second half of 2025 have been set across various distribution licenses (DL1 to DL4), reflecting ongoing regulatory challenges.
To alleviate financial pressures, the government approved several debt management strategies under Sri Lanka’s IMF-supported Extended Fund Facility (EFF) programme in February 2025. Measures include debt swaps, extended repayments, syndicated financing, and restructuring outstanding liabilities.
In response to queries about the sharp reduction in hydropower generation, CEB Spokesman clarified that hydropower output is largely constrained by factors beyond the board’s control.
Water releases at key hydroelectric sites such as Laxapana and Mahaweli are dictated primarily by drinking water requirements, determined through regular coordination meetings involving the CEB, Department of Irrigation, Mahaweli Authority, and the Environment Ministry.
“Power generation is not the priority when it comes to water release,” Wimalaratne emphasized, explaining that environmental and community needs dictate water flows, which in turn limits hydropower capacity.
Seasonal weather variability and extended dry periods further reduce hydro availability, forcing greater reliance on costlier thermal power plants and the Norochcholai coal plant, especially during nighttime when solar power is unavailable.
“If water is not released from Laxapana, downstream areas such as Labukele will face severe impacts,” he added, underscoring the complex balancing act between environmental management and energy production.
