Sri Lanka’s new electricity law, certified by Speaker of Parliament Dr. Jagath Wickramaratne on August 18, officially came into force this week, signaling a major shift in the country’s energy policy framework. The Sri Lanka Electricity (Amendment) Act, No. 14 of 2025, aims to guarantee a more reliable and affordable power supply while promoting renewable energy development and reducing greenhouse gas emissions.
The Act replaces the National Electricity Advisory Council with a National Electricity Policy that aligns with the broader National Policy on Energy. It also renames the “Wholesale Electricity Market” as the “National Electricity Market,” marking a structural transformation in how electricity will be traded, priced, and regulated in the future.
This legislation supersedes the 2024 electricity law, which was tied to a package of International Monetary Fund (IMF)–backed reforms. Under IMF conditionalities, the government has pledged to restructure state-owned enterprises, including the heavily indebted Ceylon Electricity Board (CEB). The new Act lays the groundwork for unbundling CEB operations into separate entities for generation, transmission, and distribution. It also opens the door to greater private sector participation, both local and foreign, in key areas of electricity production and delivery.
Supporters argue that the Act introduces much-needed efficiency and accountability to a sector plagued by losses and chronic mismanagement. The unbundling of services is expected to make costs more transparent while improving competition and service quality. Provisions for renewable energy investments are also seen as critical to meeting Sri Lanka’s climate commitments and reducing dependence on expensive fuel imports. By creating a clearer policy framework, the government hopes to attract long-term investment and stabilize electricity tariffs for consumers.
However, the law has not escaped controversy. In its draft stage, both the private sector and the Public Utilities Commission of Sri Lanka raised concerns about ambiguities and possible governance loopholes. In June, the Supreme Court ruled that several provisions were unconstitutional. For instance, Clause 13(1)(c), which touched on the restructuring of employee rights, was deemed to violate the sovereignty of the people and required approval through both a two-thirds majority in Parliament and a national referendum unless amended. Other clauses were flagged for being vague or inconsistent with employment protections guaranteed under the Constitution.
Critics also fear that privatization could eventually lead to higher costs for consumers if safeguards are not properly enforced. Labor unions have warned of job insecurity during the unbundling process, while some analysts caution that excessive reliance on private investment may reduce the state’s ability to control strategic infrastructure.
The government insists that the new law is a necessary step to modernize Sri Lanka’s power sector, attract capital, and ensure long-term energy security. Yet its success will depend heavily on implementation, regulatory oversight, and balancing the competing interests of consumers, employees, and investors.