By: Staff Writer
September 23, Colombo (LNW): Sri Lanka’s electricity pricing system came under sharp review this week as an International Monetary Fund (IMF) technical team met with Parliamentarians and government officials to examine reforms to the Ceylon Electricity Board’s (CEB) tariff methodology ahead of a key November 2025 deadline under the Extended Fund Facility (EFF) programme.
The joint session, led by IMF mission chief Delphine Prady, brought together the Committee on Public Finance (CoPF), the Committee on Public Enterprises (COPE), the Sectoral Oversight Committee on Infrastructure and Strategic Development, as well as officials from the Energy Ministry, Finance Ministry, CEB, and the Public Utilities Commission of Sri Lanka (PUCSL).
While described as a technical review rather than a policy-making exercise, Sri Lankan participants stressed that the tariff framework must strike a balance between cost reflectiveness, cost recovery, affordability, and renewable energy goals.
Cost Recovery and Investment
Officials noted that ensuring cost recovery is essential for the sector to meet its total expenditure, curb inefficiencies, and attract the financing and credit required for modernisation. Cost reflectiveness, meanwhile, would ensure consumers are billed in line with the actual cost of serving their demand, reducing the burden of cross-subsidies between customer categories. Without such measures, the power sector risks deepening losses and deterring investors.
Renewables at the Core
A central theme was Sri Lanka’s renewable energy target of 70% by 2030. Experts emphasised that achieving this will require not only expanding solar, hydro, and wind power but also investing in energy storage, transmission upgrades, and emerging technologies such as green hydrogen.
Thermal generation, while still part of the mix, was branded as “super expensive” and volatile, leaving the country exposed to global fuel price shocks. Renewables, though increasingly competitive, demand substantial upfront investment and long-term policy certainty.
Affordability and Consumer Protection
Participants highlighted the risks posed by volatile generation costs, stressing the need for accurate forecasting and predictable tariff structures to avoid sudden price shocks for households and businesses. MPs underscored the importance of protecting vulnerable consumers through targeted subsidies, safeguarding workers affected by restructuring, and ensuring that efficiency gains result in fairer outcomes for the public.
Governance and Transparency Gaps
The discussions also exposed weaknesses in governance, with concerns raised over incomplete cost breakdowns, opaque Power Purchase Agreements (PPAs), and inadequate information systems. Stronger regulatory independence and data integrity were deemed critical for applying an effective and credible tariff methodology.
Policy, Not Just Technicalities
Both IMF representatives and local stakeholders agreed that tariff reform cannot be approached as a purely technical task. Instead, it must be rooted in broader policy goals: building a financially viable electricity sector, accelerating the shift to renewables, protecting vulnerable groups, and enhancing transparency across the industry.
As the November deadline approaches, the debate highlights the difficult balancing act facing Sri Lanka keeping electricity affordable for consumers while ensuring the power sector’s sustainability and alignment with the country’s climate commitments.
