Amid Sri Lanka’s sweeping electricity sector restructuring, the Ceylon Electricity Board’s (CEB) recent tariff revision proposal has ignited fresh controversy over pricing fairness, regulatory integrity, and adherence to International Monetary Fund (IMF) commitments.
Coming at a moment when the state power utility is being unbundled into six separate entities, the proposal for an 11.57 % tariff increase for the January–March 2026 quarter has drawn sharp scrutiny from analysts, consumer groups, and the Public Utilities Commission of Sri Lanka (PUCSL).
CEB argues the hike is needed to bridge a projected Rs 13.1 billion revenue gap based on forecast generation costs, hydro conditions, and demand growth. However, data from 2025 reveals a more nuanced picture: while CEB reported a modest profit in the quarter ending June 2025, its larger half-year accounts showed significant cumulative losses.
Equally telling, PUCSL regulatory reviews found surplus revenues from prior periods that were adjusted against shortfalls, highlighting that over-recovery occurred in earlier tariff cycles.
Under the IMF-backed cost-reflective tariff framework, electricity prices must reflect efficient costs and any excess revenues must be passed back to consumers through tariff adjustments or Bulk Supply Tariff Adjustment (BSTA) mechanisms. In 2024-25, PUCSL’s calculations resulted in an effective 44 % reduction in tariffs from early 2024 levels, and on several occasions the regulator rejected CEB’s hike proposals entirely, citing affordability and prior surpluses.
These decisions stem from rigorous application of the tariff methodology, which scrutinises not only cost forecasts but actual revenue performance. The regulator’s actions suggest that at times CEB retained more revenue than allowed, requiring downward tariff pressure — a corrective measure aligned with IMF commitments. Yet, the proposed 2026 hike tests these principles.
Critics say the timing is problematic: it comes just as restructuring plans will split CEB into multiple companies, a move that will alter cost allocations and expose consumers to potentially higher costs if economies of scale are lost. They argue that instead of rate hikes, emphasis should be placed on improving operational efficiency, enforcing PUCSL cost discipline, and ensuring transparent power purchase agreements.
For the new National People’s Power (NPP) government, this tariff debate is a litmus test of its economic stewardship. Approving a substantial increase now could be seen as contravening the IMF’s cost-reflective tariff commitments and ignoring documented surpluses. Rejecting or tempering the hike, on the other hand, would reinforce regulatory autonomy and consumer protection but could intensify financial stress on the fledgling utilities post-unbundling.
In the end, whether tariffs rise, fall, or stay unchanged will indicate how seriously Sri Lanka’s energy governance reforms and IMF obligations are being implemented in practice, beyond theoretical frameworks and budget projections.
