Sunday, February 5, 2023

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Sri Lanka goes ahead with power sector reforms with cabinet endorsement 

The government will be implementing power sector reforms to restructure Ceylon Electricity Board (CEB) to make it a profitable entity serving the people.  

Minister of Power and Energy Kanchana Wijesekera announced that Cabinet approval was granted yesterday Monday 28 to the recommendations proposed by the Committee on Restructuring the Ceylon Electricity Board (CEB) appointed on August 05.  

The eight member committee has submitted its report couple of months ago making recommendations on the restructuring of CEB and improving power generation

Sri Lanka’s state-run Ceylon Electricity Board (CEB) has incurred a massive loss of Rs 44.31billion billion in the third quarter this year (from July to September) compared to Rs 21.45 billion during the same period last year  due to high costs for fuel and coal along with operational expenditure, the latest CEB financial statement divulged.

In the first eight months of 2022, the CEB has suffered a loss of Rs 108.6 billion rupees, and It anticipates a loss of RS.108 billion rupees in the fourth quarter despite electricity tariff reforms that were implemented in August, Minister Wijesekera said.

Explaining the reasons for the long-running losses of the CEB, the minister noted that a delay in imposing cost-reflective pricing was the main reason for the utility provider to make losses.

He disclosed the CEB expects an additional income of Rs.15 billion following tariff revisions in August this year.

The limited foreign currency liquidity and resultant shortages of key inputs including heavy fuels and disruptions to the CPC refinery have constrained operations of the CEB resulting in power outages creating significant economic and social challenges, financial statement clarified.

The CEB with a staff of  23 000 members consisting of over 1400 professionals has become a liability to the government due to its massive losses since 2016 as it has been selling electricity to its consumers below cost price which is around Rs 20 per unit.

CEB has massive hidden costs due to its inefficiencies in supply and administration, including over compensation and overstaffing, which are covered through subsidies by large-scale industrial and commercial clients and government guarantees.

The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of the CEB while taking measuresas soonas possible to enact it in parliament.

Successive governments had tried to introduce power sector reforms following recommendations of international agencies the World Bank (WB), ADB and JICA after conducting comprehensive feasibility studies spending millions of dollars from time to time during the past two decades.

As a last ditch attempt, Energy Ministry has been directed by President Ranil Wickremasinghe to expedite the restructuring process of unbundling the CEB by setting up of  state owned companies jointly with the private sector management to take over the generation, transmission, distribution and other functions.

There will be one joint venture each for generation and transmission and three or more for distribution, according to the CEB cabinet memorandum.

It has also been proposed to form separate power generation joint venture companies to undertake functions of the CEB relating to hydro electricity, thermal electricity, coal power and non renewable power generation, distribution, and other activities as well as Lanka Electricity Company (LECO).

These companies will serve as independent power producers (IPP) and will have to sell the energy they generate to the transmission company, along with other IPPs.

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