The Ceylon Electricity Board (CEB) is currently refusing to pay interest on Rs. 10 billion in customer security deposits that have been made when opening new connections, until the state-owned entity returns to a financially viable status or better terms are negotiated, Mirror Business learns. Multiple sources have revealed to Mirror Business that CEB has refused to pay interest due to its current loss making status.
CEB General Manager A.K. Samarasinghe in an earlier occasion had stated that the non-approval of a cost-recovery pricing mechanism for electricity supply by the Public Utilities Commission of Sri Lanka (PUCSL) and the government’s failure to provide a subsidy to finance the interest payments weighed on the decision.
Multiple attempts by Mirror Business to reach Samarasinghe were unsuccessful.
Finance Minister Ravi Karunanayake had steamrolled CEB’s proposal last September to increase electricity prices by 5 percent to break even.
A cost-recovery pricing formula was supposed to be implemented by last December as a key measure of the US$ 1.5 billion International Monetary Fund Extended Fund Facility.
Although a formula was ready, Karunanayake last week said that more burdens shouldn’t be placed on the customers and that a new formula is currently being created with consultation from PUCSL and foreign parties.
PUCSL sources however said that no such consultation has taken place yet.
When inquired about CEB’s refusal to pay interest, CEB Spokesman Sulakshan Jayawardena said that the status quo is currently heavily in favour of the customer.
“There are of course two sides to every story. We’re providing electricity at subsidized rates for many customers. We also provide invoices on credit for one or two months, and electricity prices have only been reduced, not increased in recent years compared to price increases in other goods and services, so the interest payments have to be balanced with these benefits,” he said.
Therefore, he said that a committee has been appointed to discuss the rate of interest to be paid, and the date to commence payments.
“I agree that we need to provide the greatest benefit to the public, but our financial position also has to be taken into account,” he admitted.
According to the Electricity Act No. 20 of 2009, CEB is required to pay interest on customer security deposits—annually for retail customers and monthly for
“Those are provisions which only come into effect when a directive is issued on what interest rate to pay and stating from which date,” Jayawardena said. PUCSL directed CEB this January to pay interest effective from January 1, 2017 at an annual interest rate of 8.93 percent for 2017, with the rate linked to the Central Bank’s average weighted fixed deposit rates for future interest rate revisions.
“PUCSL has directed us, but we need to take everything into account,” Jayawardena said in defence of not paying interest so far.
When PUCSL made the directive, it had stressed that non-payment of interest on security deposits would result as committing an offence under the provision of the Electricity Act.
When contacted, Power and Energy Ministry Secretary Dr. Suren Batagoda speculated that CEB may only be delaying out of necessity.
“I don’t think they have refused to, because the ministry has given them the directive to pay interest. Maybe they haven’t paid interest yet because they haven’t set up the process,”
PUCSL Director General Damitha Wickramasinghe too painted CEB in a positive light.
“I think they have some concerns on the terms of the law, like whether they should be paying interest for deposits held since the 1960s. They haven’t refused to pay. The directive was enough for them to start paying interest, but they’re waiting for some more clarification,” Wickramasinghe said.
Meanwhile, a government official told Mirror Business under the condition of that anonymity that regional CEB officials are withdrawing security deposits made to regional CEB accounts.
However, Jayawardena said that adequate checks are in place.
“Two or three high-level regional official signatures are required to withdraw from CEB accounts, so there are always paper trails. Frequent internal audits are also carried out, so I don’t think that it is likely. The security deposits are also frequently transferred from the regional accounts to a central account,” he said.