Power monopoly threatens reform gains, Advocata cautions

Sri Lanka risks reversing the crucial energy reforms, unless it holds the line on the 2024 Electricity Act, the Advocata Institute cautioned yesterday, calling on the government to reaffirm its commitment to overhauling the power sector.

The Colombo-based think tank stressed the need to legally unbundle the Ceylon Electricity Board’s (CEB) core functions and push for a more competitive, transparent electricity market.

“Sri Lanka cannot afford to fall back into a monopoly-driven model at a time when attracting private capital and enhancing efficiency are critical to economic recovery and energy security,” said Advocata Institute Chief Executive Officer Dhananath Fernando, referring to the act as a landmark step towards a more efficient and accountable energy future.

Advocata, in its newly released paper ‘Powering Forward: Why Unbundling the CEB is Critical for Sri Lanka’s Energy Future’, warned that the proposed amendments to the 2024 Electricity Act threaten to reverse decades of progress in the sector. The institute stated that such reversals could severely undermine Sri Lanka’s economic and fiscal stability. 

The paper critiques some of the 2025 amendments to the Sri Lanka Electricity Act, which seeks to reconsolidate the CEB by placing generation, transmission and distribution under 100 percent state control.

Advocata argued that this reversal would entrench inefficiencies, deter private investment and further strain the already constrained public finances. The position paper outlines three key reasons for why Sri Lanka should reconsider reconsolidating generation, transmission and distribution under 100 percent state control. 

Sri Lanka’s challenges demand private capital: continued reliance on public financing to cover the CEB’s losses and infrastructure needs is fiscally unsustainable. Circular debt, state guarantees and legacy liabilities already burden the Treasury, threatening Sri Lanka’s ability to maintain its primary surplus and meet the International Monetary Fund commitments. 

They also undermine the country’s creditworthiness, limiting access to capital markets and affordable borrowing. Unbundling the electricity sector can help address this by creating a range of investment opportunities, allowing private investors to engage in specific segments that align with their risk-return preferences.

Drawing on some global examples, the paper demonstrates how unbundling has improved operational efficiency, transparency and service delivery, particularly when supported by competitive tendering and strong regulatory oversight. 

Noting that strategic interests can be protected without full state ownership, the think-tank highlighted that global and local experience shows that strategic assets in generation, transmission and distribution can be safeguarded through strong regulation, public-private partnerships and majority state ownership, without full state monopolisation. 

The paper highlighted the case of Lanka Electricity Company (LECO), a publicly owned but commercially governed distributor that has consistently delivered operational efficiency and innovation, due to competitive pressures. Rather than dismantling LECO and absorbing it into a centralised, 100 percent state-owned entity (as proposed), the paper argues that this successful model should be replicated and scaled.