Power shock proposal: CEB seeks 13.56% tariff hike

The CEB has not finalised fuel supply agreements for its power plants, despite earlier directives

A fresh electricity tariff hike proposal has sparked controversy after the Public Utilities Commission of Sri Lanka (PUCSL) revealed that the Ceylon Electricity Board (CEB) has requested a 13.56% increase in power tariffs for the second quarter of 2026, despite unresolved fuel agreements, disputed cost estimates, and billions in past debts now set to be passed on to consumers.  

According to the PUCSL, the CEB submitted the request on February 13 under the Sri Lanka Electricity Act No. 20 of 2009, claiming it faces a Rs. 15.8 billion revenue shortfall between April and June. The regulator has now opened the proposal for public consultation, while raising serious concerns about several assumptions used to justify the hike.  

The CEB estimates total electricity supply costs for the quarter at Rs. 136.5 billion, while expected revenue is only Rs. 116.9 billion, even after adding a carried-forward surplus of Rs. 3.8 billion.  

The cost breakdown submitted by the utility includes:  

 Generation – Rs. 96.3 billion  

 Transmission – Rs. 6.0 billion  

 Distribution – Rs. 26.3 billion  

 Finance costs – Rs. 7.9 billion  

Based on these figures, the CEB has proposed that the entire shortfall be recovered through a uniform tariff increase across all consumer categories, meaning households, businesses, and industries would all pay more by the same percentage.  

The PUCSL said the proposal relies on a generation mix of hydro, coal, oil, and renewables to meet an estimated 4,577 GWh demand, but warned that some forecasts appear inconsistent.  

The projected mix includes:  

 Hydro – 26.6%  

 Coal – 30.19%  

 Oil – 12.57%  

Non-conventional renewable energy – 30.64%  

However, the Commission noted that coal generation from the Lakvijaya plant has been reduced in the forecast while capacity costs have increased, raising doubts about the accuracy of the calculations.  

In a major point of contention, the regulator disclosed that the CEB has not finalised fuel supply agreements for its power plants, despite earlier directives.  

An enforcement order had required the agreements to be completed by February 21, yet the tariff proposal was submitted using estimated fuel prices provided by the Ceylon Petroleum Corporation, a move the Commission says must be verified before any price hike is approved.  

The PUCSL also questioned the inclusion of Rs. 7.9 billion in finance costs, which include repayments linked to past borrowing and legal settlements.  

These include:  

Rs. 3.7 billion for working-capital loans tied to previous debts  

Rs. 1.3 billion for an arbitration settlement with Sojitz Kelanitissa (Pvt) Ltd  

Over Rs. 1 billion in overdraft interest  

The Commission said it must determine whether consumers should bear the cost of past financial decisions and delayed reforms.  

Further controversy has arisen over transmission and distribution expenses, with the PUCSL calling for verification of payments related to:  

Voluntary retirement schemes  

Insurance reserve funds  

The Vidulakapaya headquarters project  

Costs linked to the unfinished SESRIP project  

Capital expenditure adjustments from previous years  

Some of these expenses may be removed after review, meaning the requested tariff hike could change.  

The proposal to apply the same 13.56% increase to all users has already triggered criticism, as it would raise bills for low-income households and small businesses at the same rate as large industrial consumers.  

The PUCSL said public comments are now being accepted before a final decision is made, but the disclosure of disputed costs, missing fuel agreements, and debt repayments has intensified debate over whether electricity consumers are being asked to pay for inefficiency rather than actual power generation costs.