Advocata slams PUCSL for “discriminatory” electricity tariff revision

Colombo-based economic think-tank, Advocata Institute, slammed the electricity tariff revision approved by the Public Utilities Commission of Sri Lanka (PUCSL) calling it “discriminatory”.
In a strong-worded statement to the media, Advocata stressed a well-defined and appropriate tariff structure must balance the financial sustainability of the sector on the one hand and the well-being of various segments of society on the other. 

“The CEB’s tariff revisions seem to be mainly focused on the aspect of revenue sufficiency, ignoring the other aspects.  As electricity is a commodity, there should be no difference in the prices charged to different users, except when reflecting any differences in the cost of providing services to different classes of users,” the statement said. Electricity tariff design must meet two main objectives—raising the money needed to pay for the costs of provision and sending the right economic signals to each customer to favour the optimal socio-economic use of electricity. 
To meet the two objectives, Advocata pointed out that five key principles must be followed when designing tariffs, which are: economic sustainability or revenue sufficiency, 

equity or non-discrimination among users, economic efficiency in resource allocation, and transparency, simplicity, and stability of the methodology.
While differential tariff implies that some categories are subsidised leading to the question of who pays these subsidies, the current structure is such that households consuming an excess of 60 Kwh, and general purpose bulk supply users subsidise the industrial, hotel and charitable sectors, Advocata said.
“The cross subsidisation between customers violates the equity or non-discrimination principle of a good tariff and discourages use by the overcharged and promotes overconsumption by the subsidised,” the think-tank asserted. 

To iron out the issue, Advocata called on the PUCSL to review tariffs to prevent the prevailing distortions. And instead of cross-subsidies, the regulator should be working to reduce overall cost of the provision of electricity through better procurement and greater efficiency. 
“The PUCSL needs to set efficiency targets in order to set fair and reasonable tariffs. The CEB should be incentivised to control its costs by specifying and enforcing performance requirements. Bench-marking CEB performance against regional and international peers to assess relative efficiency is necessary, as is consulting stakeholders on achievable efficiency targets,” Advocata said.