Ceylon Electricity Board proposes to hike energy tariffs by 5% to cut losses

 By Chandeepa Wettasinghe
The Ceylon Electricity Board (CEB) has submitted a proposal to the energy regulator, the Public Utilities Commission of Sri Lanka (PUCSL), to increase electricity tariffs on all consumer categories by 5 percent for the next six months, due to the rise in global coal prices.

“We have looked at the numbers and we will continue to look at the numbers. A 5 percent increase seems reasonable but implementing it depends on government policy,” PUCSL Tariff and Economic Affairs Director Kanchana Siriwardena told Mirror Business. The CEB sent the proposal following a request by the PUCSL to do so and the CEB, in its proposal said that even after the 5 percent increase, it will have a Rs.38 million loss per month.

 The CEB is expecting to increase its revenue by a further Rs.838.57 million per month under the new proposal, pushing the total forecasted revenue to Rs.17.78 billion per month.

Siriwardena said that the cause is mainly due to the global coal prices, which have pushed the CEB’s losses to Rs.5.5 billion so far this year.

“That (coal) is the main contributor actually,” Siriwardena said.

Last month, PUCSL Director General Damitha Kumarasinghe, in response to a query by Mirror Business over what effect the increasing global coal prices would have on Sri Lanka, said that the regulator is not worried about the situation.

“We have considered the six-month period ahead. Not only the coal prospects matter but also the patterns of weather and availability of renewable sources as well as hydro and the demand forecast matter here,” he said.

Another contributing factor for the call for a tariff hike may have been the droughts experienced over the past several weeks. This is however despite the record flooding in May, which may have boosted hydropower generation.Kumarasinghe had also told Mirror Business that there would be no change in electricity prices for the six-month period from October 2016 to March 2017 as well.

“There’s nothing on the cards because the CEB is in the process of recovering its costs. We have considered (a price increase), we have done some studies on the cost, therefore I don’t see any requirement right now,” Kumarasinghe had said. 

Siriwardena noted that Sri Lanka purchased coal at US $ 71 per tonne in January, which had increased to US $ 79 per tonne at the last purchase.

Australian thermal coal prices, which are the standard for global oil prices, increased from around US $ 53 per tonne this January to just over US $ 72 per tonne in September.

The prices rose as China halted production in large mines to reach targets set to cut down overproduction, while abnormal weather that had led to flooding of coal mines in the world’s second largest economy, had also contributed. China, which is focusing on consumer spending to maintain growth, had instead gone on a coal buying spree to maintain its energy reserves, putting upward pressure on the global coal prices.

The PUCSL had expected the average coal generation cost per unit to be Rs.9.94 and the average energy cost per unit to be Rs.5.80 for the next six months.“The price of coal could go up by Rs.3 per unit,” Siriwardena said. He added that there is no expected cut in electricity rates for the next several years, as the key to averting the 2018 power crisis is costly thermal energy. Around 40 percent of the expected capacity to avert the crisis is also through expensive private sector renewable options.