No cost recovery by CEB despite sharp price increase

By Ifham Nizam

The Ceylon Electricity Board (CEB) expects to collect revenue between Rs 32 and 35 billion in October, up from a monthly Rs. 20 billion earlier.Though a 75 per cent tariff increase was enforced in August, CEB was able to collect only Rs. 29.5 b in September. This is due to variation in the billing process, a top CEB official said.CEB Finance Manager Tissa Liyanage told The Sunday Island that before the price revision they were collecting nearly Rs. 20 billion monthly. “Now total income would be between Rs. 32 and 35 billion.”

According to electricity sector regulator, Public Utilities Commission of Sri Lanka (PUCSL) the annual revenue requirement as filed by CEB is Rs. 505 billion (excluding LECO costs) requiring 82.4% increase in revenue to recover the projected costs for 2022. When the proposed tariff revision is applied, the overall revenue increase is forecast at 512 billion (including LECO sales) meaning a 79% increase.

The tariff revision has been submitted in terms of Section 30(2) of Sri Lanka Electricity Act No. 20 of 2009 and the tariff methodology approved by the PUCSL.The PUCSL stated that it rejected the CEB’s proposal to increase electricity tariffs by 229%, capping the hike at 75%, after taking all public and other stakeholder comments into account.

Power and Energy Minister Kanchana Wijesekera said that the CEB is likely to make a loss of Rs. 152 billion in the next four months despite the electricity tariff hike implemented in August.

“During the first eight months of the year, the CEB has lost over Rs. 108.67 billion,” he said.

Irrespective of the massive losses, the minister said it has been estimated that an additional income of a monthly Rs. 15 billion could be generated by the CEB following the upward tariff revision effective from August 10 – the first after nine years.Wijesekera attributed the long delay in introducing a cost-reflective pricing mechanism as the key reason for the massive losses incurred. He added these losses were due to the wrong policies of successive governments rather than wrong decisions of officials.

“Inability to implement new power generation projects and failure to switch to efficient least cost alternative energy sources are key reasons for our present predicament. This compelled us to depend on fuel-based power generation last year,” he said.

In addition, he said increased global fuel and coal prices as well as the rupee’s depreciation adversely impacted the finances of the CEB. This particularly applied to 2022.

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