Cost of deregulation

Monopolies are bad for an economy because competition is a fundamental part of ensuring consumer interests are upheld. But in Sri Lanka, important public service providers’ function as monopolies or duopolies, key among them is the Ceylon Electricity Board (CEB) and the Sri Lanka Water Board. 

In 2002 the Public Utilities Commission of Sri Lanka (PUCSL) was set up to act as regulator to the CEB, so regulatory and policy implementation responsibilities are divided and consumers could have more of a say in how power is generated, sold, and consumed. But the Government is now trying to scrap this institution entirely and vest unspecified powers back with the CEB and the Consumer Affairs Authority (CAA). 

The letter sent by President Secretary Dr. P.B. Jayasundera to the Attorney General says the move in line with proposals in Budget 2021 to fast-track investments but does not acknowledge such bottlenecks were also created by vested political and other interests or what would happen to the policy and public engagement work done by the PUCSL in other sectors such as water. 

Without an industry regulator, the CEB can move forward with its coal power plant proposals, rolling back renewables, purchasing emergency power whenever and at whatever price it wants, setting prices as it pleases, and signing unsupervised power purchase agreements with the private sector. Essentially, the CEB will become a power unto itself and can go back to ignoring industry standards, transparency, and even global trends. All this is problematic because power is central to growing an economy, and Sri Lanka already has considerable issues due to high power prices and non-implementation of generation plans. 

Since it set up shop, the PUCSL has held a number of public consultations regarding tariff revisions and long-term generation plans to gather public opinion, giving opportunity for consumers to express their views. This is a space which was never available to the consumer before, and one that can now be taken away. 

The independent regulator was set up to ensure that tariff control is managed with consumer interests in mind, with checks and balances to ensure that the utility provider is also held accountable for taking measures to improve system efficiency, without passing costs onto the consumer. It could not arbitrarily cut power, and if there was load-shedding, there had to be explanations. 

The PUCSL also pushed for more renewables in Sri Lanka, particularly solar and LNG plants, sparking a years’ long standoff with the CEB, which favoured coal. The upshot of this was CEB officials refused to sit on tender boards, and no large-scale power plant has been established since Norochcholai. The regulator has also encouraged more private sector involvement in the power sector, including from the Asian Development Bank. All this may end with the PUCSL. 

The CEB is among the biggest loss making State Owned Enterprises (SOEs) in Sri Lanka and functions with public funds. There has also been an endless string of corruption scandals and regulatory issues linked to the sector, with perhaps the latest being the Government’s move to approve an LNG plant sans Attorney General’s approval. Therefore the CEB cannot be allowed to run the power sector without oversight. Strengthening regulation is not negative to investment and is essential for public interest. The Government cannot stem corruption if its priority is to roll back safeguards.