Ceylon Chamber of Commerce moots pre-conditions to proposed CEB tariff hike

The Ceylon Chamber of Commerce Chamber has submitted proposals and recommendations on proposed electricity tariffs to the Public Utilities Commission of Sri Lanka, to ensure the implementation of an effective tariff revision, which sustainably addresses energy requirements. 

This was formulated by the Energy Sector committee of the Ceylon Chamber after careful analysis of the proposed tariffs and recommended feasible courses of action to ensure an effective tariff structure is implemented. The submission was twofold comprising of the observations and recommendations. 

The observations address vital issues such as the accuracy of costs, power cuts, reasonableness of the costs, financial independence of CEB entities, renewable energy, cost of energy and service for categories, fixed and variable costs, cross subsidies, price elasticity and tariff principles required. 

The recommendations made by the Committee are given below.

Context

The tariff methodology calls for annual tariff revisions – however in the current context this may need to be revised every six months. This is especially so due to the tariff being artificially low compared to cost which is backward looking (1H 2023 costs significantly higher than 1H2022 costs due to fuel/exchange rates). Therefore, the Energy Sector Committee’s comments reflect this and future tariff filings based on prior observations submitted as well. 

a) We request PUCSL to insist on the following changes as a pre-condition to the tariff increase,

1. Proper operation of Bulk Supply Transaction Account (BSTA) and financial independence of CEB generation and distribution licensees

2. Financially independent Power Purchase Agreement (PPAs) established for CEB generation plants, and the avoidance of artificial subsidies

3. Initiate the Dispatch Audit process 

4. As the reason for rapid electricity price hikes is the lack of adequate renewable energy, gazetting of new and economically feasible NCRE tariffs for SPPAs and rooftop solar systems

b) We request PUCSL to ensure the following conditions are met before any further tariff increases are proposed,

1. All recommendations of Deloitte with respect to the Dispatch process to be implemented

2. Dispatch Audit completed for a minimum period of two years (at minimum 2020, 2021). CEB must initiated immediate remedial measures of any adverse findings

3. Heat rate revisions incorporated into all PPAs

4. BSTA account properly audited and evidence of generation and distribution licencee initiation

5. All costs to be properly verified – e.g. costs of Lanka Coal Company (LCC) and costs shown in BST cannot differ. Costs of coal must be paid by LCC and not CEB

6. Move the tariff process to the transmission licencee finance team, headed by finance/economist professionals

7. A comprehensive cost of service and cost of energy study carried out for each consumer category, backed by actual data

8. A comprehensive tariff study to make recommendations to the Government on the best process to allocate costs and prices

9. Since a significant amount of CEB capex is tied to grid upgrades (and CEB still insists that the grid cannot take sufficient renewables), please audit the investments for transmission and distribution grid

c) We request the Government to initiate the following steps prior to imposing any further tariffs, 

1. The best way to protect manufacturing and service industries is to allow direct power purchase agreements from renewable energy producers. Amend the Act to enable the same, and PUCSL to work with Transmission Licencee to create an equitable mechanism

2. Fast track renewable energy implementation which is the only way to reduce costs to the consumers and make electricity affordable

3. Complete the unbundling of the CEB and the creation of an Independent System Operator 

4. Develop a national consumer tariff policy that will articulate how costs are allocated and the policy on cross subsidies

The full submission can be accessed at chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.chamber.lk/images/pdf/inputs-on-pucsl-tariff-submission.pdf.