Rs. 50.6 b financial loss due to delay in implementing planned power plants

The Public Utilities Commission of Sri Lanka (PUCSL) has estimated a financial loss of Rs. 50.6 billion due to the delay in implementing planned power plants and has urged authorities to step up as a matter of national importance. 

The assessment and recommendations are contained in PUCSL’s report which attempts to identify any prospective delays in the plant implementation schedule of the Least Cost Long-Term Generation Expansion Plan 2018-2037 approved and attempts to forecast the financial implications and economic consequences of such delays. Over 20 projects aiming at generation through thermal and renewable means are faced with delays. 

“The total expected financial loss due to implementation delays of the 2018-2020 plant schedule in the long-term generation expansion plan is Rs. 50.62 billion. The financial loss due to any further delay beyond what is forecasted in the previous section will cost Rs. 3.43 billion for each month,” the PUCSL said.

 

Given the scale of financial losses that can be expected and prospective impact this is going to have on the national economy, the PUCSL has recommended expediting the procurement of the listed power plants in accordance with an approved schedule as a matter of national importance.

It said that these financial loss or cost overrun figures are merely the primary outcomes of implementation delays. 

“The cumulative effect of implementation delays over the next three-year period can very likely trigger a power crisis that can seriously affect the national economy,” PUCSL warned. 

It does not recommend purchasing emergency power in the future to meet any capacity or energy deficit due to implementation delays of these upcoming power plants and is of the view that such costs should not be passed through to the consumers through tariffs.

“The Government may consider a change in industry structure if the generation plan implementation cannot be efficiently carried out within the current structure,” PUCSL added.

It said implementation issues pertaining to power plants identified in the Least Cost Long-term Generation Expansion Plans (LCLTGEP) have been prevalent over the last 20 years. Many of the identified power plants were delayed and some were not implemented at all.

This has resulted in serious problems that have plagued the electricity sector over the past decade and seriously hampered its progress. Cost overruns and load shedding are the most prominent and direct consequences while the impact of these two factors on the economy of Sri Lanka and its competitiveness are secondary consequences. The cost overruns happen because of the expensive emergency power procurement and over dispatch of existing expensive power plants. The financial loss due to non-implementation or delay of the approved power plants over the last 20 years is enormous and the economic impact of load shedding and high prices is much bigger.

The issue of implementation delays or non-implementation of power plants is not some past phenomena, but something very much prevalent even at present.

PUCSL has been continuously monitoring the progress of the CEB in implementing the approved plan and has observed delays in the procurement process of power plants expected to be commissioned by 2020. Based on the information obtained from CEB, the Commission expects delays in implementation of the power plants that had been approved to be implemented by 2020.