PUCSL challenges CEB’s tariff proposal

• PUCSL analysis proposes tariff reduction of 11.8%, citing potential saving of Rs. 16.2 b by replacing thermal power with hydro, renewable energy
• Disputes CEB’s reliance on CPC fuel prices without formal agreements, estimating an additional Rs. 27.6 b savings with recalculated fuel costs
• Highlights inefficiencies in CEB’s planning, projecting 1,973 GWh of renewable energy vs. CEB’s 1,675 GWh, 2,368 GWh of hydro power vs. CEB’s 2,217 GWh
• Forecasts Rs. 28.6 b surplus by incorporating hydro, renewable energy generation estimates
• Reveals high tariffs have led to 30% rise in electricity disconnections in 1H of 2024, severely impacting industrial and religious users 
• Final decision on electricity tariffs on 17 Jan. 2025

By Charumini de Silva

The Public Utilities Commission of Sri Lanka (PUCSL) estimates a reduction of Rs. 16.2 billion in energy costs compared to the Ceylon Electricity Board’s (CEB) proposal for revision and opined it could result in a tariff decrease of up to 11.8%, challenging the utility’s request to maintain the current tariff structure in the first half of 2025.

The electricity regulator launched public consultations on 17 December regarding the proposed electricity tariff revision for January 2025, igniting debates on affordability, energy efficiency, and the country’s transition to renewable energy. 

The ongoing consultations, following the delayed third revision during 2024, comes amid heightened economic pressure on households and businesses, exacerbated by fluctuating global fuel costs and reliance on expensive thermal energy.

The proposed tariff revision follows a detailed assessment of the CEB’s forecast for power generation, fuel costs, and revenue shortfalls for the first half of 2025. 

The CEB estimates a total energy cost of Rs. 173.7 billion with a projected deficit of around Rs. 38.9 billion if existing tariffs persist. As per the proposed tariff structure, the CEB suggests maintaining the existing rates, claiming that the projected revenue shortfall of Rs. 2.3 billion is within an acceptable error margin. 

However, as per an analysis by the electricity regulator, it is offering an alternative scenario suggesting a potential reduction in energy costs by replacing high cost thermal power with hydro and renewable sources.

The Commission suggests this figure could be significantly reduced by revising the hydro and renewable energy generation forecasts. It added that by incorporating the PUCSL’s revised forecasts for hydro, renewable energy and fuel costs, the Commission projects a potential surplus of Rs. 28.6 billion, suggesting it could allow for a tariff reduction of up to 11.8% instead of maintaining or increasing rates. (https://www.ft.lk/front-page/No-electricity-tariff-revisions-for-1H-of-2025--Power-Ministry/44-770490)

The PUCSL also challenged the CEB’s acceptance of fuel prices from the Ceylon Petroleum Corporation (CPC) without formal agreements, noting that the lack of contracts and transparent pricing leads to inflated costs.

The Commission projects that by recalculating fuel costs based on updated crude oil prices and exchange rates, generation costs could be lowered by an additional Rs. 27.6 billion. 

The PUCSL’s analysis also criticised the CEB for underestimating the potential of Non-Conventional Renewable Energy (NCRE) in its tariff revision proposal for 2025. 

Accordingly, the CEB projects NCRE generation at 1,675 GWh for the first half of 2025 and the PUCSL’s analysis suggests an achievable output of 1,973 GWh based on anticipated capacity additions and historical generation patterns. This gap highlights the inefficiencies in capacity planning and a lag in commissioning approved renewable projects in 2022 and 2023, such as solar and wind power installations.

In addition, the CEB forecasts hydro generation at 2,217 GWh for the first half of 2025, whilst the counter projection by the PUCSL, adjusted for updated inflow estimates and the contribution of the new Uma Oya hydropower plant generation, is at 2,368 GWh — suggesting this higher generation capacity could offset the reliance on costlier thermal power.

The proposed revision for 2025 also comes against a backdrop of increasing electricity disconnections and the electricity regulator underscores the social consequences of high tariffs. The Commission noted in the analysis that between January and June 2024, the average monthly disconnections rose by 30% compared to 2023 reflecting the financial strain on electricity users. The impact was particularly severe for industrial and religious consumers with unity price surging by 175% and 573%, respectively, since 2014. 

Consultations at the provincial level will continue till 10 January 2025 and the final decision by the PUCSL is expected on 17 January 2025, which will likely serve as a litmus test for the Government’s commitment to equity and affordable energy.