Sanjeewa Jayaweera, in The Island, 8 January 2023, with this title “IS THE CHAIRMAN OF THE PUBLIC UTILITIES COMMISSION OF SRI LANKA A HERO OR VILLAIN?”
Currently there is an ongoing tussle between the Power & Energy Minister Kanchana Wijesekera (KW) in one corner and Janaka Ratnayake (JR), the Chairman of the Public Utilities Commission of Sri Lanka (PUCSL), in the other. As a result, the Minister is on his own, whilst JR is supported by the CEB Engineers Union, CEB Trade Union Alliance, Electricity Consumers Association and pretty much the rest of the country!
It is over the proposed electricity tariff increase effective January 2023. The Minister is on record that if the country is to enjoy an uninterrupted power supply in the forthcoming year, then a significant rate increase is required. That the increase in tariff is being proposed just a few months after a substantial rise, along with an increase in direct and indirect taxes and hyperinflation, is a justifiable cause for concern.
However, what is being forgotten is that there was no tariff increase between 2014 and August 2022 despite the rise in costs. The two-state banks have funded those losses placing a great deal of stress on those banks vis-a-vis their depositors. I have also read that the Independent Power Suppliers have not been paid around Rs. 150 billion for power supplied.
None of those criticizing the proposed tariff increase today demanded a cost-reflective charge in the intervening years. Those who were members of the PUCSL during the period 2014 and August 2022 stand guilty of dereliction of their duty. I believe the Act requires the PUCSL to adjust the tariff yearly according to the cost incurred by the Ceylon Electricity Board (CEB). No doubt, they succumbed to political pressure exerted by those in power and did not discharge their duties as an independent regulator.
To the credit of the minister, he is championing a cause that will not make him popular. Quite a contrast from those who have previously held that portfolio.
A quote that sums up our predicament “Electricity is something that people cannot live without in the modern day. Without it, life will be so much more difficult and slow. Therefore, people need to learn how to value electricity and learn how to produce it from renewable sources (Carolyn Anderson). See Table 1
ELECTRICITY CONSUMER SEGMENTS
|NO OF UNITS PER MONTH||NUMBER OF CONSUMERS||AVERAGE UNIT RATE -RS|
l have gotten used to flicking a switch, and getting our electricity. At least, that was the case in Sri Lanka until the beginning of 2022. Even poorer households are used to having electricity on demand, whether to light a bulb in the evening or watch television for entertainment. But, of course, any power interruption angers people. Those who govern us and are responsible for making challenging and, at times, unpopular decisions pandered to our wishes to keep us happy. So whenever hydro-power was insufficient, the CEB was asked to provide uninterrupted power using expensive fossil fuel. But, unfortunately, the incremental cost of such generation was not recovered from the consumers. So as consumers ( domestic and commercial), we got used to bad habits.
Now that the chickens have come home to roost due to the economic Armageddon we are in and the need to introduce a cost-reflective power charge is causing significant heartburn. I am not underestimating the financial challenges that a tariff increase will cause for most domestic and commercial consumers. However, we also need to sit back and reflect on whether, as citizens of an impoverished nation, we have a right to demand uninterrupted power at below cost.
There is a trust deficit in the government, or should I say there is absolutely no trust! For example, the minister has said that a unit of electricity will cost Rs. 56.90 if the CEB is to supply uninterrupted power in 2023. However, projected cost invariably involves various assumptions. For example, if CEB assumes that rainfall will be less than what we have been blessed with in the last two years, it is a fair assumption.
However, the minister must be blamed for not sharing the assumptions made by the CEB in a public document. Had he done so, it would have enabled various independent power experts like Dr Tilak Siyambalapitiya and others to confirm that the projected tariff accurately reflects the cost. Suppose the revised tariff is proven excessive at the end of the year, there can be a refund made to the consumers, or the following year’s increase can be reduced, or indeed the surplus is used to settle the bank loans and the independent power supplier dues. Ultimately CEB customers should not expect the state bank depositors to bear the loss.
I have reproduced the CEB bill that has analyzed the charge levied to my residence based on the consumption of 299 units in a particular month. According to the CEB, I have been charged Rs. 7,391.17 over the cost. But, unlike certain parliamentarians, I settle my bills in full.
I now realize that in addition to paying a significant amount as income tax every year, paying for private health and educating children privately, I am also being asked to subsidize many customers of the CEB.
Whilst I subscribe to the view that the better-off need to pay taxes to support the less well-off, this responsibility appears to be overburdening some of us. I, therefore, support the statement made by the minister that all consumers, including places of worship, are charged a uniform rate of RS. 56.90 per unit, and the government makes a cash transfer to those entitled to a subsidy due to their lower income. However, I am sure many will not be entitled to the cash transfer and will still need to pay the higher rate. It is certainly not an easy discussion, but ultimately we can no longer continue to operate state enterprises at a loss. See Table II
ANALYSIS OF BILL FOR MY USE OF 299 UNITS
|NO OF UNITS||RATE PER UNIT||COST IN RS.|
|CHARGE FOR ELECTRICITY CONSUMED||16,113.00|
|COST OF ELECTRICITY CONSUMED||8,721.83|
|CHARGED IN EXCESS OF COST TO SUBSIDISE LOWER-INCOME CONSUMERS||7,391.17|
I cannot understand why Buddhist temples and Christian churches have demanded a lower rate. Driving around, you observe many temples and churches that are excessively illuminated, contributing to the wastage of electricity. Similarly, hotels badly impacted by the revision of tariffs are also significant electricity users. Unfortunately, architects and owners of hotels have not designed their properties with energy conservation as an essential operational requirement.
What of the actions of the Chairman of the PUCSL? Is it his duty to consider the fairness of the tariff as applicable to religious institutions and the poorer segment of the population as opposed to ensuring that the tariff is in line with the cost of supplying electricity by the CEB?
There is no doubt in my mind that JR thrives on publicity through the media. Last year in the period leading up to the lengthy power cuts, there was confusion concerning the duration of power cuts, as pronounced by the CEB Engineers and the Chairman of the PUCSL.
When the Chairman of the PUCSL publicly contradicted the CEB engineers, the consumers were confused and unable to plan their activities, not knowing the exact length of the power interruption. However, after a few days, the CEBEU pronouncement proved to be correct, and there was a lingering doubt about whether the confusion was a result of the protocol as to who was authorized to announce the duration of the cuts as opposed to the actual duration of the power cut.
On a lighter note, many a joke is being made of the attire of JR, which includes a waistcoat which is now pretty uncommon even in countries where it originated. Is it part of his everyday attire, or only for media conferences?
As an independent regulator, I believe that the PUCSL needs to deal with facts concerning the cost of electricity generation and not indulge in political rhetoric.
The Ceylon Electricity Board Engineers Union (CEBEU) and The Ceylon Electricity Board (CEB) United Trade Union Alliance have also been at the forefront of criticizing the revision of rates. However, their actions can be deemed to be hypocritical.
The CEB Engineers have been criticized for lengthy delays in approving the connection to the grid of solar-generating power panels for both commercial and residential customers. Given the low-cost option of generating solar power, there is no justifiable reason for such delays.
The recent disclosure and publication of the monthly wage bill of the CEB should be an eye-opener as to how consumers are being made to pay for a wage bill that seems outrageously excessive. In addition, some of the costs need an explanation. For example, despite the CEB being significantly overstaffed, the monthly overtime bill is approximate Rs. 660 million, and the monthly reimbursement of loan interest is around Rs. 180 million. What it represents is anybody’s guess. See Table III
As is the case in most problematic issues bedevilling our country, there is no simple or logical explanation. Yet, when trying to identify the culprits, the politicians head the list for lacking in vision and not taking difficult and unpopular decisions to ensure that electricity is priced on a cost-reflective basis and investments for increased generating capacity on the least cost basis are made timely.
Former President Sirisena canceled the setting up of a coal power plant which had been in the planning stage for five years with no apparent alternative. The decision was as wrong as banning the use of chemical fertilizer. We are paying dearly for both mistakes.
We, the electorate, are to blame for continuously electing incompetent politicians lacking in visionary leadership. The trade unions, particularly the CEBEU, are to blame for holding the country to ransom by the threat of industrial action and preventing much-needed reforms.
As I write this article, there is a news item stating that the President has asked for a report from the Chairman of Sri Lankan Airlines and the Chairman of the Ceylon Petroleum Corporation as to why bonuses were paid despite both organizations posting significant losses. The sad irony is that the taxpayers of this country ultimately bear these costs. Unfortunately, it seems that being profligate with others’ money for personal popularity is the norm in our country.