ECONOMYNEXT – Sri Lanka’s electricity use has fallen steeply and customers have shifted to lower categories, Director General of the Public Utilities Commission, Damitha Kumarasinghe said amid price hikes and a currency collapse.
Electricity consumption had fallen more closely in line with the projection made by the PUCL when a power tariff hike was made in the first quarter of 2022.
The CEB in its tariff filing for the first half of 2023 had initially projected 16,520 GigaWatt hours of generation compared to 15,031 GWh by the PUCSL secretariat.
Related Sri Lanka regulator disputes CEB costs, demand projections for 2023The CEB has later revised it down to 15,377 GWh.
Forecast Gap
The CEB had projected power generation of 44.96 GigaWatt hours for February down from 51.32GWh hours a year ago. The PUCSL has projected 42.01 and actual generation was 41.82 GWh.
For March generation of 47.22 GigaWatt hours was projected down from 51.32GWh hours a year ago. The PUCSL had projected 45.21 GWh for March and actual generation had been 42.36 GWh.
For April the CEB had projected 44.28GWh, the regulator had projected 41.23 actual generation had been 40.36 GWh.
In January-2023 before the price hike, generation had fallen to 40.7 GWh from 47.10 a year earlier.
By May 10, 2023 generation was down 13.8 percent to 5,391 GWh from 6,259 GWh last year.
In the domestic category, large numbers of users had moved down to lower categories.
The CEB had initially projected 16,520 GWh for 2023 compared to PUCSLs 15,031GWh. In April, a revised down forecast of 15,377GWh hours was made by the CEB to the regulator.
Savings
When higher volumes of generation are and sales are projected the marginal increase comes from liquid fuel plants, which are among the most expensive sources of generation.
A reduction in consumption therefore results in a sharp fall in costs from the most expensive sources of generation, Kumarasinghe said.
Since January, coal and fuel prices have gone down, he said, lowering costs and potentially allowing tariffs to be reduced.
However, Sri Lanka also has differential pricing and cross subsidies for domestic customers based on usage. The lowest users have tariffs which fall below average costs.
When high users reduce their consumption, CEB’s revenues and margins also goes down.
Consumption Fall
Sri Lanka raised fuel prices after a nine-year gap in August 2022 after the rupee collapsed from 200 to 360 to the US dollar, destabilizing the finances of both the CEB and Ceylon Petroleum Corporation.
Currency collapses by soft-pegged central banks lead to economy wide collapses in consumption, business failures and bad loans in banks.
Sri Lanka’s exports have also fallen in 2023 amid tighter conditions after inflation went up in Western markets from money printed by the Federal Reserve and European Central Bank. Central Bank data showed that electricity sales to industries fell 18.7 percent in January to 333 GWh.
According to CEB data available up to now analyzed by the PUCL by January 2023 out of 6.37 million domestic customers, 279,696 used more than 180 units in September 2022, when the first tariff revision was done.
About 200,000 people have moved from higher categories to under 30, another nearly 300,000 in between 30 to 60 unit category. So people have reduced their consumption and some near to the poverty line,” Kumarasinghe said.
By January 2022, 86,049 had moved from above 180 units down to lower categories.
Out of 643,696 who used up to 180 units 161,788 had moved down on a net basis.
Out of 835,866 who had used 120 units, 168,193 had moved down.
Out of 1.56 million who had used below 90 units in September 2022, 78,961 had moved down.
As a result the category between 30 and 60 units had increased by 283,238 customers from 1.61 million customers in September 2022 to 1.89 million customers in January 2023.
The category below 30 units had increased by 198,794 to 1,231,836 customers.
Data on what happened after March 2023 is not yet available.
Sri Lanka has high inflation and never-ending energy price hikes due to monetary instability from a so-called flexible exchange. The highly unstable regime found in countries that are unable to climb out poverty and has social unrest and strikes.
The rupee collapsed from 200 to 360 to the US dollar in 2022, and has since appreciated to 310 to the US dollar after private credit turned negative and money printing was reduced.
The currency has tended to collapse over the past decade as soon as credit picks up and money is printed to mis-target interest rates through aggressive open market operations.
The CEB was last allowed a tariff increase after about 9 years. From 2011 to 2013 the rupee collapsed to 131 to the US dollar from around 113 when the last tariff hike was made.
Critics have called for the central bank’s ability to inject liquidity and operate a monetary regime with both exchange and money policies to be outlawed to bring stability to the country, and end the impoverishment of the people. (Colombo/May18/2023)