ECONOMYNEXT – Sri Lanka’s Ceylon Electricity Board is facing a cost-rise of 155 percent 705 billion rupees in 2022 as fuel prices rose and the rupee collapsed, requiring a price hike, Public Utilities Commission Chairman Janaka Ratnayake said.
The CEB originally submitted a tariff proposal which projected a cost rise from 276 billion rupees to 505 billion rupees on March 19, 2022, Ratnayake said.
But on April 23, the projected cost had risen by another 200 billion rupees to 705 billion with a steep fall in the rupee.
CEB is now charging an average of 17 rupees from customers for a unit (kilowatt hour) of electricity. But the cost of production had risen to 53 rupees a unit.
The cost of coal had risen from about 75 dollars a tonne to over 200 dollars, Ratnayake said.
The US Federal Reserve after printing money has driven up inflation to 40 year highs.
The PUCSL will seek guidelines from the Ministry of Power on whether government will give subsidies and if so to which segments of customers.
The the PUCSL will have a public consultation and approve prices, Ratnayake said.
The PUCSL has failed to raise power prices driving up losses and forcing the CEB to borrow from state banks of Independent Power Producers to borrow as the utility delayed payments, adding to domestic credit and import demand.
Sri Lanka has to cut domestic credit to stabilize the rupee and energy utilities are typically largest borrowers in a currency collapse. When power or fuel prices are not adjusted monetary meltdowns accelerates.
The Ceylon Petroleum Corporation has adjusted prices faster. Last Friday the central bank printed more money, which will drive up demand, credit, imports and eventually forex shortages.
The current monetary meltdown, long predicted by analysts after flexible inflation targeting with output gap targeting began is the worst created in the history of Sri Lanka’s central bank.
(Colombo/Apr26/2022)