ECONOMYNEXT – Sri Lanka’s discriminatory electricity pricing where various consumers are charged prices penal prices, are purely the work of the regulator and officials and not political, Energy Minister Kanchana Wijesekera said.
Sri Lanka’s Public Utilities Commission has approved tariffs with as bewildering array of discriminations penalizing customers based on their type, size and type business simultaneously.
“It is not ministers or someone who make the tariff system,” Minister Wijesekera told reporters.
“There are officials who are hired to exclusively to work on this. They are in the Electricity Board as well as the Public Utilities Commission.
“Based on the methodology these officials, use digital system. If as you say there are shortcomings I can tell the CEB and PUCSL.
“If there is some wrong calculation a complaint can be made to the regulator to correct it. The best approach is to complain directly. Because neither myself, nor senior ministry officials nor ministers intervene to calculate tariffs.
“We only set the methodology at a policy level. If the government can give a subsidy to industries it will be done.”
There are concerns that actual prices approved by the regulator are violating the principles set in a tariff methodology.
There are rising concerns that mis-pricing energy is sending the wrong economic signals in a country that is supposedly a market economy at least on paper.
READ MORE Sri Lanka’s cross-subsidising power tariff revision questioned
Industries and hotels are charged knock down prices. Meanwhile within industries bulk customers are charged higher prices, though they should be getting as discount based on market dynamics.
A small industry and small commercial establishment are charged different prices effectively penalizing small and medium enterprises that are not in manufacturing or hotels, sending distortionary economic signals without any cost basis.
Households are charged higher tariffs as consumption increases, to levels where prices are far in excess of cost of as much as 89 rupees a unit.
“A differential tariff implies that some categories are subsidised leading to the question of who pays these subsidies,” Advocata Institute, a Colombo based free market think tank said.
“With regards to hotels, in effect, domestic consumers subsidise foreign tourists.”
The discriminatory pricing gives rise to other absurd outcomes, Advocata pointed out.
“…[T]he differential tariff between general bulk supply and industrial/hotel users is meaningless,” Advocata pointed out.
“For example, a hall that hosts weddings and celebrations would be treated as a general bulk customer and be charged double the tariff that a hotel would be charged, even though both host similar events.
“A restaurant in a shopping mall would be charged as a general customer, but the same restaurant located within a hotel would enjoy a tariff half of that which a hotel incurs.
“While this differential existed under the previous tariff, it is made worse under the new structure; hotels faced a 10% increase in tariff while general users faced a 20% increase.”
Though households form a bulk of the night peak where generation cost are the highest, critics say charging 89 rupees is far in excess of cost. And it also does not make sense to subsidize smaller industries and hotels with penal rates on households.
In countries like Vietnam the highest household rate is about 40 rupees.
In Singapore where generation costs are high due to having an liquefied natural gas base, the highest domestic price is 31 cents (about 74 rupees) with tax. Industries also have to pay around 66 rupees due to LNG, but off peak prices are half that.
Meanwhile in a fresh concern that gap between peak and off-peak prices have almost disappeared taking away the main tool to boost off peak power take up and make uniform use of capacity.
While peak industry tariffs at around 38 rupees are comparable to some East Asian nations like Vietnam which has a large coal and hydro base, the off peak at 32 rupees is far higher. (Colombo/Nov02/2023)