ECONOMYNEXT – Sri Lanka’s Public Utilities Commission has disputed forward looking tariff hike for state-run Ceylon Electricity Board in 2023 saying fuel sold by a petroleum monopoly as well as demand projections are too high.
The CEB is seeking a 400 billion revenue increase in 2023, under a new plan by the government to revise tariffs every January and July.
PUCSL Chairman Janaka Ratnayake says the Ceylon Petroleum Corporation is over-charging the CEB by selling fuel at large profits.
“The amount we pay for fuel and furnace oil is extremely high,” Ratnayake told reporters. “We mostly need furnace oil and Naptha. Furnace oil, CEB takes from the CPC at 320 rupees per litre. Naphtha for 160 rupees.
“We know this amount is extremely high. Even the CPC has accepted from diesel and petrol that they are making around 150 rupees in profit per litre.
“According to that, from one litre of furnace oil, CPC is making a profit of 120-140. And they are asking for a 404 bn rupees from a tariff hike.”
Because the CEB is not an end user, it should not get a retail tariff with large profits, Ratnayake said. Lanka Coal, the state company which buys and re-sells coal to the CEB does not keep large margins, he said.
It is not clear whether the CPC is trying to recover past losses by keeping retail prices above cost.
The Treasury has said that in 2022 so far the CPC had been paid 80 billion rupees to cover low cost fuel sold to the CEB earlier and the Treasury could no longer give subsidies.
Ratnayake alleges that at attempt is being made to recover past losses.
“We do not accept that,” he said. The reason is, the price revise cannot be done to recover a previous loss.
“The revision should be done based on the cost recovery manner. In revising that, there is a theoretical process for that.”
For 2023 the CEB is projecting generation of 17,400 GigaWatt hours with 721 billion rupees of costs. About 404 billion is set to come from 4,600 GWh from the most expensive liquid fuel costing 404 billion rupees.
In 2021 the CEB generated 16,716 GWh of energy. Up to September power generation was down 3.6 percent. In September generation was down 7.6 percent. In 2023 the economy is also expected to contract.
The PUCSL is projecting demand of only 15,500 GWh and 1,800GWh of liquid fuel costing 147 billion rupees.
At current world prices the liquid fuel costs should only be 86 billion rupees, the regulator says.
The PUCSL however is projecting coal generation at at optimistic 85 percent plant factor of 6,000GWh. The plants are designed for around 80 percent. The CEB is expecting only 5,100GWh from coal.
In the first quarter around February and March there is a drought in Sri Lanka requiring high volumes of liquid fuel.
Ratnayake said the regulator also wanted to revise tariffs every six months and in 2016 had proposed revisions in April and October.
The CEB however had not filed tariff requests, he said.