Backlash from moves to purchase private power plants

Moves are underway to purchase three private-owned power plants without following proper tender procedure under the cover of a possible power shortage caused by the recent drought, Ceylon Electricity Board (CEB) trade unions alleged.

The cost to the CEB of generating power through its own plants and private plants rose to Rs. 25 billion last year.

The CEB has been directed to purchase the 100 Megawatt Ace thermal power in Embilipitiya, 20 Megawatt Agrico power and 50 Megawatt Asia power plants as an emergency measure, a leader of CEB joint trade union alliance divulged.

The board has already purchased 60MW Barge Mounted Power Plant owned by Colombo Power Pvt Ltd which has a power purchase agreement since 2000.

Energy experts, raising questions on this deal, ask why the CEB spent a massive sum of Rs. 838 million to buy this outdated, 15-year old power plant in 2015 despite the assurance given by two Japanese investor companies Mitsui Engineering & Shipping Co. Ltd. (MES) and Kawasho Corporation that it will be handed over to the government in 2020.

The CEB purchases power from private thermal plants annually to meet the increasing demand of electricity. These purchases are being made without providing a proper mechanism and procedure, they alleged.

CEB purchases power from Asia Power at a unit cost of Rs. 27 rupees, ACE Kalanitissa at Rs. 22, ACE Embilipitiya at Rs. 21 and West Coast Rs. 26.
CEB had purchased 2173 Gegawatts of power at a cost of Rs. 61.37 billion in 2016 from private power plants, Finance Ministry data showed.
The power generation cost for 2017 is Rs.187 billion which include the cost of hydro and thermal plants of the CEB, private thermal plants and renewable energy sources.

Four PPPs Asia Power (Pvt) Ltd, Sojitz Kelanitissa (Pvt) Ltd, West Coast (Pvt) Ltd and Northern Power are currently generating power to the CEB’s national grid.
The agreements between CEB and Lakdhanavi (Pvt) Ltd, ACE Power Generation Matara (Pvt) Ltd, ACE Power Generation Anuradhapura (Pvt) Ltd, Heladhanavi (Pvt) Ltd, and ACE Power Generation Embilipitiya (Pvt) Ltd have been concluded following the expiry of their periods.

According to the Sri Lanka Electricity Act competitive bidding process should be followed in purchasing power from the private sector, Secretary to the Ministry of Power and Renewable Energy Dr. Suren Batagoda said adding that the least cost option should be considered when purchasing power, for the benefit of the people.

The ministry will introduce electricity pricing mechanisms such as cost reflective electricity tariff formula supported by IMF, he disclosed.

Measures will be taken to reduce the possibility of future financial losses by the CEB and avoid large ad hoc adjustments in electricity tariff while allowing time for public consultation and obtain cabinet approval of the automatic pricing mechanism for electricity by September 2018.