Govt.electrocutes CEB

• Dr. Harsha de Silva lambasts State-run utility over delaying power plants, says Govt. cannot work alone
• Says holdup with LNG plant due to CEB engineers refusing to sit on tender and procurement boardsÂ
• Admits Govt. is “frustrated” by bottlenecks, final warning given to deliver by next Wednesday
• Calls on CEB to put aside differences with PUCSL, wants it to stop “running away” from responsibilities Â
• CEB officials contend Govt. decision-making fragmented, appeals for institutional cooperationÂ
• Govt. considering risk adjusted capital instruments to encourage private sector investmentÂ

National Policies and Economic Affairs Deputy Minister Dr. Harsha de Silva yesterday took the Ceylon Electricity Board (CEB) to task over delayed power projects and promised tough action unless the State-run utility provider followed policies, acknowledging the Government was “frustrated” by the bottlenecks created.

In a display of chagrin, the Deputy Minister lambasted the CEB for not participating in an energy forum organised by regulator Public Utilities Commission of Sri Lanka (PUCSL) and criticised it for not sitting on tender and procurement boards. He also charged that the CEB had failed to roll out plans to build 385 MW of solar power plants, 245 MW of wind power and 450 MW of LNG despite repeated warnings that Sri Lanka could face a power shortage.

“There is no point in entertaining these kinds of people. So let me on behalf of my minister, the Prime Minister, express our deep disappointment that the Ceylon Electricity Board (CEB) has been very unprofessional by not participating in this important forum and we will deal with this appropriately in the time to come,” he said.

He also spoke extensively of the gridlocked Sampur power plant, which the Government decided would be changed to an LNG facility more than a year ago but has since failed to award a tender to kick-start the project.

Dr. de Silva put most of the blame for the delay on the CEB highlighting a difference of opinion between the State power monopoly and the PUCSL.

“What has happened to the LNG procurement? Why is it stuck? Is it the Government’s fault? Is it the CEB’s fault? Whose fault is it? I’m not here to place blame but we need to find what the problem is so we can provide solutions. I have sat at multiple Cabinet Committee on Economic Management (CCEM) meetings where many excuses have been given.  Now what I understand is that no CEB engineer is sitting on the procurement or tender boards. That’s a hell of a how-do-you-do. Are we being held to ransom by some people? Then the accusation comes back to the Government saying the Government doesn’t want to do it because it wants to procure electricity at high prices. But it is not the decision of the minister in charge or the prime minister to go ahead and award a tender. It must be done by those who have been appointed to do it. If those who are appointed to do it are absconding then how is it the fault of the Government?” he said.

“The CEB is running away from responsibilities the institution has been tasked with. A final warning has been given that by next Wednesday it has to be done. If it’s not done then we will see because this kind of activity cannot go on and on. The persons who pay the price are the people of this country.”

During question time CEB officials present at the forum responded to Dr. de Silva explaining that the CEB had completed its duty and the reports had been represented to the relevant Cabinet procurement committees.

They also pointed out that Government decision-making had been fragmented and appealed to encourage other government bodies to work in tandem with the CEB. One official also pointed out that land for some power plants had not been released by the relevant authorities resulting in implementation delays. The officials did not wish to be quoted despite being approached by the Daily FT at the end of the forum.

At the end of the forum the Deputy Minister struck a more conciliatory tone, appealing to the CEB to cooperate with other stakeholders to provide reasonably priced power to the masses and assist in fostering development. He also acknowledged that the Government has to take responsibility for failing to carry out reforms at the correct time, recalling his own experiences in being part of policymaking during former President Chandrika Bandaranaike Kumaratunga’s tenure.

Dr. de Silva also welcomed private sector competition on wind power pointing out sharp price reductions at the end of the latest round of tenders. He also proposed risk adjusted capital instruments to boost investor confidence and said he would consider partial risk guarantees such as those provided by multinational development organisations like the Asian Development Bank (ADB) to support regulatory risk for private investors. However, during discussions he noted that the Government was open to renegotiating existing power purchase agreements with companies if they were seen to be excessively costly.

“The issue that we have at hand is a complex one. It is an important issue. The losses that the CEB is making, the prices consumers are paying, the inefficiencies at which we are operating are all making Sri Lanka uncompetitive. It is like kick-starting a motorcycle with an empty gas tank. What I am trying to stress here is that this problem cannot be solved only by the Government. We must understand that we have some serious issues to deal with and the solution must be developed by multiple stakeholders.”

“In times of crisis strong people take responsibility. If the responsibility is too much, if the challenge is too much running away from sitting in tender boards, running away from not participating is not the solution.”

Sri Lanka has done well over the years in reaching its access targets, he noted.  But access itself is not enough as power has to be reliable and affordable, the Deputy Minister went on to say, acknowledging that Sri Lanka’s current capacity was inadequate to meet its ambitious economic growth goals.

The Harvard Centre for International Development was working with the Government to understand the constraints that Sri Lanka was facing in its development drive and has flagged energy as “fairly stable” but over time could become a “binding constraint” if supply was not developed fast enough.

Energy growth through sustainable measures is a key development challenge as dependence on non-renewables makes Sri Lanka unhealthily dependent on imports.

In the past decade petroleum imports have accounted for 20% of all imports as between 2005 and 2015 as much as 41% of demand has been met by thermal energy. Up to September 2017 Sri Lanka’s energy breakdown was coal 38%, thermal 37%, hydro 17% and non-conventional renewable only 7%. Dr. de Silva also emphasised that the Government’s stance on moving towards renewables was unlikely to change despite inherent challenges.

“Losses of State-Owned Enterprises in energy are not entirely their fault. It is not because the people are inefficient that they keep losing money. It is because, by and large, they are unable to sell at a price where they can recover cost. However, what is cost? Can you produce cheaper energy? We need to find answers. The estimated loss of the CEB for the first half of 2017 is Rs. 30 billion; the CEB owes the Ceylon Petroleum Corporation (CPC) about Rs. 40 billion for the first nine months of this year. Taxpayers are paying this money.”