With reduced power generation capacity, CEB brought some retired power plants back on stream and populace was saved from undue hardship. But how long will the situation last? The impact of many extra billions spent, for the use of expensive oil-based power, are not reflected in the electricity bill
Future electricity supply to the country is sitting on a time bomb. Since latter part of 2016, expected rainfall failed to arrive and the rainfall in 2017 was worse. Meanwhile 3x300 MW capacity Norochcholai power plant’s generators failed to operate continuously and people faced intermittent power-cuts but were not serious.
With reduced power generation capacity, CEB brought some retired power plants back on stream and populace was saved from undue hardship. But how long will the situation last? The impact of many extra billions spent, for the use of expensive oil-based power, are not reflected in the electricity bill. It has been claimed that astounding figures like Rs. 52 billion are payable to IPPS operating oil based power plants. Meanwhile, ministers speak of reducing the future financial losses of CEB with an automatic pricing mechanism for electricity as early as September 2018.
The country’s power generation and distribution is controlled under the Sri Lanka Electricity Act (SLEA). The Act states that, the transmission licensee (CEB) shall prepare a Generation Expansion Plan is expected to forecast electricity power consumption into the future and ensure that there is sufficient capacity from generation plants to meet reasonable forecast demand for electricity.
Public Utilities Commission
As CEB failed to deliver power to consumers as expected, the Government created the Public Utilities Commission of Sri Lanka (PUCSL) under Act No 35 of 2002. Apparently anticipated procedure did not take place and the SLEA was amended by Act No. 31 of 2013. The Act requires the Transmission Licensee to prepare and submit the Least Cost Long Term Generation Expansion Plan (LCLTGEP) for approval of the PUSL.
In Section 43 (8), the term “Least Cost Long Term Generation Expansion Plan” is defined as “a plan prepared by the transmission licensee and amended and approved by the Commission on the basis of the submissions made by the licensee and published by the Commission, indicating the future electricity generating capacity requirements determined on the basis of least economic cost and meeting the technical and reliability requirements of the electricity network of Sri Lanka which is duly approved by the Commission and published in the Gazette from time to time”.
Section 24 of the Act states that “The Transmission Licensee shall update the Generation Expansion Plan at least once in two years. The Plan shall be approved by the Public Utilities Commission of Sri Lanka (PUCSL), review the Plan for compliance with the guidelines provided herein, request for clarifications and amendments, and approve the Plan.”
The PUCSL set up as a regulator for the industry and does not fall under the purview of the Minister of Power and Renewable Energy or even the Cabinet of Ministers. All licensees are required to abide by its directions and decisions. The CEB is just one of the licensees and has no right to make demands the way the CEB Engineers Union has done with or without the concurrence of the CEB management.
Planning for the future
Accordingly, CEB submitted the input parameters for preparation for their Generation Expansion Plan to the Commission’s information in February 2017 and the Commission published the input parameters for stakeholder comments. CEB submitted the Least Cost Long Term Generation Expansion Plan (LCLTGEP) for the period 2018-2037 on 5th May 2017. The Commission published the CEB’s proposal for stakeholder comments and conducted oral comments session in mid-June.
On July 20th, having received public comments PUCSL issued its recommendation for the LTGE Plan of CEB for 2018-37. The next step should have been for CEB to incorporate the recommended changes and resubmit the amended LTGE Plan to PUCSL for approval. But CEB refused to go further.
As CEB failed to resubmit, PUSCL considering the stakeholder comments, corrected errors in the CEB report and published the finalised document on August 03, 2016 containing the decision of the Commission on the “Least Cost Long Term Generation Plan for the period of 2018-2037” as per powers vested on the Commission.
Now, CEB claims PUCSL that it has exceeded its mandate and demand their own proposals be accepted.
Comments from PUCSL on CEB submission
PUSCL commented to Transmission Licensee (CEB) on August 03, 2016 regarding proposals submitted in LTGE Plan to CEB of their failures as:
1. Absorb more electricity from Renewable Energy Sources
2. A scenario to include locally available natural gas
3. Alternative to Sampur Power Plant and
4. Failure to consider Government policies as not to have future coal plants and failure to include same in their final submission, among others.
Power generation proposals CEB vs. PUCSL
Given in table 1 is a summary of proposed power additions proposed by CEB and the additions as amended and approved by PUSCL for the period 2018 to 2037. However, the table does not include hydro, mini-hydro, solar, biomass and wind in future additions to power generation in the comparison.
CEB proposals assume coal being the main base of power, including Sampur power plant expected to come on stream during 2023 and 2025. PUCSL’s proposal mainly include LNG (liquefied natural gas).
PUCSL’s decision on LCLTGEP 2018-2037
In the PUSCL’s document on “Decision on Least Cost Long Term Generation Expansion Plan 2018-2037” among the claims are. In preparation of CEB proposal used average market prices for 2015 and 2016 for fuel cost estimates, when current prices are substantially different appear to misrepresent actual pricing. Also, their prices for oil products include taxes, etc. are higher.
PUSCL claims CEB has deliberately priced coal cheaper and LNG expensive. PUSCL also claims CEB has not included any externality costs as environmental conditions, plant technology and fuel used. Based on above CEB claims coal be cheaper than LNG, thereby justifying extensive usage of coal for electricity generation.
After adjusting the updated fuel costs and externalities PUCSL modified the CEB plan under least cost principals with the investment cost of $ 13,336 million be lower than the proposed CEB base plan of $ 14,894.64 million.
Row over power plan: CEBEU to strike
The CEB Engineers’ Union (CEBEU) in a letter to the Minister informed their decision to take trade union action unless the Ministry of Power and Renewable Energy approves the CEB’s Long Term Power Generation Plan instead of PUCSL modified plan. If the Minister fails to act, the Union will initiate trade union action from 7 September. In a subsequent letter to the Minister, the Union threatens to withdraw its members from all Technical Evaluation Committees (TEC) pertaining to Power Plant requirement including emergency power plants and more serious union action if no solutions are provided to its demands.
The union is against introduction of only LNG power plants by PUSCL in lieu of Coal Power plants recommended by CEB in the LCLTGEP approved by the Commission.
CEB unions stage a strike
Meanwhile, trade unions representing lower level staff went on strike seeking rectification of salary anomalies and demanding action against financial frauds within the organisation. Meanwhile, the President of National Movement of Electricity Consumers commented: “A CEB labourer gets a basic salary of Rs. 45,000. This is more than what a Government doctor is paid.”
Striking unions claim salaries of 10% senior officers of CEB were increased on numerous occasions, but salaries of lower level employees remain unchanged. Unions claim these increases has resulted salary scales of administrative staff vs. other staff moving from 6:1 to 9:1 from 2015 to date indicating the salary increases received by senior staff (engineers?). They also claim basic monthly of an engineer exceeds Rs. 100,000 and the general manager nearly Rs. 600,000.
All CEB staff belong to the privileged group being eligible for EPF plus pension benefits as well. CEB, Port and Water Board employees’ salaries are higher than others in Government service. The salary increases provided in CEB, would have been approved by the Board of Directors (with a Treasury representative) and Secretary to the Ministry.
The CEB Union’s strike exposes another reason for losses, high salaries paid to staff. The striking Unions do not claim their salaries are low, they only claim administrative staff gets much more.
Kerawalapitiya LNG Plant
The Government had called for proposals to construct a 300MW Combined Cycle Power Plant in Kerawalapitiya. Eight foreign suppliers submitted bids for the plant. The Technical Evaluation Committee (TEC) after initial evaluation recommended six bidders to be considered. But the Standard Cabinet Appointed Procurement Committee (SCAPC) decided to consider only the bid from a Korean supplier.
But when the bid was opened it did not include a hard copy of the tender and the soft copy failed to open and was rejected. Now, the Cabinet Committee on Economic Management (CCEM) ordered balance five bids be opened for evaluation. The plant needs to be in operation by 2019 and any delays in selecting the tenderer and implementation would be crucial.
CEBEU complained of the selection of a single bidder by SCAPC a non-technical body of civil servants (under whose instructions?), but is a typical example of how things happen in CEB.
CEB to purchase private power plants
Since early 1990s to overcome power shortage CEB purchased power form Private Power Producers (PPP) paying varying prices from Rs. 21 to 27 per unit, based on agreements signed for 15 to 25 year periods and paying for costs, depreciation, running costs, overheads and profits for the producer. According to Finance Ministry in 2016 CEB had purchased 2,173 Gigawatts of power at a cost of Rs. 61.37 billion from PPPs.
Today only 4 plants continue to supply power. The agreements with Lakdhanavi, ACE Power Matara, ACE Power Anuradhapura, ACE Power Embilipitiya and Heladhanavi have completed contract periods. Now CEB is attempting to purchase old plants who have completed agreement period. The board has already purchased the 15 year old 60MW Barge Mounted Power Plant in 2015 from Colombo Power Ltd. for a sum of Rs. 838 million, although the Japanese investors had agreed to hand over the plant in 2020.
The CEB is to purchase the 100 MW Ace thermal power in Embilipitiya, 20 MW Agrico Power and 50 MW Asia Power plants claiming to supply emergency power, but the purchase has been opposed by the trade unions.
CEB’s reluctance against LNG
CEB’s Long Term Generation Expansion Plan in 2013 for 2015-2034 did not include LNG and the possibility of using locally available LNG was excluded. When questioned by PUESL, CEB informed that a. Discovery of the natural gas resources is still at very early stage and b. Gas quantities are not quantified with reasonable accuracy.
A power plant has a life of 20 to 30 years and once established termination would be very expensive. The availability of gas in Sri Lankan waters was established in 2009, but further exploration was discontinued due to sudden crash of fuel/gas prices in the world market. When a plant commences operation it could work begin with imported gas and change over to local gas. The government has declared its policy to proceed for gas. But CEB engineers are reluctant to use imported gas and move over to local gas when become available.
Under the Accelerated Mahaweli Project by the mid-1980s the country had sufficient hydroelectric power and further power generations took a back stage, resulting from early 1990s citizens were forced to experience regular power-cuts. Environmental arguments over the proposed coal powered power plant’s location Norochcholai dragged the implementation decision till 2005, and finally came into operation in 2015. During the period locating the coal-powered power plant in Mawella in the south, selected as most suitable, but CEB engineers failed to consider the option.
When Norochcholai plant broke-down regularly during early period CEB blamed the Chinese. But they overlooked that purchasing power-plant from China was a political decision. The purchase agreement was signed in September 2005, over one year after the MOU, by CEB General Manager and the President of Electrical Engineer’s Association with technical specifications for the plant prepared by CEB assisted by a foreign consultant. Thus Norochcholai power plant supplied was as per CEB requirement.
Over the years, CEB failed to propose or introduce power plants keeping with the increasing demand and was met from purchases from Private Power Producers (PPP). In selecting PPPs the investor and payments for power purchases has not been transparent. There have been serious allegations of corrupt practices in the purchase of oil and coal for the generating plants.
Today, CEB engineers are reluctant to use gas that will enable to country to switch over to local gas, but wish to continue on imported oil and coal to the extent they demand the Minister to override PUCSL recommendations which the minister nor the Cabinet has the authority, failing to take trade union action. The importance of oil and coal to them personally are such.
As pointed out by CEB union’s CEB administrative staff (engineers?) are paid extremely high salaries compared to themselves. But junior workers are not underpaid, they too are paid well above others in the public service including EPF and a pension in addition to numerous allowances. Already the Ministers who are negotiating have offered increases, but the unions are greedy for more. When the country is going through a financial crises, Parliamentarians in addition to numerous perks approved themselves a Rs. 100,000 office allowance. Naturally, unions in organisations that supply basic requirements have unending appetites, would have to be paid by the public.
The establishment and running of electricity generation plants, supply of coal and oil, and purchase of power from PPPs involve massive sums of money and investors/suppliers are prepared to influence persons involved in decision making from engineers to higher up in the ministries.
Since the 1980s CEB engineers have been manipulating power supply to their personal advantage. Recent actions of PUCSL to use locally available gas against oil/coal would reduce corruption to some extent, but will not end altogether. Their action has upset engineers and their anticipated future losses force them to threaten trade union action. In procurement of Kerawalapitiya plant the Standard Cabinet-Appointed Procurement Committee, a non-technical body, decided to consider only a single tenderer out of six, showing there are others above engineers in the game.