Re-energising the CEB

Assuring 10-year energy security, Minister of Power and Energy Champika Ranawaka asserts that in five years the Ceylon Electricity Board (CEB) will be revolutionised to breakeven position. Airing his views on huge losses incurred due to the delay in commissioning power plants, Ranawaka points out the importance of diversifying energy options in order to main steady tariff levels.

Claiming the CEB has no authority to revise electricity prices, Ranawaka hints that there will be a new tariff structure from January next year. Explaining the decision to vote for the Gambling Bill, Ranawaka says restricting gambling to a designated area is acceptable and wants betting centres to also be included in the gaming act.

Following are excerpts of an interview:



Q: Power and energy plays an important role in the process of development. When certain areas in the country are yet to receive electricity and main cities experience power cuts after a rainfall, how could you contribute to the process of development?

A: Sri Lanka is the only country in this region that provides 24 hour electricity supply. No other country in this region has that facility. Every Pradeshiya Sabha in the country has electricity. We have covered nearly 85 per cent of the population. Apart from that, over three per cent of the population gets electricity under stand alone solutions. These are the remote and hilly areas that cannot be supplied electricity from the main grid. We have provided them electricity through solar power and mini hydro power. Our goal is to cover the total population by 2012. There are almost 4.5 million family units in the country. We have reached 4.2 million family units so far. We look forward to reach the balance 300,000 by 2012.

During the recent heavy rainfall, two of our grid sub-stations flooded. In Colombo we don’t have overhead lines and what we have is an underground cable. As a security measure, we turn off the underground system during a flood situation. If we don’t do that, the entire City of Colombo will get electrocuted.

Water is a good conduct and if there is a leak that is more than enough to cause damage. This is why we turn off power during a flood situation. It’s a common procedure in countries all around the world. In Bombay they took almost a month to restore power after the floods; during the Washington floods it took three months. We restored power in 10 hours, once again proving we have the most reliable power system in the region.

The enormous energy generation cost is the biggest problem we have to face. In comparison to India we are doing much better, but when we take countries like South Korea, Sri Lanka is far behind. Our energy generation cost is much higher than in those countries. However, today we do work according to a future plan. All the projects and programmes we are carrying out at present target 2020. So we will not fall into that category anymore – 10-year energy security is noteworthy achievement for a country like us.

Q: The Ceylon Electricity Board (CEB) is a heavy burden for the country. What measures have you taken to change this situation?

A: We can make the CEB breakeven by tomorrow morning. If we are allowed to load shift like in India, to have power cuts, remove the subsidies, do away with the street lights – if we go for such tough action we can make CEB a profit-making entity by tomorrow morning. But we have a target; we will achieve our goals gradually. In five years we will bring the CEB to a breakeven position.

At present CEB has huge debts; short term debts amounting to Rs. 161 billion and long term debts of Rs. 350 billion. Short term loans include Rs. 53 billion CEB owes to the CPC and Rs. 20 billion to the People’s Bank. We have decided to settle those debts starting from 2014 in phases.

The projected loss for CEB for 2011 is Rs. 40 billion. This is mainly due to high oil prices globally. Another reason is CPC suspending subsidy on oil given for electricity generation. Due to this CEB is losing Rs. 1.2 billion a month from September 2010.

The cost of an electricity unit is Rs. 18 but we sell it at Rs. 13; there is a loss of Rs. 4 to 5. There are several factors behind this loss. One is fuel cost; when fuel prices of the world market go up, we are unable to control that. The other one is that the CEB is operated as a public service and we do not consider it as a commercial entity. For example, we do not evaluate the cost benefit analysis when we provide electricity. There are instances where we spend Rs. 100,000 on a customer to provide electricity supply but we charge only Rs. 15,000 for the service connection. Meanwhile, we bear a cost of Rs. 3 billion a year for street lights.

For consumers who use below 30 units a month we charge only Rs. 3 a unit, up to 60 units it is Rs. 4.60 and Rs. 6.90 upwards. All consumers who use below 90 units a month are subsidised. This is a measure taken to protect consumers who consume low volumes. Almost 70 per cent of domestic consumers use below 90 units a month and the average subsidy is Rs. 15 billion annually for the domestic sector. We have given similar facilities to industrialists too.

Q: In order to make CEB a profit-making entity, how much more do you have to increase the electricity bill?

A: Increasing the electricity bill is not the responsibility of the CEB. It is the Public Utility Commission that will make the decision. According to the Act, a supplier cannot be the regulator. Therefore, we only make the recommendations and it is up to the Public Utility Commission to consult the people and decide on a price hike.

Now that you have asked, there will be a change in electricity prices. We have given several formulas to the Public Utility Commission. We cannot disclose them at this moment. The Public Utility Commission will disclose it by the end of this month and it will be open for public comments. All I can say is from 1 January there will be a different tariff structure. In fact we need to revise prices every year.

Getting back to the CEB, we look forward to at least making CEB reach breakeven point from the current loss-making status. We have recommended a cost reduction from the CEB. We are aiming to control the capital cost by Rs. 6 billion from the recurrent Rs. 8-9 billion, resulting in an overall Rs. 15 billion cost reduction.

We are hoping to introduce the balanced scorecard to CEB. We will give budgets to everyone; engineers, managers, deputy general managers. They cannot go beyond the budget. We will give an incentive to people who save. We are introducing balanced scorecard, 5S and ISO 9001 to CEB offices during the next two years, phase by phase. And for the first time we are introducing a management dashboard, using four criteria for evaluation; by doing so we are expecting competition inside this public institution.

Measures will be taken to modernise CEB to suit today’s world. We see a big boom in the telecom sector. People no longer wait in queues to obtain a telephone connection; today it is the telephone companies that go behind the customer to sell their products. Today there is prepaid facility; broadband facility and 95 per cent of the country is connected. Sadly, at the CEB whatever procedure that was there 20 years ago is still practiced – whether it is billing, connecting and disconnecting and so on; even the power stations dispatch is based on a phone call.

We are going to change that and introduce an automated system, with fibre optic we are preparing the SCARDA and introducing the SMART meter. We have introduced the smart grid to high end customers and planning to implement it gradually to other customers from next year. For the first time we have decided to publicise the income expenditure of the CEB. That way people can challenge if there are corruption or malpractices.

We take every possible measure to provide uninterrupted quality service to the consumers. It is the responsibility of society to understand how costly these processes are. People complain about high electricity bills, but if we charge them the actual cost, they will have to pay more.

People should know that by joining unnecessary political protests, they are also responsible for high electricity bills. People who protested will not pay for the losses incurred; the Bishop’s House is not going to pay the loss of 72 billion incurred by Norochcholai and Thondaman’s party will not pay for the Upper Kotmale loss. It is the public that ultimately pays.

Q: When Mahaweli was built, it was said that Sri Lanka would be able to provide electricity to neighbouring India. But within a few years we experienced power cuts. How viable are the projects being carried out at present? Will the commissioning of those power plants ease the current crisis in the power sector and for how long?

A: The CEB is a professional organisation that has a generation plan. It’s a least cost generation plan. This Weighing Automated System (WASP) is a computer programme that automatically picks up its sources. All we have to do is feed input data such as diesel, coal or hydro. Based on this system, we make a generation plan for every year. However, since 1988 this plan has not been functioning.

After the Samanalawewa power plant that was built in 1988, no government invested in any major energy generation plants. Meanwhile, lending agencies such as IMF and World Bank were reluctant to grant financial assistance to the energy sector. On the other hand, whatever proposals we had in hand were never initiated due to political reasons. The coal power plant and Upper Kotmale power plant that were supposed to be commissioned in the early 1990s are the best example for this. Both of those plants were not initiated for the last 20 years.

The Puttalam coal power plant was held back due to protest from the church and environmentalists. The Upper Kotmale power plant was delayed due to protests by Thondaman. Unfortunately almost 60 per cent of today’s electricity cost is due to the inability to implement those decisions at the right time.

Because of the nearly 20-year delay in commissioning the Norochcholai power plant due to the protests, the country has lost Rs. 72 billion. Who is going to bear that cost? Is the Bishop’s House going to pay that or the environmentalists going to take the responsibility? It is the public that has to take over that burden of Rs. 72 billion.

Today coal prices are very high. It’s not the same prices as in 1990. Today it is not economical to set up a coal power plant due to the ever-increasing coal prices. Meanwhile, when we weigh coal with other energy sources, it is not economical anymore. When we insert coal in to our CEB’s automated system, it does not pick coal. When we finally manage to commission the coal power plant, coal is not feasible economically.

It’s the same situation with the Kotmale power plant too, even after environmentalists agreed to the project with a solution, the Chandrika-Ranil Government couldn’t start it. If Kotmale was commissioned, today the cost of electricity would be Rs. 4.20 a unit. That is the cost for machinery. If we generate that from diesel it will cost us Rs. 25 so we have a saving of Rs. 20 compared to diesel. Upper Kotmale generates 409 million kw hours per year. The annual saving from that alone is Rs. 8 billion. This points out that each year we lose Rs. 8 billion.

If we take Kukuleganga and Kotmale, the original capacity of those plants are not what we get today. The original planned capacity of Kotmale was 700 Mw. This was reduced, claiming to preserve the Devon Fall. But that was not the only reason. If a reservoir was built in Talawakele, we would have been able to generate more electricity. In Kukuleganga there is no reservoir. The reservoir was not built to save a forest. Today there isn’t a forest there, instead of the forest there is a tea plantation. We do not have the forest or the reservoir, which could have generated more electricity.

Objecting to each and every project without thinking about the future is the biggest issue we have in our country. Our environmentalists and English media are causing more and more trouble. They just oppose these projects, but do not give a solution. In my view, there are three types of environmentalists: People attached to NGOs who just shout for money, those who object because they simply do not know the facts and the other group which objects fundamentally but doesn’t give alternatives.

Generation cost increases rapidly. For example in 1970 generation cost was 18 cents per unit (Kw hour). The figure remained the same in 1980 because in those days it was 100 per cent hydro. Today it is Rs. 18 a unit, which is a 100 fold increase. We feel that this will be Rs. 40 by 2020. Therefore our next main target is to ensure that there will be no blackouts in the next 10 years. We are in a position to meet the demand; we are content about the reliability although there are few minor issues in certain places where it has the old system.

In the next five years we will use fuel switching. We are trying to keep it at the US$ 0.15-0.16 range within the next five years. Therefore, the best option would be to try out fuel switching.

Q: You said that since correct decisions were not made at the correct time, the public has to bear an extra cost of nearly 60 per cent on their electricity bill. What percentage do people have to bear due to the inefficiency of the CEB?

A: CEB inefficiency is nearly 10 per cent and we are bringing it further down. For that we will have to bear some cost because there are technical losses. CEB had a loss of 20 per cent and we have managed to bring it to 15 per cent.

Illegal tapping is another major problem we have to face at the CEB. For example, in the Eastern Province it is 35 per cent and we have to bring it 25 per cent. In the north there was 30 per cent of illegal tapping and it is now 20 per cent. We are planning to bring it to 15 per cent and then to a single digit thereafter.

Q: Due to the high electricity cost, it is difficult to attract long term foreign investments into the country. What steps have you taken to ease this situation?

A: Yes, I agree. It has become a major drawback, especially where development is concerned. We are unable to sustain heavy industries mainly due to the high electricity bill. For that we have come up with a solution of granting an off peak tariff, which is less than the normal fares. In future we are planning to introduce special tariffs for green products too.

However, I don’t think there is a necessity for further special incentives. We already have a strong incentive; there is 24-hour electricity supply, a high-quality frequency level with least fluctuations and there is electricity all over the country.

Investors get incentives on other areas; they get free land and free electricity connections so they have concessions even the tariff is less, even when the cost is Rs. 18 they pay Rs. 8 – $0.7. It’s a competitive price in the world market and we will maintain it at these levels. There are many other advantages, our literacy rate and computer literacy level are very high and our law permits investments.

We need to diversify the energy mix. It is important that we take all the options instead of relying on oil. In the future we need to have a few new options; we have coal, we will bring LNG, heavy fuel and we will bring dendro option (modern biomass option with firewood). We have started the main grid using wind power. We will introduce solar power by next year. And we will go for geothermal option, which is at experimental level at present. We will go for tidal wave and nuclear power too. Therefore, our spectrum will be broader. When we diversify our energy options, then we could go for the least cost option.

Q: What is the present status of commissioning nuclear plants in Sri Lanka?

A: We do not have to be afraid to experiment with nuclear power. It is a massive project, so it has to start at that level. The biggest drawback is that we are not updated in using nuclear power. There are many other applications, but we are not developed enough to use those applications.

It’s pathetic that in 15 years we haven’t had proper nuclear education in our universities. Today students haven’t heard a thing about nuclear. This shows how backward we are in this area. In India engineers and scientists clad in rubber sleepers are building and working in nuclear plants. They have developed it as an indigenous technology. We shouldn’t be afraid to test nuclear power. Protesting against such moves will only take the country to the crisis situation we have had in the past.

We are looking forward to educate the children and introduce nuclear power studies into the university system. We will train people and provide opportunities to study abroad to enhance their knowledge in this field. So in 15 years we will have a knowledgeable and skilled young generation. We will be working according to the guidelines by the International Atomic Authority. We are hoping to reach a target of 1200 mw in 2025.

Q: Why didn’t we consider energy diversification as an option before?

A: There are two reasons for that. First they believed coal was the only solution for the energy crisis in the country. This was the biggest mistake committed by officials in the energy generation planning.

Secondly, we never had a political agenda that had future plans for the energy sector. Whoever came to power did whatever they felt at whatever time to gain popularity and no one ever had a genuine interest in the energy sector. Some were reluctant to make decisions since they would lose their popularity and others simply did nothing for the betterment of this sector.

Q: Do you agree that there is lack of democracy in this country?

A: What’s wrong with democracy? We don’t see any problem where democracy is concerned. We have had this country going through much worse situations in the past. May be democracy is not established 100 per cent like we expect, but I feel we never had this kind of freedom in this country before. We were either scared of Prabhakaran, the JVP or State hooligans. Do we have anything like that today?

Q: What do you have to say about the skyrocketing cost of living?

A: True, the cost of living is intolerable. But we have to keep in mind that it’s the very same ‘slogan politics’ that has put this country in peril. In 1958 when the port was nationalised, there wasn’t a port in Singapore or Dubai. Those ports were built thanks to the agitation carried out by similar red clad protestors in the past. They demanded pay hikes; during the first four years after nationalisation they had protests and strikes on more days than they actually worked. As a result all the ships went to Singapore.

Then we nationalised oil; what happened? The entire tank farm in Trincomalee was shifted to Singapore. Today 238,000 ships go to Singapore Port and we get only 4,000 ships per year. The revenue of those 4,000 ships is Rs. 25 billion. If we had the 238,000 ships coming here, our revenue would have been nearly Rs. 1,000 billion. This is what the JVP did to our country many years ago and I am telling you that it is trying to do it again.

In most countries, the development cadre comes from universities. But what is the situation here in Sri Lanka? The JVP is responsible for all the problems caused in the university sector. I am afraid that the time won’t be far when university-educated students get beheaded by O/L qualified soldiers.

We need to revolutionise the education system in this country. My personal belief is that we need to screen the top students starting from the Year 5 scholarship exam, then Ordinary Level, Advanced Level and university level; from those we can absorb for the private sector and Government sector top management positions.

Q: Your party, the Jathika Hela Urumaya, clearly stated that it is against the Gambling Bill, but why did you vote in support of the bill at the last minute?

A: There are various baseless rumours about the gambling bill. According to the bill, gambling will be restricted to a designated area. Now what is better – to have casinos all around the country or in a designated area? We would be happy if we don’t have gambling at all in Sri Lanka, but since it is not going to happen, we believe that having it in a designated area will be somewhat better. People who shout against the bill haven’t even read the bill.

Q: Does that mean that your party justifies gambling in the country?

A: Yes. It’s better than what we are having in Sri Lanka right now. I think we should also restrict bookies to a designated area.