Protect the regulator

Monopolies are bad for an economy because competition is a fundamental part of ensuring consumer interests are upheld. But in Sri Lanka, important public service providers’ function as monopolies or duopolies, key among them is the Ceylon Electricity Board (CEB). 

In 2002 the Public Utilities Commission of Sri Lanka (PUCSL) was set up to act as regulator to the CEB, so regulatory and policy implementation responsibilities are divided and consumers could have more of a say in how power is generated, sold, and consumed. But the Government is now trying to roll back powers given to this important institution. 

Through a Cabinet paper presented last month, Power, Energy and Business Development Minister Ravi Karunanayake has sought to strip the PUCSL of economic and technical regulatory powers, leaving it to only “act as the safety regulator and ombudsman for the electricity industry.” This basically means that any efforts made towards transparency and progressive policymaking in Sri Lanka’s power sector will be rooted out.

Without an industry regulator, the CEB can move forward with its coal power plant proposals, rolling back renewables, purchasing emergency power whenever and at whatever price it wants, setting prices as it pleases, and signing unsupervised power purchase agreements with the private sector. Essentially, the CEB will become a power unto itself and can go back to ignoring industry standards, transparency, and even global trends. All this is problematic because power is central to growing an economy, and Sri Lanka already has considerable issues due to high power prices and non-implementation of generation plans. 

Since it set up shop, the PUCSL has held a number of public consultations regarding tariff revisions and long-term generation plans to gather public opinion, giving opportunity for consumers to express their views. This is a space which was never available to the consumer before, and one that can be taken away by the new proposals. 

The independent regulator was set up to ensure that tariff control is managed with consumer interests in mind, with checks and balances to ensure that the utility provider is also held accountable for taking measures to improve system efficiency, without passing costs onto the consumer. It could not arbitrarily cut power, and if there was load-shedding, there had to be explanations. 

The PUCSL also pushed for more renewables in Sri Lanka, particularly solar and LNG plants, sparking a years’ long standoff with the CEB, which favoured coal. The upshot of this was CEB officials refused to sit on tender boards, and no large-scale power plant has been established since Norochcholai. The regulator has also encouraged more private sector involvement in the power sector, including from the Asian Development Bank. All this would end with the PUCSL. 

The losses of the CEB increased to Rs. 23.1 billion in the first four months of 2019, compared to Rs. 17.5 billion in the same period of 2018, according to the Finance Ministry. The total outstanding obligations to banks by CEB increased to Rs. 80.2 billion in the first four months of 2019, compared to Rs. 54.3 billion in the same period of 2018. Some of these may have been unavoidable losses, but it is clear that the CEB cannot be allowed to run the power sector without oversight. Absolute power corrupts absolutely and stakeholders have to step up to protect PUCSL.