Pavithra explains power price hike in Parliament

Following is Power and Energy Minister Pavithra Wanniarachchi’s answer in Parliament to a question by the UNP on the upward revision of CEB tariffs

First I would like to thank Member of Parliament honourable John Amaratunga for giving me an opportunity explain the current situation in the electrical power field in today’s (23 April 2013) Parliament postponement debate.



The proposal of increasing the electricity bill is one that has been presented from time to time by the Electricity Board, especially from 2011, even before I adhibited the ministerial post . After the 358 million profit in 2010, in 2011 and 2012 the Electricity Board had continuously been unprofitable.

In 2011 when they were at a loss of Rs. 19 billion; although the income was Rs. 137 billion, expense was Rs. 156 billion. The main reason for this was that the Electricity Board was not in a condition to control the fuel price and the money that had to be paid to buy electricity from private power stations.

CEB losses

In 2012 the Electricity Board has been at a loss of Rs. 61 billion. The main reason for that loss was the increase of expenses to 231 billion and the limitation of income to 170 billion.



After considering the expense of Rs. 231 billion this year, it was seen that the Electricity Board is spending Rs. 42 billion for fuel to generate electricity, Rs. 90 billion for fuel to buy electricity from private power stations, Rs. 19 billion as the capacitance charge and that is Rs. 151 billion solely on fuel. From 12 February 2012, because of the increase of the price of one litre from Rs. 45 to Rs. 65 of the furnace oil that is necessary to generate electricity, increase of the price of one litre of the low sulphur furnace oil from Rs. 50 to Rs. 75, the expense from only the increase of fuel prices in 2012 was Rs. 43 billion.



The instant reaction to this was an introduction of a fuel surcharge fare to the electricity bill. That was a temporary step and the fuel surcharge fare added only Rs. 25 billion to the Electricity Board. Because of that the financial crises worsened.



The situation was like this from 2012 onwards and my predecessor, the former Minister, had presented the proposal for the increase of the electricity bill to the Treasury and had emphasised this in a discussion with the honourable President, but hadn’t arrived at any conclusion until I accepted the duties of the ministerial post.



Before my accepting the duties of the ministerial post, that means from January 2013, the Secretary to the Treasury had asked to discontinue the act of the increase of fuel prices because the increase of furnace oil and sulphur from Rs. 65 to Rs. 90 and Rs. 75 to Rs. 100 was a additional burden that came out suddenly. The former Minister explained to the President that this fuel price increase proposal should go along with the Electricity Bill Amendment proposal. The result of this was the postponement of the fuel price increase proposal from 1 January 2013 to 1 April 2013. As the present Minister, I have been faced with helping out the financial crisis of the Electricity Board as a result of the act of the fuel price hike which was postponed and is now in action from 1 April 2013.



Only from this increase, the additional fuel charge that the Electricity Board has to undergo is Rs. 28 billion. When adding this Rs. 28 billion, the total expenses of the Electricity Board have increased to Rs. 256 billion and income was only Rs. 178 billion. With dislike, I had to give permission to the Electricity Board to get Rs. 45 billion from increasing electricity charges from the seeming monetary loss of Rs. 75 billion.

When taking this extra income of Rs. 45 billion, officers of the Electricity Board, other ranks, officers from the Ministry and Public Utility officers together inquired and implemented a scheme as the lower income groups get burdened less and higher income groups get a heavy burden and had presented for the approval of the Public Utility Commission and that had got the approval of the Public Utility Commission. These are the things that I paid attention to as the Minister:

Priorities

1. According to Chapter 30 of the Electricity Board Act No. 20 of 2009, the approved charges that can be charged from the customers are electricity generation, transmission and distribution, which are justifiable costs. According to the legal provisions of the act, the cost of an electricity unit, which is Rs. 23/30 unit fee, has to be obtained from all customers equally. But as the policy document which was made by the former Minister says, the tariff system which was been there from a long time must not be transformed into the above mentioned regular cost recovery system and should be transformed step by step within five years.





2. When taking together the legal provisions and the Government approved charges, the Ministry/Electricity Board cannot increase the charges unfairly from electricity consumers who pay Rs. 23/30 cost per unit. Because of that this was a factor that was taken into consideration when implementing this payment system.



According to the information revealed from the study of the Public Utility Commission that was done by the University of Colombo, people from rural areas who do not have electricity facilities are ready to get electricity on the basis of paying a monthly electricity bill of Rs. 323 and they are capable of paying up to Rs. 320. With this amendment, Rs. 217/50 is the charge for the consumers who have consumed lower than 30 units per month. That is to increase the monthly bill of Rs. 142/50 to Rs. 217/50 from Rs. 75. This is an additional expense of Rs. 2/50 per day that is being added to the electricity bill by a person belonging to the lower income strata who is experiencing the electricity benefits. Is this honourable gathering proposing that this is unfair? According to the relevant study, only an amount of Rs. 217/50 will be charged along with the new fees from the families who have the financial stability up to Rs. 320.





3. There are 1318,755 families who consume electricity units up to 31-60. Under the previous prices such a family’s monthly bill was Rs. 371/85. That has been increased to Rs. 546 from Rs. 174/15. That is Rs. 5/80 per day.



I cannot understand why you are not in agreement to support the Electricity Board, which is being held as a public property and not being privatised by the Government, to economise its expenses by the charged of the monthly bill of earlier said extra Rs. 75 for a family which consumes 0-30 units and Rs. 174/15 for a family which consumes 31-60 units. The important factor that you must pay attention to is that from the 1,111,125 families which consume electricity up to 0-30, from one family an electricity bill of 217/50 is being charged under the new charges and it must be considered that the Government is providing a subsidy of Rs. 481/50 per family. Also from the 1,318,755 families which consume electricity up to 31-60, an amount of Rs. 546 is being charged from one family for the electricity bill and it must be considered that the Government is providing a subsidy of Rs. 852 per month.

Under the existing prices an electricity bill of Rs. 728/40 was charged from the 1,299,301 families which consumed electricity up to 61-90. Under the new charges this will be increased up to Rs. 1,161. That is Rs. 14/42 per day. For these families the Government is providing a subsidy of Rs. 396 per month. Are you saying that this is unfair?



There are 606,926 consumers who consume up to 1,120 units. From these consumers, one family under the existed prices paid only Rs. 1,135/40. Under the new charges it will be Rs. 2,835. According to that it is an amount of Rs. 999/60, which is been increased per month. That is Rs. 32/33 per day. An electricity bill of Rs. 835 per month will be charged from these consumers and also the monthly bill which is currently Rs. 3,851/40 has been increased up to Rs. 5,355 for the 529,923 families who consume electricity up to 121-180 units. These consumers are also paying the Electricity Board more than the due cost. And also the monthly bill which is currently Rs. 5,363/40 has been increased up to Rs. 7,959 for the 40,000 families who consume electricity up to 181-210 units and also a heavy burden of Rs. 2,595/60 per month for the Sri Lanka Electricity Board. These consumers are also paying the electricity board more than the due cost. And also the 60,000 electricity consumers who consume up to 211-240 units who have a monthly bill of Rs. 9,899/40 will have to pay Rs.13,755 under the new charges. According to that, they are paying an extra amount of Rs. 3,855/60 and that is Rs. 128/52 per day. This category is also paying the Electricity Board more than the due cost.



Based on the percentage of the electricity bill hiking, creating commotion will not give a solution to the financial crisis of the Electricity Board, a Government establishment which has not been privatised and is being continued as a public property. As the Minister, my attention is also being paid to the accusations of corruptions, irregularities and losses of the Electricity Board. I will not say that there is no corruption, irregularities, inefficiency or losses at the Electricity Board. As the Minister I must be given a reasonable time period to minimise these. No solution can be implemented within a time period closer to two months. It is an injustice that is being done to me if you are thinking that these shortcomings which were there in the times of former ministers can be minimised within a short period like two months.

Salaries and vehicles

Up to Rs. 8-17 billion has been increased as the salaries of the employees of the Electricity Board. The expenses on the salaries have been increased up to Rs. 17 billion because from 2003 as 25%, 33%, 22% and 28% have been increased as the salaries for three years. This cannot be considered as corruption, irregularities or losses. The Electricity Board purchases goods approximately of Rs. 8 billion rupees per year. That is an excessive incensement of the limit of Rs. 3 billion in 2010. I will take steps to find out about this issue.



There are accusations on the usage of vehicles too. But what we have to think is that vehicle facilities must be provided to the officers who are in the field for 24 hours a day and some of the officers who are in duty in main office sections to make sure that the electricity is on for 24 hours and there are no breakdowns. Vehicles must be provided to the officers and employees to replace the continuous breakdowns in the field due to lightning. That is a thing that a decision cannot be taken with the laws that apply to a Government establishment which works for seven-and-half-hours normally per day. However, the Electricity Board is spending approximately Rs. 3 billion on the usage of vehicles. Preventing money equal to 25% from that amount will not be helpful to ease the loss of Rs. 73 billion of the Electricity Board.



It is true that interest to the banks is high. This must be minimised by a healthy financial management. But this act shows that a board that doesn’t get an income commensurable to the expenditure had no option in the past period, other than taking loans from People’s Bank to make payments continuously. This too can be minimised by making a good income with the help of the method of the amended electricity prices.

Targets

A total of 3,883 gigawatt hours of hydroelectricity, 6,100 gigawatt hours from fuel, 1,883 gigawatt hours under the first chapter of the Norochcholai coal power plant and 700 gigawatt hours from regenerated energy have been aimed in 2013. Meanwhile, 3,883 gigawatt hours from hydroelectricity plants have been expected with the trust of having a sound environment with the reservoirs. If this number increases, a decrease in the electricity units generated by fuel will be a saving for the Electricity Board and if that target cannot be achieved, the cost will be massive for generating electricity from oil power stations.



The power plant of the 11th chapter of the Norochcholai coal power plant is scheduled to be started on October 2013 and it will add 1,883 gigawatt hours to the system.



If the power plant of the 11th chapter of this project could be started on 31 December 2013, 1,883 gigawatt hours can be added to the system. According to this it has been estimated that 5,649 gigawatt hours will be added to the system by the three coal power plants and the 6,100 gigawatt hours that are being generated by fuel will be reduced to 2,334 gigawatt hours.



 If these targets could be achieved with that income, an expense saving of Rs. 45 billion is expected for the Electricity Board and as the Minister I promise that the profit which will be generated by that will be given to the electricity consumers.