Committee to draft national electricity policy

• Govt. says CEB Union demand unreasonable
• Studies show recent CEB profits due to pricing, not efficiency gains
• Unbundling CEB, introducing market competition and improving governance necessary to attract investment

Cabinet Spokesperson and Health and Mass Media Minister Dr. Nalinda Jayatissa said yesterday the Cabinet approved the appointment of a committee to draft Sri Lanka’s national electricity policy and guidelines as required under the amended Electricity Act.

The committee will have up to eight members with at least 15 years of expertise in energy policy, renewable energy, energy transition, system planning, and economics.

Dr. Jayatissa said the members include Prof. Mohan Munasinghe, President’s Counsel Milinda Gunathilaka, Professor Arulampalam Athputharaja, Engineer W.J.L. Shavindranath Fernando, and Dr. H.M. Gunathilaka.

The Sri Lanka Electricity Act was enacted in June 2024 to modernise the energy sector by restructuring the Ceylon Electricity Board (CEB), promoting private-sector investment and renewable energy.

Dr. Jayatissa said the restructuring includes the establishment of independent corporate entities for generation, transmission, and distribution, and creating a National Electricity Advisory Council to guide policy. 

The CEB launched a work-to-rule campaign last week charging the CEB restructuring was illegal. Their demands also included a 50% pay raise for those who would transition to any of the new entities.

“The CEB will be split into four distinct entities initially which will operate as state-owned enterprises, and I don’t understand why some CEB unions are opposing the restructuring,” Dr. Jayatissa said. 

The Government is listening to their concerns but it’s only a matter of moving to another state-owned enterprise that will be well governed to ensure the people of the country do not have to bear the burden of high electricity prices and unsustainable debt,” he told journalists on Tuesday.

Dr. Jayatissa said CEB employees who would like to advance their careers in the sector could always do so in one of the new entities they would fit into. “If not, they could take up the VRS offered by the Government and move on,” he said.

Amendments to the 2024 Act were passed in August 2025, although the full operational status of the Act is contingent on an appointed date within a year of its enactment.

The Advocata Institute, in a position paper in June, argues the 2025 amendment reverses the 2024 Electricity Act’s unbundling by recombining the sector into six fully state-owned entities and urges the Government to retain separation of functions, allow private capital and strengthen independent regulation.  It says recent profit volatility reflects pricing design rather than efficiency, noting the CEB reported Rs. 58 billion in 2023 and Rs. 144 billion in 2024, but a Rs. 18 billion loss in the March quarter of 2025 after a 20% tariff cut, compared with a Rs. 63 billion profit in the same quarter of 2024. Advocata calls for a transparent, formula-based tariff reviewed regularly by an independent regulator.

The paper details fiscal spill overs. In 2023 the Treasury injected Rs. 126 billion to clear arrears to CPC and IPPs. Cabinet approved settling legacy CEB debt of about Rs. 182 billion, while the IMF cites Rs. 301 billion as at September 2024, with recovery partly through future tariffs. By end-2024 the CEB owed Rs. 253.7 billion to domestic banks and Rs. 14.3 billion in cross-arrears to CPC and IPPs. 

Tighter rules under the Public Debt Management Act and bank exposure limits raise the cost of sovereign guarantees, with a cited premium of about 4.8% for an AIIB loan. With a 2024 primary surplus of Rs. 649.6 billion or 2.2% of GDP, revenue at 13.7% of GDP, interest absorbing 65.7% of revenue, and public investment down to Rs. 817.1 billion or 2.7% of GDP, the paper says fiscal space for grid expansion is limited. It notes Sri Lanka’s Caa1 rating and refinancing risks from 2028 to 2029. Advocata attributes high costs to slow renewable integration, premature LNG commitments without clear pricing or demand planning, and says ring-fencing inside a vertically integrated SOE has been ineffective.

It recommends continuing unbundling, introducing competition for the market in transmission and distribution through concessions with strong regulatory oversight, using mixed-ownership or golden-share models where strategic control is required. It warns that re-centralisation would deter investment, weaken regulatory neutrality and increase fiscal risk.