Power Sector Reforms DG clarifies

With reference to the Daily FT story titled “Inter national donors raise alarm over changes to Electricity Act” published on 25 June 2025, the Power Sector Reforms Director- General (DG) has responded to the concerns raised by the article, considering the fact that electricity consumers and investors should be aware of the rationale behind the said Amendments and its implementation if the Sri Lanka Electricity (Amendment) Bill is passed in Parliament.

Following is the full clarification issued by the Ministry.

Concern 1: Permanent Government ownership

The Government of Sri Lanka (GoSL) will hold 100% permanent shares in both the Generation Company and the Distribution Company incorporated with the Preliminary Transfer. However, the Generation Company and Distribution Company will be further unbundled as stated in Clauses 13 and 20 of the Bill. There is no legislated permanent 100% GoSL ownership in those further unbundled companies except the company with Hydropower. This was further elaborated by the proposed committee stage amendments to the Bill. The flow of GoSL shares in new companies is shown in Figure 1. 



Concern 2: National Transmission Network Service Provider (NTNSP)

The Ceylon Electricity Board (CEB) owns 35% shares in LTL Holdings Ltd., (LTLH) and 100% shares in Sri Lanka Energies Company Ltd., (SLEC) as a valued “Asset.” This “Asset” – the CEB-owned shares in LTLH and SLEC – will be allocated to the NTNSP according to the transfer plan. The NTNSP will remain limited to its core function of Transmission. However, the NTNSP may have multiple fully owned or partially owned subsidiaries into multiple other businesses. 

In this particular case, the NTNSP, LTLH, and SLEC are separate corporate entities. As long as the NTNSP is limited to Transmission, there will be no re-bundling of the activities. Any power plant owned and operated by LTLH and SLEC will be having a Power Purchase Agreement (PPA) with the National System Operator (NSO); thus, the NSO will do the electricity procurement in a competitive manner as in Section 11 of the Sri Lanka Electricity Act. There will be no conflicts of interest in this regard and competitive procurement will assure transparency in the processes.

Concern 3: Distribution Company

Amendment in Clause 20.(4) of the Bill is drafted correctly, and is to be read as follows: “... to take over the assets, liabilities, and functions of the Ceylon Electricity Board as referred to in the preliminary transfer plan, relating to – (iii) Lanka Electricity Company Ltd.;” 

The CEB owns 55% shares in Lanka Electricity Company Ltd., (LECO). This takeover by the Distribution Company is specific and limited to the assets, liabilities, and functions of the CEB relating to this 55% shares in LECO.

There will not be any full-absorption of a distribution licencee by another distribution licencee; it is just a transfer of shares owned by a distribution licencee (CEB) in another distribution licencee (LECO) to another distribution licencee (Distribution Company).

Therefore, the quote and the meaning by “... Distribution Company will assume ‘the assets, liabilities, and functions’ of LECO” in said letter by the Development Partners is incorrect.

The Distribution Company and LECO are separate corporate entities. The Distribution Company will be further unbundled with the final transfer plan. Those further unbundled distribution companies and LECO can take independent corporate decisions on strategic private investments.

The Amendment in Clause 18.(2) of the Bill will enable “Retail Markets” that electricity consumers get more efficient, well-governed, low-cost options in electricity supply, where LECO finds more corporate business opportunities by expanding their consumer base both geographically and even in distribution voltage levels. 

Concern 4: Role of the regulator in tariff setting

The final suggestion by the Cabinet of Ministers is “in consultation with the Ministry of Finance.” It is very clear that the Regulator has to do the final Tariff Setting in accordance with the national tariff policy.