CEB moots 18.3% tariff hike for 2H to offset costs, operational challenges

• Insists proposed tariff increase is essential to maintain uninterrupted power supply, ensure financial viability as per IMF program, and support national energy security goals
• States tariff hike to address projected revenue shortfall of Rs. 42.19 b between June and December 2025
• Forecasts revenue from new tariff revision is over Rs. 230.71 b
• Cites significant maintenance outages scheduled across several plants—Lakvijaya Power Plant, Kotmale, Ukuwela, and Victoria hydro plants
• Notes 312 MW Sobadhanavi IPP Thermal Plant expected to begin operations in combined cycle mode by next month 
• PUCSL to release Public Consultation Paper tomorrow, will make decision in early June

By Charumini de Silva

The electricity regulator, the Public Utilities Commission of Sri Lanka (PUCSL) on Saturday announced that the Ceylon Electricity Board (CEB) has formally submitted its proposal for the second electricity tariff revision for 2025, seeking a significant 18.3% increase in electricity tariffs for the second half of the year. 

The proposal was sent to the PUCSL in response to its earlier correspondence (PUC/E/Tariff/01, dated 29 April and 14 May 2025), citing escalating operational expenses, hydroelectric generation adjustments, and the need to maintain financial stability under Sri Lanka’s Extended Fund Facility (EFF) arrangement with the International Monetary Fund (IMF).

The tariff hike is intended to address a projected revenue shortfall of Rs. 42.19 billion between June and December 2025, which the CEB warns could jeopardise the financial and operational stability of the power sector.

As per the proposal, the CEB anticipates a total net energy generation of 10,116.0 GWh during the second half of 2025. This includes 3,224.2 GWh from hydro sources, 3,814.9 GWh from thermal plants, and 2,810.4 GWh from other renewables. It added that hydro inflows are expected to reach a notable 3,277.9 GWh due to heavy rainfall levels experienced in early 2025.

Electricity sales from June to December 2025 are projected at 9,329.3 GWh. Of this, 8,489.6 GWh will be sold directly by the CEB, while 839.7 GWh will go to the Lanka Electricity Company (LECO).

Total costs for the June-December period are projected at Rs. 276.48 billion, including energy costs (Rs. 156.6 billion), capacity costs (Rs. 44.9 billion), transmission allowed revenue (Rs. 12.99 billion), finance costs (Rs. 14.06 billion), and distribution costs (Rs. 47.9 billion).

Fuel prices used in the calculation include Rs. 274/litre for auto diesel and Rs. 45.41/kg for coal, with an exchange rate of Rs. 303.33 per US dollar.

Revenue from the current tariff is forecasted at Rs. 230,713.51 billion. However, with updated fuel prices, an Average Weighted Prime Lending Rate (AWPLR) of 8.45%, and legacy debt burdens, a tariff increase is deemed necessary. 

The PUCSL has allocated an additional Rs. 11,858 million as compensation for BST deviations from July to December 2024, but this is offset by a Rs. 8,283 million deficit arising from the unsanctioned 20% tariff reduction in January 2025.

In alignment with the IMF program, cost-reflective tariffs remain a key structural benchmark. The tariff proposal reiterates that the current pricing is unsustainable, particularly after operating under a frozen tariff regime from 2014 to 2022, which led to heavy borrowing and deferred payments, accumulating massive legacy debt.

The Cabinet of Ministers has already approved a multi-pronged strategy for debt restructuring under Decision No. 25/0235/825/012 dated 9 February 2025, including debt swaps, extended treasury loan terms, and syndicated financing.

The revised transmission allowed revenue for the last seven months of 2025 has been adjusted to Rs. 12,989 million, reflecting underestimations in previous submissions.

Distribution Licencees have also seen their revenue allowances adjusted for network efficiency and OPEX recovery.

All energy permits and environmental clearances are expected to comply with Generation Licence No. EL/GB/25/01, issued on 10 March 2025. Furthermore, a deferred payment scheme for energy permits is to begin in January 2026.

The CEB pointed out that, under Clause 5.2 of the PUCSL’s Tariff Methodology, this proposed tariff increase is essential to maintain uninterrupted power supply, ensure financial viability, and support national energy security goals.

The dispatch plan accounts for these hydro gains and also integrates the maintenance schedules of several power stations. This includes a 25-day Level C outage for Units 1 and 3 at Lakvijaya Power Plant in June and July, a 60-day Level B outage for Unit 2 from October to November, and a 12-week maintenance at the Kelanithissa Combined Cycle Power Station (KCCP) starting in November. Other scheduled outages include seven weeks for Kotmale Hydrop Power Plant (HPP) Unit 2, three months for Ukuwela HPP Unit 1, and six weeks for Victoria HPP Unit 3.

The CEB noted that the 312 MW Sobadhanavi IPP Thermal Plant is expected to begin operations in combined cycle mode by June 2025.

The proposal, detailed in Annex III and supported by the Bulk Supply Tariff in Annex IV, awaits the PUCSL’s approval for implementation in the final half of 2025. 

The PUCSL stated that its Consultation Paper will be published tomorrow (20). The CEB’s proposal is available at www.pucsl.gov.lk (https://www.pucsl.gov.lk/proposed-electricity-tariff-revision-2025-2/).