ENERGY SECURITY or ‘the uninterrupted availability of energy sources at an affordable price” is one of the critical areas that Sri Lanka needs to look at when it’s come to the electricity industry. The Indian Ocean Island has about 0.6 million domestic and industrial electricity accounts.We spoke to experts at the Public Utilities Commission of Sri Lanka (PUCSL),the regulator of the electricity industry on economic regulation and how to deliver energy security to the consumers.
HASANKA KAMBURUGAMUWA, ASSISTANT DIRECTOR REGULATORY AFFAIRS, KANCHANA SIRIWARDANA , DIRECTOR TARIFF AND ECONOMIC AFFAIRS and PUNSARA NAGASINGHE , ASSISTANT DIRECTOR LICENSING
What is the PUCSL’s role as an economic regulator?
Eng. Hasanka Kamburugamuwa: As an economic regulator for the electricity industry, we involve in setting the regulatory mechanism and ensuring transparency in generation, transmission and distribution of electricity in Sri Lanka. For example, if you take the generation cost,be it transmission or distribution, we have to consider only prudent costs. If the cost is not prudent, then it cannot be passed on to consumers. That’s where we come in.
One other area that comes under economic regulation is tariffs of the utility. We have introduced a transparent tariff methodology for CEB and LECO, and through that, the country was able to save Rs150 billion for the past five years. We are now in the process of implementing a regulatory accounting system in CEB so that financial statements would be more transparent.
Apart from that, we have introduced several regulatory tools as guidelines,rules,regulations to increase efficiency through loss reduction and have set targets for CEB and LECO to achieve while we monitor it so that unjustifiable losses would not pass to the consumer.
Eng. Punsara Nagasinghe: It would be noteworthy to mention that 80 % of the total electricity cost is on account of electricity generation. This is around Rs160-170 billion annually.
Therefore, if you take the generation of the electricity, we play a significant role in approving the power plant plan for the least cost and approving power purchase agreement (PPA). PUCSL go through PPA’s of power plants to determine the return on equity. If the return is not justified, we question it and ask that it be renegotiated and amended.
We also overlook dispatch planning as daily energy demand varies. Electricity demand peaks in the late evening and is also high during the day. During peak hours, demand rises, and the CEB should dispatch idle plants to obtain electricity. To make it more transparent, we have introduced system audits.As an economic regulator, we ensure tariff to the consumer is justifiable through these measures, and the utility providers are economically viable.
What is being done to meet the country’s energy needs and supply?
Eng.Nagasinghe: The country’s energy need is met with the least cost, long term generation plan prepared by the CEB. The plan identifies power plants needed to supply the electricity demand for 20 years. This plan is amended every two years. It also identifies different technologies and fuel types,so that the country won’t run out of power should there be a significant power plant failure. PUCSL has the regulatory mandate to approve these power
generation plans and had approved all such plans so far.
The main challenge over the last few years was the non-implementation of the generation plant to the given timeline. For example, the 120MW Uma Oya and 300MW natural gas power plants were expected in 2019, and a 100MW furnace oil power plant in Galle was expected in 2018 but was not added as expected These delays created an issue in electricity supply and demand which CEB matched with high-cost emergency power. Recently CEB procured 100MW as emergency power. Data shows that Sri Lanka had purchased 100MW emergency power in 2016, 180 MW in 2017, 156MW in 2018, 670 MW in 2019 and plans to purchase 665MW in 2020 and 770MW in 2021. So this is purely a result of the non-implementation of the power generation plan. Fast implementation of the same plan in a timely manner is the only solution to meet the country’s energy needs.
What of alternative energy sources?
Eng. Nagasinghe: Initially, most alternative sources were mini-hydro. As of now, most of the potential of mini hydros are exploited. Solar and wind have more potential now. In around 2016, many rooftop solar panels were added to the system. Before this programme, the available rooftop capacity was 20MW, but as of 2018, there is about 150MW from rooftop solar. Also, there are solar power plants, five of which are already in the system. By the end
of 2018, there were 128MWs wind power and 360MW for mini-hydro.
Sri Lanka has also exploited natural gas in the Mannar Basin. If that comes in, the country’s energy security would be safeguarded as we don’t need to depend on some fuel imports.
What is the cheapest and most viable long-term power generation plan for Sri
Lanka?
Eng. Kanchana Siriwardane: What we found during the last review of the generation plan was that LNG, along with renewables, is the best combination. Coal is obviously cheaper but does damage to the environment and people.If you have a combination like renewable energy with LNG, that will the cheaper and better choice which minimum negative environmental impact. We don’t have preconceived notions about energy sources. Instead, our approach is based on the least economic cost to the consumer. The combination can vary, based on their economic cost.
[pullquote]SOLAR AND WIND HAVE MORE POTENTIAL NOW. IN AROUND 2016, MANY ROOFTOP SOLAR PANELS WERE ADDED TO THE SYSTEM.[/pullquote]
What is the PUCSL’s role in regulating the electricity tariff?
Eng. Siriwardane: Our role in tariff regulation as a Commission is to ensure that the licensee recovers their reasonable cost.A reasonable cost is when the operation is prudent and efficient. To monitor this, we look at the technical performance, including technical loss targets, their operations and the maintenance cost. Those are scrutinized against benchmarks. Then, we have to look at government policies with regards to customer tariffs and ensure that the direct subsidies are funded by the government.
How can the PUCSL ensure affordable pricing for electricity?
Eng. Siriwardane: We have to understand that the electricity system does not change; costs can vary depending on world market prices for fuel. What we can ensure is that the system is efficient in utilizing fuel and that we have the forward plans to minimize future costs. This can be done through the technology we use, the efficiency of the power plants and the efficiency of our operations.
Eng. Kamburugamuwa: For example, if a consumer uses large amounts of electricity, he or she is charged more per unit. But if a consumer uses only 0-60 units a month, he or she is charged less. That is the tariff schedule. The person who uses more pays more on average. So,the user has an incentive to reduce their consumption and save money.
How does the PUCSL ensure energy security in the long term?
Eng. Nagasinghe: We deal with security of supply, which involves sourcing affordable supply. We can have many sources, and there should be enough conversion methods, in case you need a network. We have to look at long-term planning in terms of generation and transmission networks, and the pipes to deliver the energy. This is all being looked into at the generation planning stage. In the short-term, we have to worry about supply shortages, which includes the reliability of transmission lines. PUCSL analyses the energy security of Sri Lanka from time to time and provides policy advice to the government when and where necessary. We also work with CEB and LECO to implement a regulatory framework to ensure energy security in the country.