July 26 – Sri Lanka plans to revise electricity tariffs every six months starting from April 2017, in a bid to maintain cost-reflective pricing, the country’s power regulator said.
The government has given the go ahead to revise power tariffs every April and October, director General of Sri Lanka’s Public Utility Commission Damith Kumarasinghe told a forum in Colombo.
Sri Lanka state-run Ceylon Electricity Board and Lanka Electricity Company, is in the process of improving their cost accounting to boost transparency in costs.
Kumarasinghe was addressing a training session to improve regulatory accounting practices at the two power distributors.
He said transparency in costing will improve public acceptance tariff changes.
Sri Lanka’s politicians usually try to block power or fuel tariff increases and borrows from the banking system to cover losses of energy utilities in a bid to deceive the public that power tariffs are ‘subsidized’ by the government.
The central bank usually prints money to prevent rates going up amid the higher credit demand.
The printed money then generates excess aggregate demand which then triggers a balance of payments crisis, and collapse of the currency, making everyone poorer.
In 2008 and 2011, central bank accommodated energy tariffs were the proximate causes of BOP crisis, though in 2015/2016 it was central bank accommodated state salary hike.
Ceylon Electricity Board Chairman Anura Wijepala said the building of coal plants had reduced the total costs of power production which was earlier pushed up by liquid fuel plants.
With lower costs the utility would now be able to offer lower cost reflective tariffs which would be more acceptable to the customers, he said.
Liquid fuel plants were brought in as stop-gap measures usually by cabinet decision after planned coal plants were scuttled by environmentalists and politicians.
After under-pricing tariffs, the Treasury then collects taxes from other goods such as basic foods to subsidize the CEB when money is not printed to destroy the currency.
Kumrasinghe said the regulator was tasked with allowing cost-reflective tariffs, so that the utilities would be viable but the customers also had to see the prices as fair.
Critics say, In the last tariff hike, however larger customers were charged unfair tariffs way above costs – perhaps the higher tariff in the world – in a quasi- taxation measure to cross-subsidize other customers in a political move. (ECONOMYNEXT)