Electricity Act amendments: Reversing reform

THE Government has published Amendments to the Electricity Act No. 30 of 2024, which they plan to approve in the month of June.

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These amendments reverse some of the main provisions of the original Act to the detriment of the country.

The context of the reform

The electricity sector in Sri Lanka has been run as a Stateowned, vertically integrate monopoly with poor efficiency management practices and technology that belie investment in it by both Government and funding agencies. The cost of electricity has been significantly high during some years compared to the region, while blackouts have been a regular occurrence spanning the last decade.

While investments have been made, their prioritisation and efficacy remain questionable. While the ADB has pumped millions of dollars into the CEB purportedly to increase the absorption of renewable energy into the grid, the CEB has recently resorted to curtailing renewable energy generation and deterring further additions by imposing non-viable feed-in-tariffs citing technical challenges that other countries have long since overcome. This is inexcusable, as curtailing energy from the sun and wind will hurt the consumer.

The utility's finances have been in shambles, and the recent tariff stand-off with the IMF appears to have been triggered by ba accounting practices related të deferred income. State interference in blocking tariff increases resulted in CEB making losses from 20162022. The losses and additional capex were funded by debt from DFIs, treasury and state banks ultimately, the public.

These debts were "repaid" by treasury either infusing equity or converting debt to equity - which happened in 7 out of last 12 years, with the largest in 2022 amounting to a staggering Rs. 450 billion. Now most of CEB's losses, inefficiencies and wasteful borrowings sit on the Government's balance sheet, socialising their losses to the pub lic.