Sri Lanka power regulator proposes green tariffs; cross subsidies

Dec 03, 2010 (LBO) – Sri Lanka’s power regulator has called for public responses on proposed new tariffs for next year, which indicate steep rises for some domestic users and low prices for industry and government offices and a new green tariff. Sri Lanka governments own energy policy has an objective to cut widely discriminatory pricing between different classes of users and the use of cross subsidies or ‘robbing Peter to pay Paul’ type of pricing.

Even under the current scheme larger domestic users paid the highest per unit charge of 25 rupees per unit above 181 units and 30 rupees above 600 units, while industry continued to get a subsidized rate.

Under the new tariffs domestic users above 91 units would pay 23.50, going up to 45.50 rupees when usage exceeds 600 units.

CEB’s GT-7 Gas turbine, which is the utility’s most expensive substantial plant costs 27 rupees a unit to operate. Most private power plants cost less than 17 rupees a unit to run, though they have a fixed annual capacity charge.

Analysts say the practice of charging exorbitant tariffs far above the real cost of generation is a violation of the basic principle of cost-based pricing in utilities as well as the intentions of Sri Lanka’s national energy policy.