Does Sri Lanka need a regulator for utility industry

power

Former Chairman of PUCSL, Attorney at Law, Saliya Mathew writes

Being a utility regulator has perils because the independence of the regulator necessarily removes power from politicians, operators, and others. Furthermore, regulators are sometimes scapegoats for unpopular policies and unavoidably become involved in shaping the policies that they are supposed to implement. As a result of such frictions, regulators are sometimes removed from office or marginalized in some way. However, having a regulator is paramount important to a country and its people. Sri Lanka has and had many regulatory authorities and these regulatory institutions are known for its independence and for its dedication to improving the lives of the people.

One such Regulator among them is Public Utilities Commission of Sri Lanka or PUCSL, widely known as the electricity sector regulator in Sri Lanka. The Public Utilities Commission of Sri Lanka (PUCSL) was established by an Act of Parliament to regulate the power industry, water service industry and petroleum industry in the country. It was in 2009 that the Sri Lanka Electricity Act was passed by Parliament and the regulatory powers of the power industry were transferred to the Commission. Accordingly, regulation of the economic, technical and safety aspects of was initiated.

As an Economic, Technical and Safety Regulatory 

Economic regulation controls the purchase of electricity and the electricity tariffs paid by the consumer.  PUCSL has established a transparency procedure to purchase electricity at reasonable prices and to determine the price of electricity that consumers can afford.

The PUCSL has been able to keep electricity tariffs at the stable in the recent past. Especially since the purchase of unnecessary electricity was prevented, it was possible to maintain the tariffs without increasing. If electricity tariffs were increased, the cost of production, raw materials, etc would have been increased and the entire economy would have been impacted.

PUCSL also protects the rights of the consumers while safeguarding the utility provider through consumer obligations.This is one of the major responsibilities of PUCSL.  The PUCSL resolves the grievances/disputes of the aggrieved consumer through mediation. More than 6000 grievances between the electricity consumer and the CEB / LECO have been resolved through this system in the recent past. If the PUCSL was not there, the electricity consumer might have to go to court and various organizations to get the issue solved. You may already know that the judicial process is very time consuming and costly. Sometimes even complaints submitted to the courts are referred to the PUCSL for a faster and fair resolution. PUCSL has introduced more than 20 special regulations, especially for electricity consumers.

In terms of electrical safety, standards and regulations have been enacted to ensure the safe use of electricity in a manner that does not harm the public or property. Prior to the introduction of the PUCSL, about 200 deaths occurred annually due to severe electric shocks. Due to the regulations and various awareness campaign carried out by the PUCSL, the death toll has reduced to 85 per year. Over the past three years, an international standard for plugs and sockets in Sri Lanka was introduced and implemented. Our country now uses an international standard of 13-ampere plug and socket standard that is a practice in many developed countries. The changed to one standard helped to reduce the cost of electrical wiring for households. The PUCSL also managed to introduce and implement a professional licensing system for electricians in this country. This is a program that gives the electrician in Sri Lanka a national and international recognition. Under this programme, about 45,000 electricians will be issued with a free National Vocational Training Qualification (NVQ 3) and licenses. This will help the consumers like you and me to do our electrical wiring more safely through a qualified electrician.

PUCSL has introduced more than 20 regulatory tools to the electricity sector to safeguard the consumer and the utility and has continually given policy advices to the government of various issues.

For the promotion of Renewable Energy Projects in Sri Lanka, PUCSL were able to introduce a free licensing system for rooftop solar power systems. Accordingly, homeowners were able to generate electricity without a license and sell it to the Ceylon Electricity Board or the Lanka Electricity Company Private Limited and earn an income.

Designated Regulator for Water Services and Petroleum Industries

The PUCSL was not given full legal powers to regulate the water service and the petroleum industry even though the Act says the PUCSL is designed to regulate those two industries.  However, PUCSL advises the Ministry of Water Resources and the National Water Supply and Drainage Board to upgrade the country’s drinking water service whenever the need arises.  

PUCSL held public consultations throughout the country to identify the issues of water consumer issues to formulate policy advice to the government on drinking water and I must say it was a very successful project.  PUCSL also proposed a system to resolve water consumer complaints and disputes and will be able to do the same for petroleum consumers.

The PUCSL is in a position to fully regulate the water services and the petroleum industries when the relevant acts passed through the parliament.

Contribution to formulating the policy of Natural Gas for Sri Lanka is one of the biggest contributions PUCSL made in my tenure with PUCSL. In addition, PUCSL implemented a comprehensive program to protect the quality of the lubricant market within the limited powers vested in us as the shadow regulator of the lubricant market. The raids were carried out in collaboration with the Consumer Affairs Authority to stop the sale of substandard lubricants and PUCSL took the first steps to test the quality of lubricants and to set up an international level lubricant laboratory in Sri Lanka. In addition, policies, standards and guidelines were formulated to protect electric vehicle charging stations and electric vehicles.

Most talked Power Generation Planning in Sri Lanka

Least Cost Long-Term Generation Expansion Plans or in other words power generation plans are one of the most important tasks that CEB does for the nation. These power generation plans are submitted to PUCSL in every two years for approval. PUCSL take this process very seriously and make sure that every aspect is covered and adhered before approving it.

In the recent past, the PUCSL has approved two long-term generation plans. Under this, the necessary approvals were granted for the construction and tendering of 1450 MW power plants to be constructed between 2015 and 2020. It is a difficult process and you may click the below link to refer the process of approving the power generation plan 2020-39.

https://www.pucsl.gov.lk/lcltgep-2020-2039/

However, PUCSL saw a slow implementation process of the generation plan which is constructing the power plants in Sri Lanka even as far back in 2016 and informed the parliament of that. Not only the then Secretary to the Power and Energy Ministry but also the Board of Directors of the Ceylon Electricity Board acknowledged that there was a delay in the construction of power plants and that steps would be taken to expedite it in 2017.

Have PUCSL delayed approving the power plants?

Apart from approving the Power generation Plans, CEB also seeks PUCSL approval to tender power plants for the country from time to time. But the implementation process takes a long period.

As an example, the CEB seek approval to tender the first LNG power plant in Sri Lanka on 15th November 2016. PUCSL convened the Commission expeditiously and gave the necessary approval within two days, on 17th November. According to that approval, the generation of the power plant was scheduled to commence in 2019. However, the tender process had not been completed till 2019. As far as I know, the tender process was completed in the late this year.  Even after 4 years, the tender process was not completed. The CEB and the Ministry of Power and Energy are the responsible parties for calling tenders, not PUCSL. PUCSL only approve.

PUCSL has approved to build 1400 MW of low-cost power plants during the last 5 years. But the construction of power plants has been delayed. It is not the PUCSL who is responsible for tendering and constructing the power plants in Sri Lanka but the CEB only. In 2016, PUCSL approved to build a 100 MW diesel power plant in Galle. My first term in the PUCSL ended and I left the Commission in July 2019.  Even up to that point CEB had not taken any initial steps to build the power plant. It is very clear who delayed the construction of power plant projects.

Emergency Power

While the PUCSL encourages the construction of low-cost power plants, it discourages the purchase of emergency power at higher prices. Recently, the CEB requested to purchase about 1400 MW of unwanted electricity. The purchasing of emergency power started in 2016.  In 2016, the CEB asked the approval of the PUCSL to purchase 155 MW of emergency power. In April 2016, the CEB asked the approval to purchase 55 MW of electricity as an emergency purchase without a tending process and PUCSL did not agree as it saw that there would be enough hydropower to support the system due to the rain in those months. When this was pointed out, the CEB accepted that it was an unnecessary purchase.

Another well-known example is the attempt to buy about 600 MW of electricity from two Turkish ships. At that time the CEB also said that there was a shortage of 470 MW. But the PUCSL did not approve the purchase of electricity. There was no shortage of electricity and no power cuts were carried out due to shortage of electricity.

If such unnecessary purchases of electricity were allowed, the CEB would be bankrupt and the burden would be placed on the consumer. In this manner, the PUCSL was able to save nearly Rs. 1000 billion in the last 5 years alone. If those unnecessary purchases were allowed, the price of a unit of electricity would have to be increased by about 50 rupees.

Removal of a Commissioner

Section 7 of the Public Utilities Commission of Sri Lanka Act clearly states how do remove a member of the Commission before the expiry of his or her term of office of 5 years. Parliament can make the final decision on removal. The Minister shall notify the Member in writing that he will remove the member on the grounds that he has been declared an unconscious person, that he is unfit to act as a member, that he has failed in his social responsibilities for more than three months, or that he has been guilty of misconduct. If the member makes any statement, the report of the Minister should be presented to Parliament along with those reports. A member cannot be removed unless a motion to remove the member is passed by a majority vote of the total number of Members of Parliament, including those who are absent.

However, the members of the Commission have the power to make independent decisions. They are entrusted with the task of complying with the provisions of the Public Utilities Commission of Sri Lanka Act and the Electricity Act of Sri Lanka. The members appointed to the Commission are accountable to the people of this country through Parliament. A member may resign for any personal reason. But it is not clear the recent resignation of all the members at once was for personal reasons. The Act states that at the inception of the Commission, the founding members shall be appointed for a term of 4, 3, 2 and 1 years respectively. Such provisions have been included to ensure that all members of the Commission not to remain vacant at all times. Prior to these resignations, all the Commissioners should have studied the provisions of the Act. Due to the resignation of all at once, all new appointees have to do a lot of research before starting the regulatory process and it will also impact in carrying out the functions given through the Electricity Act and halt the process of carrying out dispute mediations, power plant approvals, giving license to the electricians, etc.

The writer, Saliya Mathew served as the Chairman of the Public Utilities Commission of Sri Lanka from July 2014 to July 2019. During his tenure, he was the Elected President of the South Asian Infrastructure Regulatory Forum for 3 years. Mr Mathew started his career as a lawyer in 1975 and has served in various courts. He has been the Governor of the Sabaragamuwa Provincial Council for 10 years. From 2006 to 2013 he served as the Co-Chairman of the Salaries and Cadres Commission and served as the Chairman of the Employees’ Trust Fund Board for one year.