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| Sunday, 7 April 2002 |
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Features |  |
| News Business Features Editorial
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Vacillation: root cause of power crisis by Hana Ibrahim
The revised electricity rates introduced on April 1, has given Sri Lanka the dubious distinction of having one of the highest tariffs in the world. This, coupled with the power-cuts, which is now in its 10th month, has made electricity not only expensive but also a rare commodity. Why is it necessary to impose such high rates and more significantly why is the country facing such a serious power crisis? Dr. Susantha Perera, Chief Engineer (Tariff) Ceylon Electricity Board (CEB) and President of the CEB Engineers Union, answers these and a few other pertinent questions that shed light to the power situation. Question: The new tariff structure has upped the price of a single unit by as much as Rs.2. Why has electricity become such an expensive commodity and why was it necessary to increase the price by such a high percentage. Answer: The root cause is the cost of recovery. The CEB is spending a lot of money on thermal generation which is expensive, and if the Board is to be run as a business, revenue has to match the cost of supply. We are compelled to rely on expensive emergency power because long term plans for cheap and sustainable power generation were not implemented. The CEB objectives are to meet the increasing demand without interruption and to ensure that the demand is met at the lowest possible cost. However both objectives have been defeated - primarily at funding stages - because of government inaction. Q: What is the estimated revenue from the increased tariff? A: We expect Rs.12.5 billion extra revenue with the increase. Our revenue for the past 12 months was Rs. 33 billion. With the increase, we expect it to go up to Rs.46 billion. Q: Will it cover the cost of emergency supplies? A: It will barely cover the current expenditure, but not the price of emergency power, which will cost us an additional Rs.30 billion. Q: Can you explain the steps taken to provide emergency power? A: We've already commissioned 100MW and signed a contract for an additional 130 MW. We plan to have 300MW of emergency supply from May to September. Q: How does the new tariff work? A: Prior to the increase, the price was Rs.5.71 per unit. Now we are aiming at Rs.7.80 per unit - this figure is arrived at by dividing the revenue by the total unit sold in a year. The supply of electricity falls into three categories - domestic, industrial and commercial. There is also a fourth category now - Hotels. Each category has a separate pricing structure, with unit prices for the domestic sector beginning at Rs. 3.00 for the first 30 units and increasing to Rs. 4.00, for the second 30 units, and going up to Rs.15.80 if anything above 180 units. Q: Should we expect the rates to be increased further? A: If the existing trend - burning up expensive fuel like diesel for emergency power supply - continues, the cost will escalate substantially and the consumers will have to pick up the bills. If the Rs.30 billion bill for emergency power until September is to be recovered through tariff, we will have to increase the charge by another Rs.2 per unit. Q: Why are we facing such a profound power crisis? A: The primary reason is the failure of the monsoons. Two to three consecutive monsoons have been poor and this was foreseen five to six years ago. Data on rainfall for the past 50 years, including low rainfall thresholds, indicates that an average 3800 metric units of power was generated from hydro resources. However last year, it recorded the lowest at 2850 to 2900 metric units. Q: If you say the current situation was foreseen, why wern't any long term or even contingency plans made to avert it? A: CEB's planning branch had prepared a 15-year plan that is updated annually. The coal power project was planned in 1982 (it was a long term project). It was also the cheapest alternative. Trincomalee was chosen as the site because of the natural harbour and the deep sea. But due to various reasons, some of which were security related, it was shifted to Mawella in the southern coast in 1985. This site also has a deep sea, but there was a problem with re-settlement and the project was stopped overnight. We then went west - all the way up to Negombo - to Norochcholai. Rs.400 million was spent on environmental impact assessment studies, and we received permission from the Central Environmental Authority (Wyamba Provincial Council) and the Coast Conservation (after submitting detailed reports) to proceed. The project was almost ready for implementation when the Bishop of Chilaw objected. What happened was that the government in power allowed a Bishop to hold an entire country to ransom. Q: Allegations have been made that Norochcholai was always a non-starter and the Bishop's objection on environmental grounds just helped the cause? A: Not true. The government agreed to the Bishop's request to have an independent consultant from Denmark to do another environmental impact study. In his report, the expert described the project as being well designed and in keeping with state-of-the-art international practises. The report also said that there would be no disturbance to the population. However it did recommend that the planned jetty (for transporting coal from ship to shore) be replaced with a barge transport system that would require a smaller harbour and would also be cost effective. We agreed to that. But the Bishop continued to object. Q: At a recent press conference to announce the new tariff, CEB officials requested that Norochcholai be implemented. Subsequently it was reported that the government decided to shelve the project. What is the official status of Norochcholai today? A: Consecutive governments have not taken a decision as to whether to continue with the Norochcholai project or cancel it. The present government has not made an official announcement either. Q: What about the Bishop? A: He has been vocal but not consistent. Now he appears to have given the green light and has stated that the government can proceed, but that it should ensure that the environment is maintained. However he still thinks it is a bad decision. Q: There have also been allegations that the estimates for Norochcholai is way too high when compared with coal power projects in other countries. Is there any truth to it? A: The allegations would have proved correct if the jetty, which was estimated at US$78 million was still part of the plan. But with that scrapped, we are well within the general cost of US$ 1 million per MW of power. The entire project will provide us 900 MW of power in three phases. The first stage which will provide the basic infrastructure for the entire project and complete the 300MW power plant, will cost US$400 million. Q: The fate of Norochcholai is still undecided, and we are still left with no proper long term plans. What are the alternatives? A: In my view, coal is the cheapest option that enables us to supply power at an affordable level. We have conducted all the studies, obtained legal permits and the Japanese government is still interested in funding the project on concessionary terms. There is no reason why we should not go ahead. If you start now, can finish the project by 2007. It is also important to remember that whatever the fate of Norochcholai, we need a coal power plant by 2013. Q: Where does the combined cycle plants come in? A: By 1995, when we knew the coal power plant wouldn't be a timely option, we formulated plans for expansion. It was accepted by the then Government and in 1999 planned the combined cycle gas and steam plants in Kelanitissa, with two plants that would provide an additional 300MW of power. However, the plants too were not commissioned in time. One plant was offered to the private sector in 2000 - This is expected to be functioning by July 2003. And the other which was supposed to be commissioned in 1999 was only commissioned last year. It is already providing 110MW. Hopefully by next year, both plants will be fully operational - but it will be three years late. Q: What about Upper Kotmale? Here again environmentalists have objected to the project and warned dire consequences to the surrounding areas and predicted that waterfalls would run dry? A: The project was also delayed by six years. It has now been redesigned and can generate 150MW, which will help us save a substantial amount of money. It had also got the approval of the relevant bodies. Japan has agreed to provide the funds and the project can be completed in 2 to 3 years. Q: So where do we stand now? A: We cannot have short term plans. By 2004, 180 to 200MW of power need to be added to system, this amount will need to be added every year. In reaching that objective, we have to look at the economical viability. Gas turbines are easy, but very expensive. There are no arguments as to coal being cheap. It is also available in plenty - (use clean coal that is low in sulphur) - for the next 200 years resource. Q: What about private sector participation? A: Already there are two or three private sector plants in operation. They work on contract. We also have long term plans for private sector participation with thermal, diesel or Naphtha generation. Q: Getting down to the issue of power cuts, how long should we expect it to continue? A: I am confident that by June, with the added capacity, we will be able to lift the power cuts. Perhaps even quicker, if we get substantial rains. |
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