Electricity distribution:

Keep privatisation and franchise options open

by Prof. Kumar David.

Power and Energy Minister John Seneviratne (Daily News, July 22 and Sunday Leader, July 9), technical types like Dr Siyambalapitiya (Daily News, July 5) and various others are falling over themselves to assure some CEB trade unions that nothing really significant will change if the proposed Amendments to the Electricity Reform Act are enacted.

For heaven's sake! For what affliction of pluperfect madness does one want to enact hotly contested legislation if nothing important is going to change? Unless the fundamental structural malaise of the CEB, principal among which is its palpable inability to provide a quality, efficient and customer-oriented distribution and supply of a vital public-good is addressed, the Honourable Minister and his professional apologists are better off shoving the proposed legislation.

The CEB distribution sector has made testing the limits of public forbearance its mission and motto. It is a tangled web of bureaucratise; it is a blight that an anguished public has to suffer in silence; and if the pain of mind, wasted man-hours, and the three-wheeler expenses that households, widows, the poor and the rich suffer are to be avenged, why "domestic fury and fierce civil strife" should erupt, to borrow the words of an irate Mark Anthony.

The JVP oriented CEB trade union is holding not just the government, who cares, but the public to ransom, and the powers that be, from the President down, are capitulating like ninepins. The CEB is not, repeat is not, the property of those who happen to have a job there, it is public property, and electricity is a public-good. The CEB employees are no more the guardians of the public interest in the electricity sector than bank employees the owners of the deposits in their vaults.

Testing the limit

Trade unions as they exist here are not, and are not meant to be the guardians of the public interest; they are concerned with the interests of their stakeholders - and that's fine.

Hence let the public, not those who walk away with a month's salary for a month's work not done, be the final arbiters of what reforms are needed in the public sector and state enterprises. Let the Minister, or an empowered consumer council, call public hearings on how the CEB's distribution and supply arm serves consumers; just make sure a queue from Galle Face Green to Donra Head can be accommodated.

Siyambalapitiya is unashamed to make the following remarks: "There are no additional benefits to the electricity customers in the new Amendments"; "The Amendments are purely to satisfy the aspirations of the employees"; "... the Amendments block privatisation and provide a veto to an employee-owned trust"; "What more can a responsible (sic) government do to please the employees and their political masters?" What is this man saying? Is the consumer supposed to find a slap in the public face on behalf of the JVP and its trade union, a cause for veneration and adoration? Not in all my quarter century of research and consultancy in electricity supply industry reform have I heard such unmitigated drivel from someone who has otherwise earned a high professional reputation.

Seneviratne echoes similar inanities: "The government has deliberately imposed many hurdles on privatisation of the new power sector companies in order to ensure that they will remain government owned companies in the foreseeable future". So the proposed legislation is pure eye-wash.

How can the public interest be served if certain options and avenues are foreclosed in perpetuity irrespective of their desirability from a public point of view?

The plain fact is that there is indeed a role for the state and state enterprises, and there are other spheres that it should keep out of. The supply (retail) end of the electricity sector, that is the interface with the public where service quality and customer sensitivity is vital, is a business that state enterprises, especially mismanaged and public relations inept bellyaches like the CEB, should be debarred from.

The downside of giving an example is that generous minded readers may conjecture that it is an occasional event. Let me assure you that it is not; the kind of thing described below is happening every day at the CEB's area distribution offices.

The Assassins, that is the feared disconnection crew arrives at your doorstep armed with an order to pull the plug on your supply and leave you in the dark (in more ways than one) for "non-payment of dues".

Rest assured that the bill has been paid two or three weeks ago, you are armed with the receipt from the Bank of Ceylon, you flash it in their faces triumphantly, surely all will be well. Bollocks! They tell you to go to hell and rip out your supply line anyway. You grab the phone, if you belong to the social class that enjoys such niceties otherwise you rush to a sympathetic neighbour, and dial the Area Engineer, the techno-bureaucrat who bosses over your local Area Office. In your naivet, you believe justice will now be done.

You can't quite believe what this pompous little functionary spouts: "We don't know about that, we don't recognise payments made to BoC, they haven't forwarded the payment to us". Then you plead "But the back of your invoice says I can pay to BoC and this was weeks ago and I have the receipt, I can spend money on a three-wheeler and bring it to you".

The putative provider of a public service, the servant of the people, responds as follows, "No point; bring the money and pay again (sic) at our Head Office or our special counter at some People's Bank branches".

This is near verbatim from the notes I made interviewing a customer who suffered at the hands of the Kirulaponne office.Believe me this happens day in day out. I have set aside some of my time and watched as old ladies and young men, middle-class, rich and poor, curse and swear in the paying queue; I have collected first-hand accounts from irate consumers at the Kirulaponne and Dehiwala CEB area offices; I have taken notes substantially as per the previous paragraph from sufferers.

To cap it all, in the case verbalised above the person was of some standing so he had the temerity to go to the BoC branch and complain about the alleged non remittance of payment. The bank manager took it seriously and showed him the print out of transaction records documenting that payment had been remitted to the CEB account on the very next day. Such cases have been reported to the CEB on innumerable occasions to no avail.

I have taken pains to labour this point because this kind of chaotic situation applies not only to service disconnection but also to other types of mismanagement and incompetence that plague CEB area level distribution branches. However, in all fairness I must add that office staff often make an effort to be helpful and most are polite, but they themselves are overwhelmed and defeated by a system that suffers from cerebral palsy.

Services that require intimate interaction with the public (retail level, customer-oriented and accountable) have to be left to private enterprise, or to organisations like LECO, which though ultimately owned by the state, provide an adequate service thanks to being arms length from state intervention and are organised on commercial principles.

It is entirely appropriate that the new companies in which it is proposed to vest the eighteen state-owned generating stations, and the proposed transmission cum single-buyer entity, be two state-owned enterprises as envisaged in the legislation. It is especially important that the transmission system be vested in a socially accountable entity - I have no space to elaborate on the reasons here.

It is also necessary that directive policy principles be laid down by the state to guide the overall development of the power supply industry. Yes, these are the valid roles of the state.

However, this mandate does not extend to inappropriate sectors such as distribution and supply retailing. The water-tight guarantees locked into the proposed Amendments against any possible future privatisation or franchising of any part of the retail business, and much lauded by Ministers and their sycophants, is utterly flawed.

The circumstances and pressures accompanying the present legislation, exemplified by the inane comments reproduced above, leave no doubt that turning the CEB distribution arm into five state owned companies, as proposed in the Bill, will not break the stranglehold of corruption, mismanagement and employee ineptitude.

Changing the name from CEB Distribution to wholly government owned companies protected by guarantees against divestiture will achieve no improvement in financial accountability and service quality. This cock will not fight! Bad legislation is worse than no legislation since it spoils the name of reform.

To break this malaise the option to change ownership and control must not be excluded; or in more simple words, the option to privatise or to franchise out management and control of some, especially heavily urbanised sections of CEB distribution, must not be foreclosed in advance. The option to transfer some distribution sectors to local government authorities must also not be foreclosed in advance. If the prospect of fundamental stakeholder transformation is ruled out in advance, then let's shove this legislation!

I will not here purport to have answers cast in stone in respect of which areas to privatise, which to franchise and good candidates for local authorities to assume control of; but such detailed investigation is pointless if the possibility is shut out in advance.

There is not much that the proposed reform can do to bring down power prices. Inefficiency, corruption and mismanagement do indeed add a not insignificant component to power prices, but in future years by far the largest share of the tariff will go towards paying for primary energy - oil and coal. Hydro costs capital but operation is virtually free; but we have used up most of the best sites.

As oil prices go ballistic in coming years, $100 and then towards $200 a barrel and other fossil fuels track this rocket, industry reorganisation is powerless to do anything about prices in the short and medium term. In the far long run of say two decades, alternative energy sources can aim to supplement traditional fuels by 10 and perhaps even 20%. Nevertheless the big energy price picture in electricity and transportation is bleak.

An underdeveloped country seeking to increase its per capita consumption, even after making allowance for forceful conservation efforts, is especially badly off. It is not just Sri Lanka but the world that is facing hard times in respect of energy prices, but this is no excuse for castrated legislation.