by Dr Janaka Ratnasiri
The government of Sri Lanka (GoSL), in a policy decision made in 1998, expressed its commitment to power sector reforms and embarked on a programme to restructure it by unbundling the Ceylon Electricity Board (CEB) into separate companies for generation, transmission, and distribution, as reported in the ADB Report on Country Assistance Programme Evaluation: Power Sector Assistance Evaluation, August 2007. To give effect to this policy, a Bill was drafted to introduce reforms in the power sector as far back as 2002.
ELECTRICITY REFORMS ACT 28 OF 2002
The draft titled Electricity Reforms Bill was presented to the Parliament in 2002, outlining sector reforms comprising restructuring of the electricity industry by breaking the Ceylon Electricity Board (CEB) and Lanka Electricity Company (LECO) into several independent state-owned companies to carry out generation, transmission, and distribution functions.
The Bill proposed that independent companies be incorporated for the following purposes:
One company to take over the functions of the CEB relating to hydroelectricity generation and thermal electricity generation,
One company to take over the functions of the CEB relating to transmission and bulk procurement of electricity,
Three or more companies to take over the distribution of electricity, and
One or more companies to take over other functions of the CEB and LECO.
The Bill when presented to the Parliament brought in strong protests from many quarters including the CEB trade unions and other trade unions as well as from several political parties. They saw this Bill as an initial step towards privatizing the CEB and consequently loss of employment for its staff. Once the government gave the workers an assurance that the workers’ rights would be safeguarded, the protests died down and the Bill was passed in March 2002. It was gazetted as Electricity Reforms Act No. 28 of 2002 on 13 December 2002. However, the necessary order to give effect to the Act was not gazetted by the Minister and as a result the Act did not come into operation.
ENERGY EXPERT’S RECOMMENDATIONS FOR UNBUNDLING THE POWER SETOR
Prof. Priyantha Wijayatunga, Director of the South Asia Energy Division of Asian Development Bank (ADB) said at the launching of the Techno 2019 exhibition held in July 2019, that “Sri Lanka still needs to go a long way in relation to sector governance, compared to other countries in the region. It is time that we look at this closely so that we do not lag behind. Reforms will undoubtedly help the energy sector and hence the country’s economic development,” (Daily Mirror, 18.07.2019).
He specifically pointed out that improved governance in the energy sector in India and Bangladesh enormously helped conceptualizing and implementing clean energy initiatives, while enhancing their energy security. He highlighted the important role played by independent energy regulators and separation of functions of the energy sector in these countries, which had paved the way for breakthroughs in clean energy initiatives.
Prof. Wijayatunga elaborated “By now, a large majority of the countries, including many in the developing world around us, have fully unbundled the energy supply industry with a reasonably independent regulatory environment. If we look at South Asia, India and Bangladesh have already significantly advanced and are rapidly progressing in these areas,”. Further, he noted that “reforms also led to an increase in private sector participation in all sub sectors, including generation, distribution and even in transmission business in these countries”.
RECOMMENDATIONS OF INTERNATIONAL ORGANIZATIONS
The GoSL, from time to time, engaged the services of international institutions such as World Bank (WB), Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA) to make recommendations to improve the power sector. Among the reports produced from these studies are:
JICA Master Plan Study on the Development of Power Generation and Transmission System in Sri Lanka, February 2006,
Asian Development Bank report on Assessment of Power Sector Reforms in Sri Lanka, 2015,
JICA Report on Electricity Sector Master Plan Study in Sri Lanka, March, 2018, and
World Bank Group study on Sri Lanka Energy Infrastructure Sector Assessment Programme (InfraSAP), April 2019.
The 2006 JICA report observed that “political intervention is making it impossible for the CEB to manage itself autonomously. As a result, its management has been criticized as inefficient by external parties. Moreover, it has piled up a debt big enough to jeopardize its continued sustenance. One of the areas where politics has been heavily involved is the tariff question. Thus far, political considerations have worked against attempts to raise tariffs, and tariff revisions to reflect the costs have consequently been delayed. To put a halt to political intervention in CEB management as…