Cost of Electricity Generation and the National Economy

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Ceylon Electricity Board Engineers' Union
(CEBEU)
Media Revelation
18.04.2018
1. Cost of Electricity Generation and the National Economy
The total annual electricity generation of the country is about 15 billion units at
present and it increases nearly by 1 billion each year. Hence if the cost of
generation of one electricity unit is increased by a mere one rupee it would
incur a loss of more than Rs. 15 billion to the country at present.
It is a duty of the Ceylon Electricity Board to prepare a Least Cost Generation
Expansion Plan identifying most appropriate power plants complying with
technical requirements of the Sri Lanka electricity system. After commissioning
the Norochcholai coal power plant as identified in CEB’s long-term plans, the
cost of generation of one unit was reduced from Rs. 23.66 in 2012 to Rs.15.07 in
2015. In line with this, the government reduced the electricity bill by 25% for the
first time in the history.
However, since no low cost major thermal power plants were added to the
system after 2014, electricity generation from diesel power plants (like
emergency power plants) were increased which in turn has increased the cost
of generation up again to Rs. 21.32 in 2017. As a result of this Ceylon Electricity
Board, which made profits with the commissioning of Norochcholai coal power
plant, has incurred a loss of Rs. 45 billion in 2017.
After spending nearly 10 years for resolving political, social and environmental
issues, the Sampur coal power plant was cancelled at the very last moment at
which it was about to be tendered. Even if the Sampur coal power plant was
cancelled, there are no any signs of commencing the construction of any new
major power plant as a successful measure to resolve the crisis caused by the
cancellation of the project. Under these circumstances, it is inevitable that CEB
will incur heavy losses of more than Rs 50 billion annually in coming 6-7 years
until a low cost major power plant is commissioned.
The damage to the country's economy due to the increased diesel power
generation as a results of the delaying the commissioning the Norochcholai
coal power plant by 15 years, was staggering 900 billion Rupees. This amount

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is equivalent to the construction cost of eight more highways similar to the
Southern Expressway. Similarly, the loss of terminating the Sampur coal power
plant at the very last minute is nearly Rs. 200 billion for five years. This could
finance the construction of four more highways similar to Katunayake
expressway. Accordingly, it is clearly evident that unlike other sectors, the
erroneous decisions taken by the top government authorities for the power
sector can have massive impact on the nations economy.
2. Controversy over Generation Expansion Plan of CEB
Ceylon Electricity Board prepares the Least Cost Long Term Generation
Expansion Plan (LCLTGEP) once in every two years for a twenty year horizon to
provide safe & reliable electricity supply to the people of this country at an
affordable price. The role of the Public Utilities Commission of Sri Lanka (PUCSL)
is to ensure the plan submitted by CEB is in line with the government policy and
the legal frame work and then to grant approval for implementation.
It is the Ceylon Electricity Board who has the knowledge, expertise and more
than 30 years of experience and the mandate to prepare the Generation Plan
as per the Sri Lanka Electricity Act. However, PUCSL deviating from this well-
established practice of the sector, discarded the Generation Expansion Plan
2018-2037 prepared and submitted by CEB and send a plan prepared on their
own giving undue opportunities to private investors with vested interests for
high cost power plants while dangerously manipulating future generation mix
of the country.
The Commission mainly consists of personnel from legal profession and there
are few inexperienced junior engineers who do not have sufficient knowledge,
competence or exposure even in the related field, to assist the commission in
technical matters. They have tailor made a generation plan advantageous to
private business mafia in the sector. Despite the clear demarcation of the rights
of preparing and approving the plan to two authorities the CEB and PUCSL by
the Act, it is crystal clear that performing all by the Commission is not correct.
That plan is not only illegal but also will lead to enormous financial burden to
the country and complex technical issues.
The plan prepared by CEB is well balanced with proper generation mix of LNG,
Coal, Hydro, Wind, Solar and etc. According to the plan prepared by PUCSL,
all future thermal power plants are based on Liquid Natural Gas (LNG) fuel. If
their plan is implemented, the whole country will depend largely only on a
single fuel for thermal power generation which is a telling blow to the energy
security of the country.

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The Commission has introduced 150MW LNG power plants in their plan instead
of 300MW LNG power plants proposed in CEB plan on their own stating that
300MW plants are too large for the system. However it is surprised to note that
the same commission has recommended to the government that 400MW and
500MW LNG power plants brought forward by private investors in the guise of
government to government offers, are now suitable despite the claiming by
CEB that the capacities are technically too large for the system. This clearly
establish the fact that whether the officers of PUCSL actually serve the people
or dance to the tunes of LNG business mafia.
3. Why Coal should include the generation mix ?
3.1 Identify the risk of depending only on one fuel associated with
oil
The mafia officers of the Commission recommend only the LNG based power
plants for all future thermal power plants. Depending largely on a fuel like LNG
will strike a severe blow to the energy security of the country. LNG is a
petroleum product found mostly in the oil producing regions and its prices are
directly associated with oil prices. LNG will have to be procured from
countries including the politically unstable Middle Eastern countries. Since bulk
of petrol/diesel are also procured from Middle East region, all primary fuel
sources of the country will sink in to a crisis at once, when there is a political
instability there.
LNG prices are associated with oil prices and current LNG prices are somewhat
low given the oil prices drop took place after 2014 in the global market. If oil
prices rise again in the future there is a greater risk that the LNG prices also can
go higher and depending largly on LNG fuel can lead country to a price shock.
However since coal is obtained in geo politically stable countries like Australia,
Indonesia and since coal price have been at relatively low levels compared
to other fossil fuels like LNG, oil over the history, adopting a policy of firm energy
power plants with a proper and strategic mix of Coal, LNG,Oil and Renewable
is vital.

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3.2 Countries in the region competing with us for investments
promote low cost coal inclusive generation mix
Bangladesh is constructing several more large coal power plants despite the
availability of LNG fuel fields in the country and even when coal is imported.
Almost all fast growing countries in the region like Indonesia, Malaysia and
Vietnam have planned to generate more than 50% of the electricity
requirement by coal power generation by 2030-2040. What is more notable in
this is that Malaysia and Indonesia are the third and fifth largest LNG exporters
in the world respectively. Further constructions of major coal power plants of
175,000MW in India, 275,000MW in China and 45,000MW in Indonesia as well as
in some other developed countries like Japan are currently in place. It is a false
spread by extremists that no coal power plants are constructed in other
countries. Australia is the second largest supplier of LNG in the world. However
64% of their electricity supply is generated by coal power plants. Accordingly,
we as a developing country should also focus on low cost electricity
generating options without blindly imitating some wealthy European countries.
3.3 Let us provide low cost electricity to eliminate poverty from the
country while complying with COP21 PARIS agreements
Our country is a signatory to COP21 agreement and it is a total lie saying that
coal power plants are prohibited by this agreement. The Generation
Expansion Plan of CEB has been prepared in such a way that it complies with
limitations of all emissions and other related targets. According to the CEB's
plan, 40% of the total generation capacity will be from renewable energy such
as Wind and Solar within next 20 years. However, there should be sufficient firm
energy power plants with proper fuel mix for the system to enable for
accommodating ever fluctuating renewable energy sources.
Our Union, Ceylon Electricity Board Engineers' Union (CEBEU) had two
discussions with HE the President regarding this and he has very clearly
stated that he does not have any objection for constructing coal power plants
with latest technology having minimum environmental effect similar to the
ones in the middle of Tokyo city.

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4. Attempt to get the issue resolved through negotiations
CEBEU had several rounds of discussions with government authorities trying to
get amicable solutions to the issue of Generation Expansion Plan of CEB during
last two years. We had two lengthy discussions with HE the President and three
discussions with Hon. Prime Minister during this period. CEBEU, as a professional
and responsible Trade Union which always place the country's benefit before
the members' rights, tried all possible means adequately to get this matter
solved. We even had discussions with several ministers and made all members
of the Parliament aware about this issue in writing. (Annex 1,2,3)
5. Trade Union Actions
Since reasonable solutions were not received, CEBEU withdrew its members
from Technical Evaluation Committees (TEC) and other related working groups
pertaining to procurement of power plants, with effect from 07th September
2017. However, since no positive responses were received, our members were
withdrawn from all TECs pertaining to all power plant procurement effective
from 21st October 2017. Thereafter, the Prime Minister promised to solve this
matter without a delay at the meeting held on 06th February 2018. However,
as there are no any acceptable results so far, CEBEU decided to launch a
continuous Work-to-Rule campaign.
If the government plans to stick further on the policy of implementing
businessmen's plans which are adverse to the country forgetting the general
public, this will be converted to more strict trade union actions.
Since our members will only work strictly during normal office hours from
08.30am to 04.15pm during this work-to-rule campaign, there will be some
power failures of different degrees, power shortages, unscheduled power cuts,
as our presence is essential to maintain 24hr uninterrupted power supply. We
are very much regretted about the hardships to the general public due to this
trade union action and they surly understand that we resort to these actions
not for our members' privileges but for the benefit of future generation of the
country. However, our members will engage on night shifts in power plants and
system control centres during the initial stage of the campaign to prevent a
total collapse of the system. Further, arrangements will be taken to minimize
the effect to hospitals and places of importance to the national security.

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Our Demands
 Approval must be granted to the duly prepared and
submitted Least Cost Long Term Generation Expansion Plan of
CEB immediately and arrangements should be taken to
commence the subsequent construction of power plants.
 Immediate action to allocate lands earmarked to locate
large low cost power plants as a solution to the electricity crisis.
 Devise a proper mechanism to provide a government subsidy
to CEB for the additional cost borne to provide electricity to
customers at a subsidized price without passing the loss to
them, due to not allowing the construction of low cost power
plants.
 Amend the Sri Lanka Electricity Act No. 20 of 2009
appropriately to remove unnecessary impediments for the
proper function of CEB.

Cost of Electricity Generation and the National Economy

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