At Last, CEB Power Purchases from Private Providers Under Scrutiny
Officials of the Ceylon Electricity Board (CEB) have been asked to present themselves before the Parliamentary Committee on Public Enterprise (COPE) within a month, with supporting documents of the agreement entered into the purchase of power from private Power Producers, Counterpoint reliably learns.
COPE Chairman, MP Sunil Handunetti confirmed that there is an ongoing investigation into the purchase of power. He told Counterpoint that there was concern about partnering with Ace Power Embilipitya (Pvt.) Ltd. instead of first exploring other options, if there was a need to obtain more power.
Both the Public Utilities Commission of Sri Lanka (PUCSL) and the CEB were summoned before COPE, on August 7, to explain their actions regarding the lease extension with Ace Power Embilipitiya (Pvt.) Ltd owned by Aitkin Spence which is controlled by business magnate Harry Jayawardene
Following three power outages within a six month period starting in September of 2015, a cabinet sub-committee appointed by President Maithripala Sirisena on March 15, 2016, to investigate the power failures, recommended the purchase of retired privately owned power plants as an emergency measure to supplement the capacity of the national grid and avoid future power outages. The stipulation was that the terms would be negotiated in a manner that is beneficial to the CEB. The CEB’s lack of urgency to purchase the plants, meanwhile, resulted in the cabinet approving again and again, CEB’s request to lease the plants.
Sources Counterpoint spoke to revealed that the while the CEB kept renewing the lease with Ace Power Embilipitiya (Pvt.) Ltd. on a yearly basis since 2016, in April this year, it extended the lease by another three years in April this year. It had also agreed to factor in a payment of Rs. 76 million per month as capital cost during the entire period of the lease, which would be five years from 2016 to 2021. This means that in 5 years, Ace Power Embilipitiya would be reaping Rs. 4,560 million as a down payment. In question is the CEB’s agreement to pay Ace Power Embilipitiya (Pvt.) Ltd. the capital cost, a payment it had already made for a decade when the power plant was originally leased in 2003. With the new agreement, informed sources said that not only will the CEB be paying Ace Power Embilipitiya a second time monies that the private provider had recovered through its original lease in 2003, at the end of the new lease period, the CEB will still not have ownership of the plant.
It is reliably learnt that earlier this year, the Government Assessor had valued the said plant, and recommended a purchase value of Rs.2, 300 million.
With private power providers and senior CEB officials involved in massive corrupt deals a new proposal has been finalised by the bureaucracy to utilise stand-by generators owned by the State and private sector when there is a supply shortage. These generators will be connected to the national Grid in a bid to minimise or completely prevent future power interruptions. Informed sources told Counterpoint that the draft memorandum presented by Prime Minister Ranil Wickremasinghe in May this year, in his capacity as Minister of National Policy and Economic Affairs, for observations by relevant stakeholders is currently being prepared for Cabinet approval.
Most State institutions, large scale industrial and commercial enterprises and the Military own backup power generators to circumvent blackouts affecting their work in the event of major power failures. The memorandum states that according to figures obtained by CEB, the estimated capacity available from backup generators is about 1500 MW. The memorandum seeks approval to tap this resource and with synchronising equipment and assistance of the CEB, connect them to the national grid.
It also suggests that the CEB enter into agreements with such state Institutions to procure power at cost-based rates approved by the PUCSL and establish procedures to provide technical assistance for installation and synchronising the equipment. It also recommends that the CEB, in consultation with the PUCSL develop a procurement plan with private enterprises that utilize backup generators. The PUCSL will also require policy guidelines that would exempt stand-by generators to sell power to the CEB.
As State and private sectors utilize their generators only when the national grid fails, or there is load shedding due to power shortages, this scheme will help the CEB to avoid power cuts, as it will be able to use the generators at full-rated capacity when required. More importantly, synchronising the generators with the national grid would mean doing away with the necessity to procure short-term emergency diesel power generation which is extremely costly for the CEB owing to minimum generation/monthly capacity charge obligations. Utilising the generators only for the required time frame which would usually be for a few weeks is also beneficial for the CEB, the memorandum points out, “as compared to a forecasted shortage when procuring emergency diesel power, a few months in advance.”
Utilising the stand by generators to meet power shortages was one amongst several other directives made by the committee appointed by President Maithripala Sirisena in, 2016. The committee was charged with investigating power outages and challenges faced by the energy sector and to issue directives that would ensure smooth provision of electricity in the future.
The directive contained in its interim report called for the immediate assessment of the generation capacities of large scale generators operated by the State and Private sector establishments in and around Colombo and developing a usage and payment scheme for it within the month. It also directed that District and Provincial Secretaries be instructed to immediately conduct a survey of back-up generators available amongst private residences, military camps, businesses and factories which could be connected to the national grid when necessary. The committee further stated that a scheme to provide required fuel for these generators is developed in consultation with the Ceylon Petroleum Corporation, and that installation of suitable meters and a payment scheme to the owners be worked out for this purpose.
Amongst the other short-term and long-term directives of the committee was the setting up of a special unit within the CEB with the authority to investigate and rectify problems occurring at the Norochchalai Coal Power plant and staffing the said plant 24 hours of the day with persons qualified in that field.
The committee also recommended a national plan to promote the use of solar power in private residences, and the introduction of Net Accounting payments to such consumers, where it is envisaged that this would add another 100MW to the grid as opposed to 20MW available at the time the committee met. A competitive bidding process to purchase solar power from the private sector and establishing solar energy parks which would produce around 300MW of power was another of the recommendations. Time allocated to complete the project was two years. However, most people are sceptical that the CEB would achieve any of these targets claiming that higher ups stand to lose hundreds of millions of rupees in kickbacks from private power providers.
The committee also recommended the setting up of a new jetty in Colombo to store natural gas and transporting it through a pipe line to the Kerawalapitiya power plant, with an envisaged capacity generation of 300MW. Even though the committee called for the completion of this project within two years, the Memorandum on backup generators claims that construction delays have pushed back the commissioning of that power plant to 2021.
The committee also called for a review of the existing work plan of the CEB, stipulating a three month period to examine it and address the needs and situation of the country.
The committee was of the view that a coal power plant in Hambantota or Galle could meet the electricity needs of the south of the country, and also urged the promotion of solar, wind, bio mass and natural gas to generate power which could be added to the national grid.
The committee also directed that holders of the posts such as General Manager, Additional General Manager etc. should give up their membership in Trade Unions. President of the Lanka Viduli Podu Sevaka Sangamaya Malaka Wickremasinghe agrees that ‘officials holding higher positions need to give up their membership of any trade union. “But we see some of these officials still involved in trade union activities as executive committee members. When this happens there is no natural justice to all.” However, the CEB’s Technological Engineers and Superintendents’ Union, Ajantha Gunawardena disagrees, arguing that while the General Manager is not a member of the Union, others have the right to remain in the Union.
They also hold opposing views on the CEB/Ace Power Embilipitiya (Pvt.) Ltd. Says Gunawardena, “The Ace Embilipitiya Power Plant is needed, because it provides power to the Southern Province. Without it the South will be in the dark during the night peak; that is from 6.30pm to 10.30pm. We need an option like Ace to power the Southern Province during this time.” Wickramasinghe on the other hand claims that such ventures are a waste of money.
The committee directives are nearly two years old, however, it is clear that officials tasked with carrying them out are slow in making the changes or implementing new projects that would address power shortages. Reports indicate that the power crisis would deepen in 2019.
The PUCSL’s report in 2017 on the Financial Impact on Delay in Implementation of Power Plants 2018-2037 states that implementation of several of the Least Cost Long Term Generation Expansion Plans have been riddled with issues causing delays for nearly 20 years.
The end result of such delays is the industry being forced to procure emergency power at high costs and the over dispatching of existing expensive power plants the report points out.
Such cost overruns caused by implementation delays for 2018 -2020 have been estimated by the PUCSL to be around 50.62 billion rupees. The report outlines the extra financial burdens the country would have to bear every time a planned project is delayed. For instance the financial cost for each month the commissioning of the 300 MW Kerawalapitiya Natural Gas fired power plant is delayed is calculated to be Rs.1.55 billion. It was scheduled for commissioning in 2019, but as stated in the Prime Minister’s memorandum, has been pushed back to 2021.
It seems that the CEB is marching to its own drum beat, ignoring government directives, and squandering public resources and funds. How and why it is unafraid of doing so will be an interesting revelation if COPE is successful in getting to the bottom of it.