By Rajan Philips –

Rajan Philips

It will not be an exaggeration to say that what the 2024 Electricity Act proposed, the 2025 Amendment seems set up to depose. Equally, what the Act set about to depose, the Amendment is seeking to re-propose. Unrestricted unbundling of the Ceylon Electricity Board (CEB) and privatizing the unbundled parts were the central purpose of the Act. Controlled unbundling without abandoning public ownership seems to be the main motivation behind the Amendment. The Act exclusively privileged everyone else except engineers to carry the burden of reforming the electricity sector. The Amendment reverses that privilege and includes mostly engineers with limited participation by other experts. Apart from policy specifics and technical details, it is unfortunate that the Act and the Amendment have singularly failed to find a balance between divergent approaches to electricity reform but have instead created unnecessary dichotomies between them.

The electricity sector in Sri Lanka has a record of impressive achievements, as well as incredible failures. There is general acknowledgement of the achievements in the technical assets of the electricity sector in hydropower generation, its transmission grid that spans the whole country, improvements in supply efficiency, as well as in expanding accessibility to virtually every household. In a Sunday Island interview (July 20), Ashish Khanna, the new Director General of the International Solar Alliance (ISA), made a point about Sri Lanka’s “almost universal energy access” in comparison to other parts of the world.

But these achievements have not come about in the most optimal ways of cost and efficiency, and maintaining them and transitioning them to expand the use of renewable energy sources have become virtually impossible in the  absence of cost-based pricing for electricity consumption and the lack of capital for future investment. The advocates of the 2024 Electricity Act want the status quo overhauled because it is based on “a State-owned, vertically integrated monopoly with poor efficiency, management practices and technology.”

The perpetually rising cost of electricity and the recurrence of backouts are all seen as symptoms of a failed system. The lack of interest and urgency in transitioning to renewable energy sources are also blamed on the inertia of the status quo and vested interests who benefit from it. There is even anecdotal assertion that CEB Engineers are not in favour of tapping into wind and solar powered energy sources. And there are common allusions to the power of the ‘diesel mafia’ akin to the ‘rice mafia’ in the food sector. Private suppliers of thermal energy would rather have their contracts continue for ever than switch to investing in windmills and solar panels.

The 2024 Panacea

The advocates of the 2024 Electricity Act see it as the panacea to all the ills of the status quo. The Act’s intention is not merely to unbundle the behemothic Ceylon Electricity Board, but to transition the whole electricity sector from a monopolistic state platform to a competitive market platform, supported by an analytics-responsive policy and regulatory framework, and enable the wholesale/retail marketing of energy, on the one hand, and providing power storage and grid stability services, on the other.

To these ends, the Act provides for a plethora of private companies (12 at the minimum) succeeding the current generation and distribution units of the CEB, along with two overarching national entities – one for the national transmission network, and the other (the National System Operator – NSO) for the planning, procuring, and delivery of electric power. There would  be additional companies to look after the so called “legacy functions” of the CEB, viz., pension fund and other employee services. And more, like the National Electricity Advisory Council (NEAC) to set reform policy and the Power Sector Reform Secretariat (PSRS) for its execution. The Act was passed on 27 June 2024 with partial operationalization and was set to become fully operational within an year with the flip of a ministerial switch.

Whatever the champions of the Electricity Act may have been hoping for in terms switching on the full lights of the Act for reforming the electric power system, they were in for a rude surprise from the voting people who made up their minds to take a chance with reforming political power, first tentatively in the September presidential election and later quite fulsomely in the November parliamentary election.

The upshot for the 2024 Electricity Act, according to its supporters, was the ‘stalling of the reform process’ by the new NPP government. The vaunted PSRS was sacked and later resurrected with a new team of all engineers and no transition and reform specialists who are supposed to include only non-engineers – lawyers, accountants and bureaucrats.

At the same time, according to the NPP government’s electricity experts it is the Power Sector Reform Secretariat that was set up under President Ranil Wickremesinghe that should be blamed for failing to facilitate the transition to new companies and prepare the preliminary transfer plan that were to be accomplished by October 27^th, 2024, within four months of the passage of the Act. By that date, all officers and employees of CEB were to be reassigned (except those voluntarily retiring) to one or the other of the successor companies of the CEB. That was the plan that was included in the Electricity Act. Now one year later, CEB is still in place, but it is the Act that was enacted to unbundle the CEB that is being bundled up or amended.

The NPP Amendment

The NPP’s Amendment, according to its detractors who are also the champions of the parent Act, formalizes the total reversal of the objectives and intentions of the Act. The Amendment is by and large the product of the work of ten experts, nine of them engineers, six of whom are academics (four affiliated to the University of Moratuwa, one from the University of Peradeniya, and one from the University of Manitoba, Canada). The committee was appointed by the Secretary to the Ministry of Energy (MoE) following authorization by the NPP Cabinet of Ministers. Apparently, the Secretary to the MoE, Prof. Udayanga Hemapala, appointed himself as Chairman of the Committee. The NPP’s CEB Chairman Dr. Tilak Siyambalapitiya was on the Committee. Dr. Siyambalapitiya has recently retired as Chairman and has been succeeded by Prof. Udayanga Hemapala, who seems to be emerging as a man for all seasons in the electricity world.

The Committee was appointed on 7^th January 2025, and the Committee’s Report – “Concept Paper on Proposed Amendments to the Electricity Act No. 36 of 2024” – was released within two weeks on 20^th January. In their Concept Paper, the nine Electrical Engineers do not hold their punches in dealing with the intentions and methods of the parent Act. While acknowledging that “many positive aspects that are essential for reforming the electricity sector are included in the Electricity Act,” the Paper is critical of the “institutions, provisions, and trade arrangements” that are proposed in the Act as being “non-optimal, non-essential or detrimental to the sector.” The Paper argues that the multi-institutional approach of the Act would even undermine its stated objectives, add new burdens to the electricity sector, and ultimately impact the affordability and the security of electricity supply.

The approach outlined in the Concept Paper that sets the frame for the Amendment, differs from the approach that led to the parent Act in four fundamental respects. First, the Paper acknowledges the scale and size of the Sri Lankan electricity sector thereby implying a proportionate scale of reform measures. To quote the Engineers who wrote the Concept Paper:

“Sri Lanka’s electricity system is yet to see a peak demand of 3,000 MW and is a relatively small system. Establishing multiple standalone companies will introduce unnecessary complexities including appointing competent governing boards and leadership teams. This will result in erosion of governance and technical capabilities of these smaller companies. Furthermore, segmented smaller companies will have a weakened ability of raising capital in an environment where substantial investments will be needed to cater for the growing demand for electricity. The recommended solution is establishing government-owned holding companies to hold shares of the completely unbundled generation, transmission, and distribution companies formed as successor companies of CEB to operate under the NSO.”

The second difference is about the pace of reform. While the Electricity Act takes a very speedy approach to implementing many radical changes, the Concept Paper approach that informs the Amendment prefers a gradualistic approach for implementing more measured changes. Third, the Concept Paper is critical of the duplication of resources for electricity policy separate from those that already exist for energy policy including electricity.

For several years, the Public Utilities Commission of Sri Lanka (PUCSL) and Sri Lanka Sustainable Energy Authority (SLSEA) have been tasked with policy and regulatory responsibilities for all branches of energy including electricity. The Electricity Act provides for a new entity called the National Electricity Advisory Council (NEAC) that would duplicate the role that is currently assigned to PUCSL. This is seen as unnecessary, and the Amendment repeals the provision for creating the National Electricity Advisory Council, but without prejudice to the role and functions that were to be assigned to it but which could as well be carried out by PUCSL. .   

The fourth difference is all political and as the old truism goes there is nothing purely technical about public action in the domain of a government. The Concept Paper draws on the NPP government’s energy policy as adumbrated during its election campaigns and asserts the need for retaining public ownership of the successor entities arising out of CEB’s unbundling.

The Amendment sets out to achieve the goal of maintaining public ownership even after unbundling. The rationale for this is based on the “strong mandate” that the NPP government purportedly received from the voters for every plank in its policy platform including electricity reform. But there is considerable ground to be covered between receiving a general mandate, strong or weak, and achieving electricity reform. The process is yet to start, the Act and the Amendment notwithstanding.