Cost-reflective pricing the panacea
Power and Energy Minister Kanchana Wijesekera identified cost-reflective pricing as the panacea to the problems ailing the energy sector in the country. Wijesekera said reforms to the Ceylon Electricity Board (CEB) should be presented to Parliament by the end of May and that the opposition and government were broadly in one set of mind on the needed reform.
Wijesekera highlighted competition as a key catalyst to efficiency. He said, “We will have competition in generation, competition in distribution, and power wheeling.” Wijesekera noted that this would bring about significant gains by way of efficiency. Wijesekera was speaking as part of a panel discussion on March 30 at the Galle Face Hotel.
The legal reform of the energy sector is going to be part of a new vision by the President. Under the new vision foreign entities will be given access to operate locally but in fierce competition with other foreign entities.
A state-backed entity will exist and either expand or contract depending on the outcomes the market mechanism delivers. The reforms to the CEB come as part of a broad set of reforms approaching energy security with a different strategy. Wijesekera said,
“The President will shortly announce the roadmap for the energy sector.” This roadmap will encompass a renewable energy roadmap. Wijesekera said, “We will have the draft act by the end of May.” Wijesekere highlighted that the country had already introduced three new players into the market. He noted that geopolitically the entrants to the energy sector have reflected the balanced foreign policy of the government. He said,
“We are attracting players like Sinopec, United Petroleum, and Shell.” Given the existing infrastructure and demographics, it is unlikely that petroleum distribution will garner any large new growth in the economy. The measurement of success in this policy shall be through the introduction of either oil refining capacity or the growth in bunkering volumes through the ports.
Wijesekera noted that the CEB had been unable to make payments to independent power providers. He noted that the thermal utilization rate could come down significantly if more renewable plants were activated. He said, “ability of the CEB to pay back is what can galvanize investment and resumption of services in the renewable energy sector.” Wijesekera reiterated that the country would pursue a green energy policy. He said,
“We needed cost-reflective pricing for energy. 30% thermal power can be converted to renewable energy.”
Wijesekera highlighted that strong progress had been made in breaking up the CEB into different parts. He said, “We need a human resource audit to identify excesses and deficits. We are well on our way to the unbundling process. The recent IMF program’s effectiveness can be measured by how quickly the country can resume normal credit arrangements.” Wijesekera said, “We are unable to do procurement by way of letter of credit.” He noted that the effectiveness of an IMF arrangement would be reflected in the swift resumption of operation on credit terms by the Ceylon Petroleum Corporation and CEB. (TP)