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Unions to short-circuit Electricity Act
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Minister John Seneviratne |
By Mandana Ismail Abeywickrema
The
implementation of the newly passed piece of legislation
covering the country's power sector hangs in the balance
with trade unions breathing fire and threatening to
prevent it from taking effect.
According to the unions, the new piece of legislation is
the first step taken by the government towards
privatising the country's power sector and is full of
ambiguous clauses.
The
main aim of the Act as pointed out by the unions and
opposition legislators is the government's need to
secure millions of dollars from lending agencies to
uplift the country's power sector.
Millions of dollars in the form of soft loans, a grant
from the Asian Development Bank (ADB) and JBIC to the
country's power sector have been in the balance for the
past few years due to the government's delay in
restructuring the sector.
The
government is to get US$ 250 million from the ADB of
which 15%-20% would be a grant and the rest a soft loan
with a grace period of 10 years.
"The
government will now try to get the foreign loans, but
the implementation of the Act is an issue by itself,"
the unions claim.
Breaking the monopoly
The
recently passed Electricity Act is aimed at breaking the
monopoly of the Ceylon Electricity Board (CEB) over the
power sector while providing legal effect to the Public
Utilities Commission (PUC) to regulate the sector.
The
PUC is also tasked with issuing licences to private
companies interested in entering the country's power
sector.
According to the new legislation, a foreign or private
company would be issued with a licence to enter the
country's power sector only if the respective company
vested some shares with the Sri Lankan government.
However, the amount of shares the government is to hold
in the private companies applying for power generation
and distribution licences have not been specified in the
legislation. Ironically even the Power and Energy
Ministry is unaware of the number of shares the
government is to hold in the prospective companies.
Power
and Energy Minister John Seneviratne told The Sunday
Leader that the number of shares the government would
hold in the private companies would be decided on a case
by case basis by the Treasury and the respective
company.
The
government stake in the private companies according to
Seneviratne would enable the state to have a hold on the
companies.
Shares held by government
Further explaining the percentage of shares the
government would hold in the respective private
companies that show an interest in entering the power
sector, Seneviratne said the percentage would vary
according to the scope of the project.
When
asked if the government would canvass for a majority
stake in order to facilitate the decision making process
of these companies, the Minister said that the Treasury
would indeed work to secure a significant stake in the
companies.
Meanwhile,
India is assisting in the development of the core sectors
of the power and energy field in
Sri
Lanka.
Talks
have been held between National Thermal Power
Corporation (NTPC) of India and CEB on setting up a
joint venture for establishing a coal based thermal
power plant in Sampur in the east.
The
plant is to have a capacity of 300MW and involve an
investment of US$ 500 million. The debt-equity ratio
would be 70:30 with US$ 75 million being provided in
cash by NTPC and an equal amount in kind by CEB.
Agreements under negotiation
The
agreements pertaining to the project are currently being
negotiated and details on the government's stake in the
project are yet unclear.
However, according to Minister Seneviratne, the Sri
Lankan government would hold 50% of the shares in the
local company NTPC would set up to complete the project.
Power
sector trade unions have however scoffed at the
government's claim of being able to have a hold on the
private companies entering the sector by taking hold of
shares in the companies.
Convener, Lanka Viduli Sevaka Sangamaya (LVSS), Ranjan
Jayalal says that in reality, the government holding
shares in private electricity companies would not give
the desired effect. "It would not help reduce the
electricity tariffs."
Reducing tariff
He
explains that the government has so far been unable to
address the issues faced by the country's power sector,
especially with regard to reducing tariffs, even with
the help of semi private electricity companies.
Citing
Lanka Transformers Limited (LTL) and Lanka Electric
Company (LECO) as examples, Jayalal said that the
government even after holding a large stake in these
companies has been unable to prevent the present crisis
in the power sector.
"The
government has been unable to even address the financial
losses incurred in the sector," he said.
According to Jayalal the government 'holding a few
shares' in private electricity companies would not bring
about any positive development to the country's power
sector.
The
issues raised by opposition legislators as well as trade
unions have created doubts as to the effectiveness of
the legislation, especially the clause stipulating the
government's 'involvement' in private electricity
companies.
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High priced power for the north
The delay in the commissioning of the 35MW Northern
Power Plant in Chunnakam has compelled the CEB to
purchase power from Agrekko on an emergency basis at
a high price to supply power to the north.
Northern Power was one of the companies that
expressed its willingness to install a power plant
in Chunnakam to provide power to the north. The
plant was initially scheduled to be commissioned
last year. However, the plant is yet to be
commissioned.
The old equipment and the shortage of fuel - furnace
oil- to generate power have been attributed as the
main reasons for the delay in operating at full
capacity.
Managing Director, Northern Power, Jehan Amaratunga
told The Sunday Leader that despite the many
difficulties in working in the north, Northern Power
has invested over US$ 25 million on the project.
Referring to the delay in commissioning the plant,
Amaratunga said the company has been given time till
June 2009 to complete the project as there were
issues related to transportation, Defence Ministry
clearance and working times.
He
explained that there were several issues over
transporting heavy machinery to the north by sea and
unloading them at the KKS harbour. "Then there was
time lost on receiving security clearance for the
people working on the project to travel to the
north."
Working hours in the north also differed on a daily
basis, according to Amaratunga.
"Also, the cyclone that hit the north damaged the
plant," he said. The contractual obligation for the
project runs till June.
Amaratunga denied that the plant was installed with
old equipment and said the plant at present
generates 13MW of power as per demand basis, but is
not fully connected to the grid. He also said that
once commissioned, the plant would generate up to
35MW of power to the north.
Speaking of the fuel needed by the plant to generate
power, Amaratunga said the equipment installed in
the plant are designed for heavy fuel (furnace oil).
However, he said that currently there was no
facility in the north to receive furnace oil.
Amaratunga said that his company had almost
completed the laying of a pipeline for the supply of
furnace oil.
"The plant at present operates on diesel, but would
revert to furnace oil later on. Generating power
using furnace oil is cheaper," said Amaratunga.
CEB to sell 51% of its shares in West Coast Power
JVP affiliated trade unions allege that the CEB,
which is unable to find the funds to pay West Coast
Power that is handling the operations of the
Kerawalapitiya power plant, is currently looking at
the possibility of selling part of its shares in the
company.
West Coast Power is a fully owned subsidiary of
Lanka Transformers Limited (LTL), which in turn is a
subsidiary of CEB. The government at present holds
63% of the shares in LTL.
Convener, Lanka Viduli Sevaka Sangamaya (LVSS),
Ranjan Jayalal told The Sunday Leader that the
unions have reliably learnt that the Treasury had
proposed to the CEB to sell 51% out of its 63% stake
in West Coast Power to enable it (CEB) to take full
control of the Kerawalapitiya power plant. The
amount due from the CEB for the purpose according to
Jayalal stands at Rs. 3,008 million.
"The CEB has no option but to take over the
Kerawalapitiya power plant. A unit generated at the
plant is currently sold to the CEB at Rs. 41.80 and
the Board has to therefore incur a heavy loss when
distributing it to the consumers," he said.
The Kerawalapitiya Combined-Cycle Gas-Turbine (KCCGT)
was commissioned with the aim of providing low cost
electricity to consumers. He added that the CEB is
currently considering the option of selling part of
its shares in order to find money to take over the
Kerawalapitiya power plant.
CEB Chairman, E.A.S.K. Edirisinghe and General
Manager, Bhadra Jayaweera were not available for
comment. |
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