The exorbitant cost of 'cheap power'

By Mandana Ismail Abeywickrema 

The pledge to provide electricity to consumers at a cheaper rate following the commissioning of the Kerawalapitiya Combined-Cycle Gas-Turbine (KCCGT) has become a pipe dream given the additional costs the CEB would have to incur due to some mind boggling decisions and the technology used for power generation in the plant.

Officials in the implementation of the KCCGT project have ignored warnings by energy experts since 2006.

Chairman/CEO, Global Energy and Industrial Operations in the US, Dr. Lakdasa Wijetilleke was in a letter to Power and Energy Minister W.D.J. Seneviratne on December 15, 2006 warn that "estimated additional costs the CEB would have to incur by using CCGTs would be Rs. 313,280 million over a 20 year period, if CCGTs are selected for the proposed 2x300MW power plants in Kerawalapitiya." This warning among others was not heeded by the officials involved in the Kerawalapitiya project and the project went ahead.

President Mahinda Rajapakse opened the Yugadanavi Combined Cycle Power Plant at Kerawalapitiya, on December 9, 2008 with a pledge to provide low cost power to consumers.

Cheapest power producer

According to the government, KCCGT once operational was to become the cheapest power producer among Independent Power Projects (IPP) in operation under the CEB and was to bring in a significant saving for the CEB as only the energy charge would have to be paid and there would be no capacity charge.

However, it is now learnt that apart from the fact that the unit price of power generated at the plant would cost much higher than initially estimated, the project cost on the whole has also seen a drastic increase from the initially quoted price.

Former CPC Chairman, Daham Wimalasena and several energy experts told The Sunday Leader that operating cost data are now available for one month from the CEB.

The CEB it is learnt has compiled operating and cost data for November 2008 for the KCCGT power plant and seven concurrently operating thermal power plants that supply electricity to the CEB. (See box)

The data indicate that the cost of electricity generation from the KCCGT plant will be twice as much as any thermal power plant in operation.

Wimalasena and other experts pointed out that the seven-comparator power plants use technology referred to as Reciprocating Engine Electricity Generation (REEG) power plants.

Lowest priced petroleum fuel

REEGs use fuel oil, which is considered to be the lowest priced petroleum fuel, produced in a refinery in contrast to combine-cycle gas turbine power plants that have to use high priced diesel fuel or imported natural gas.

The experts explained that based on CEB's data the KCCGT power plant performance is far below that of the comparator power plants in every respect - KCCGT cost of energy exceeds that of the comparator power plants by 107 %, capital costs by 250%, other costs by 333% and total generation costs by 174%. The costs are based on November 2008 price of crude oil of US$ 52 per barrel and price of low sulfur gas oil, which the power plant is now compelled to use.

They noted that the crude oil prices have ranged from US$ 25 to US$ 140 per barrel over the past year and industry and OPEC (Oil Production and Exporting Countries) consensus is that in the long term likely and sustainable oil prices of a barrel could range from US$ 40 to US$ 60 per barrel. Therefore, the November US$ 52 per barrel price is a reasonable benchmark price to base assessments.

However, the increase in crude oil prices would result in an increase in the price of gas oil  the KCCGT is to use. This in turn as pointed out by the experts would cause a greater and avoidable loss to the CEB.

According to them, had the plant opted for the REEG technology at Kerawalapitiya the costs consumers would have had to incur could have been reduced by Rs. 33,570 million or US$ 305 million per annum.

Reduced  cost

The REEG technology that uses fuel oil, similar to the seven comparator power plants now in operation therefore could have reduced KCCGT cost by Rs. 34,000 million annually.

Wimalasena and other energy experts also noted that besides, the recurring KCCGT power plant cost has been padded with an additional US$ 120 million above the initial tendered price.

They explained, the cabinet was led to believe that the KCCGT power plant would use the lowest priced fuel, fuel oil.

The CEB called for proposals for a 300 MW combined cycle gas-turbine power plant to be constructed at Kerawalapitiya during the period  2004-2005.

Samsung, a Korean company submitted the most competitive offer with full funding. However the offer was not accepted and the tender was cancelled as the power plants had to use high priced automotive diesel which made cost of power production prohibitive.

An integrated proposal

Concurrently an offer using proven technology, REEG using heavy fuel oil, which was in use in seven power plants supplying electricity to the CEB, was part of an integrated proposal for expansion of the Ceylon Petroleum Corporation (CPC) refinery.

The Cabinet appointed Energy Committee recommended the evaluation of the parallel offer since the cost of production was about 60% of that from a combined-cycle gas turbine power plant.

At this stage, in 2006, Lakdhanavi, a subsidiary of the CEB, submitted an unsolicited proposal to replace the cancelled Samsung power plant.

On hearing of the Lakdhanavi proposal, Mitsubishi, a Japanese corporation also submitted an unsolicited proposal for a 300 MW CCGT.

The CEB submitted both proposals to cabinet.

The decision of cabinet was that the Cabinet Appointed Negotiating Committee (CANC) should negotiate with both proponents and select the most competitive bid. The CANC then appointed a Technical Evaluation Committee (TEC) chaired by a deputy general manager of the CEB following which Lakdhavani  was awarded the contract.

Capital cost per unit

According to energy experts, the CEB compiled table indicates that the capital cost per unit of electricity generated by the KCCGT is Rs. 7.56 per unit while a unit of electricity generated by the comparator power plants cost only Rs.2.16. They claim that the TEC had to be aware based on recently completed CCGT power plants including the Japanese Marubeni and the AES power plants, that the capital costs were both below Rs.2.50 per unit and the industry norm in Rs./Unit range from Rs. 2.0 to Rs.3.0 per unit.

The TEC had also not reviewed critically the Lakdhanavi proposal and had readily agreed to the cost increases requested.

Citing an example, the experts said that the project cost of the Lakdhanavi proposal, as per the TEC, was US$ 294.8 million while the price quoted by Mitsubishi was US$ 241 million. The TEC however, recommended the Lakdhanavi proposal and price, which was US$ 54 million higher.

According to knowledgeable sources , Lakdhanavi had thereafter requested  for the price to be denominated in Euros at a time when the Euro was appreciating against the dollar. However, sources  connected  to the project said only one component costing US$ 30 million was bought from Europe while General Electric in the USA manufactured the gas turbines costing US$ 125 million.

Reduction of  US$ 30 million

Energy experts alleged that Lakdhanavi after converting the dollar price to Euros ended up with a price tag of US$ 335 million for the project. Lakdhanavi had thereafter requested the downgrading of capacity to 270 MW. This, according to energy experts should have been accompanied by a reduction of an estimated US$ 30 million, which has not taken place so far.

Experts point out that in January this year, the Minister had issued a directive not to pay more than Rs. l8 per unit to Lakdhanavi - Rs.41 per unit had been claimed. This, they said could result in Lakdhanavi defaulting in loan repayments to the banks and the employees' pension and trust funds in which event the Treasury which had guaranteed the loans would have to meet Lakdhanavi's loan obligations on the project.

They also said that on the other hand, if the CEB were to pay the Lakdhanavi generation cost of Rs. 41 per unit, the Treasury would have to still subsidise the CEB the difference between the tariffs charged from consumers (Rs.16 per kWh average) and the price paid to Lakdhanavi.

This would amount to an estimated Rs. 50,000 million per year, a burden that neither the CEB nor the Treasury could or should bear.

The media killing field

By Mandana Ismail Abeywickrema

With Sri Lanka earning the dreaded classification of being declared the world's second most dangerous place for journalists, political parties, civil society and media organisations are now calling for immediate action to halt the slide to anarchy.

The International Federation for Journalists (IFJ) in its latest report listed Sri Lanka as the second most dangerous country for journalists to work in. War ravaged Iraq occupied the top spot.

Opposition political parties, civil society and media organisations have now decided to join together to fight the ongoing media suppression.

The arson attack on MTV/MBC in Pannipitiya and the assassination of The Sunday Leader Editor in Chief, Lasantha Wickrematunge had resulted in these forces joining hands to launch a concerted protest campaign against the silencing of the media.

Last week saw several political parties including the UNP, SLFP (M) Wing, Democratic People's Front (DPF) and the JVP together with several civil society groups launching separate protest campaigns in Colombo and in the outstations against what they termed as the growing threat to "media freedom and democracy in the country."

The government meanwhile admitted in parliament last week that while nine journalists have been killed, 27 journalists had been assaulted since January 2006.

Chief Government Whip, Dinesh Gunawardena gave these statistics in response to an oral question posed by UNP Parliamentarian Ravi Karunanayake. Gunawardena also said that five journalists were abducted during the same period. However, he added that four of the abducted journalists had been found.

Joint meeting

It is in this backdrop that the main opposition UNP last Tuesday (20) organised a meeting of leaders and representatives of several opposition political parties, including the SLMC, SLFP (M) Wing, DPF and New Left Front among others, NGOs, trade unions, rights groups, media heads and lawyers to form a common front against the suppression of freedom.

The new front is to campaign across Sri Lanka in support of the fundamental right to life and freedom of expression. A steering committee too was appointed at the meeting to coordinate the course of action in this regard. The three conveners appointed to the committee are Executive Director, Centre for Policy Alternatives, Dr. Paikiasothy Saravanamuttu, Attorney J.C. Weliamuna, and rights activist Nimalka Fernando. The committee was scheduled to meet on Friday (23) evening to discuss and formulate an action plan.

The international community meanwhile also joined in to express concern over the deteriorating state of media freedom in the country. They noted that the recent incidents threatened the foundations of democracy in Sri Lanka.

In an unprecedented move, six former US ambassadors in a stinging letter addressed to President Mahinda Rajapakse last Tuesday (20) expressed their displeasure over the situation in the country following Wickrematunge's assassination.

Expressing their personal views, the six ambassadors, Marion Creekmore (1989-92), Teresita Schaffer (1992-95), A. Peter Burleigh (1995-97), Shaun Donnelly (1997-2000), Ashley Wills (2000-03) and Jeffrey Lunstead (2003-06) stated, ".It is for all of these reasons that we are now so upset by developments in Sri Lanka, the most recent of which was the murder of The Sunday Leader Editor Lasantha Wickrematunge. We fear that, even as Sri Lanka is enjoying military progress against the LTTE, the foundations of democracy in the country are under assault.

"The killing of Wickrematunge has prompted this letter, but there have been many previous incidents in which the rights of individuals and the media have been violated."

Not credible

The ambassadors in their letter have also stated that the argument forwarded by the government that the attacks are carried out by forces hoping to embarrass the government was not credible and called for action to be taken to stop these acts.

".Some have suggested that these events have been carried out not by elements of the government, but by other forces hoping to embarrass the government.

"We do not find such arguments credible. We are familiar with your history as a defender of those whose rights were threatened by the government. We assume, therefore, that if government forces are carrying out these acts, they are acting without your permission and knowledge. We believe it is imperative that these actions stop, and that those who have carried them out be prosecuted," they have stated.

Later that very day, US President Barrack Obama during his inauguration speech was to also touch on the subject, making it clear from the word go that his administration, now enjoying unprecedented support, would take a dim view of regimes around the world that silenced dissent.

"To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history," Obama was to say.

In US Congress

Two days later, on Thursday, the recent incidents, especially Wickrematunge's assassination were to feature in no less a place than the United States House of Representatives. Wickrematunge's assassination and his final editorial were the subject of a speech made by Congressman (R) Adam Schiff to Congress Thursday.

Congressman Schiff, the co-founder of the Congressional Caucus for Freedom of the Press stated that threats, attacks and murders of journalist are becoming all too common in Sri Lanka.

"Mr. Speaker, in 2006, I co-founded the Congressional Caucus for Freedom of the Press and since then, this bipartisan, bicameral caucus has sought to highlight the importance of free expression around the world.  I rise today to honour, Lasantha Wickrematunge, a brave journalist who was gunned down while driving to work in the Sri Lankan capital of Colombo.

"Threats, attacks, and murders of journalists are becoming all too common in Sri Lanka.  Mr. Wickrematunge knew the dangers well, but courageously continued reporting."

Congressman Schiff had proceeded to quote extensively from the final editorial comment penned by Wickrematunge titled And They Came For Me, which was posthumously published.

Meanwhile across the Atlantic Britain was also not ready to let the heat off with Secretary of State for Foreign Affairs David Miliband  urging the Sri Lankan government to take 'strong action' to prevent human rights abuses in the country and condemned the attacks on the media, specifically referring to the killing of The Sunday Leader Editor Lasantha Wickrematunge.

British statement

"Creating an environment in which people from all communities in Sri Lanka can live without fear is essential to creating the conditions for a sustainable end to the conflict," said David Miliband in a statement.

"Recent weeks have seen a considerable number of high profile attacks on media freedom in Sri Lanka," he had also stated.

"We condemn such brazen attacks. Of particular concern was the murder, on 8 January of the Chief Editor of The Sunday Leader newspaper, Lasantha Wickrematunge.

"The Sri Lankan authorities have a duty to take prompt action to ensure that a thorough and independent investigation is carried out," Miliband had said.

Meanwhile, large crowds gathered in Nugegoda to attend a protest rally organised last week against media suppression.

The JVP together with the Patriotic National Centre (PNC), Intellectuals for Human Rights, Sri Lanka Working Journalists Association, National University Teachers' Organisation and several others organised a massive protest rally under the theme "Lets' rally against media repression"  last Monday (19).

President, Sri Lanka Working Journalists Association Sanath Balasuriya addressing the rally said that while it is a healthy thing to fight with different ideas, physically fighting with weapons was unacceptable.

Stating that an attack on a journalist was an attack on the people, he charged that the country was faced with a problem regarding free expression and the right to information.

Right to information

"We can fight with ideas, but not with swords, poles and knives. If we are prevented from fighting with ideas we will have to live in a blind, deaf and dumb society. The rulers want such a society. What exists today is not an issue regarding the freedom of the journalists. It is an issue regarding the free expression and the people's right to get information. Attacking journalists is attacking the people."

He went on to say that the present administration is not the only government that has assassinated journalists. "We have come through a history of killing journalists. However, none of those involved in these killings have been punished," he noted.

President, PNC, Ven. Dhambara Amila Thero in his speech highlighted the necessity for a powerful humanitarian operation than that currently launched in the Wanni to restore democracy in the country. He said that the anti-democratic path of the government reached its peak with the attack on MTV/MBC and the assassination of The Sunday Leader Editor Lasantha Wickrematunge.

"A more powerful humanitarian operation than the one deployed for the north is necessary to establish democracy. When Killinochchi was captured one media institution was destroyed. When Vishwamadu was captured a journalist was murdered. It is yet to be seen how many will be killed when Mullaithivu is captured. This should be stopped," he said.

Ven. Amila Thero charged that the elected leaders were not acting in a patriotic manner as expected by the security forces and the masses. "If these leaders become an obstacle in establishing democracy we, who have fought against the ideological front of separatism, would not hesitate to commence the next stage of that struggle," Ven. Amila Thero said.

Peak

The Thero went on to say, "The anti-democratic path of the present government that started with non establishment of the independent commissions as outlined in the 17th Amendment, has reached its peak by setting fire to Sirasa and murdering Lasantha Wickrematunge. We are prepared to rally the masses if democracy is denied."

Also addressing the rally, JVP Parliamentary Group Leader Anura Kumara Dissanayake said that the torching of Sirasa and the assassination of Lasantha Wickrematunge were not isolated incidents.

"This is the height of the threat to democracy, especially media freedom," he said.

He said that the 17th Amendment is an important piece of legislation to ensure democracy in the country. "It is a law that was passed by all MPs except Champika Ranawaka. According to the 17th Amendment the Constitutional Council has to be established. Already nine out of 10 representatives have been appointed. This was two and a half years ago. However, the President has not appointed his representative. The first citizen of the country violates the constitution of the country," Dissanayake charged.

He said that as a result, the opportunity to carry out an independent inquiry in to an arson attack or a shooting though an independent commission has been denied. "The gentlemen in the Police Department cannot take a correct decision for they would be transferred the following day. The 17th Amendment has not been implemented in order to be able to manipulate the police," he alleged.

Obstacle

Dissanayake also said, "Today the Supreme Court has become an obstacle to the undemocratic course taken by the Rajapakse government. Therefore, the government creates clashes with the judiciary. The President wants a police that he could manipulate; journalists and media institutions that dance to his tune. This is how Marcos started in the Philippines. What has been arranged is a journey towards a dictatorial frenzy.

"Hence, we should all rally to preserve the right for free expression.  Political parties have their own definitions on various things. However, government officials cannot do so. Hence, we have to accept a top defence official's statement that setting fire to Sirasa was an inside job. If so he should reveal the information he has managed to find, to the country. We want to know why this has not been done as yet. 

"It was only in tribal societies that anyone could be named as traitors and killed. Today society is civilised.  Hence, we invite all of you to join us in opposing this journey of destroying democracy and denying media freedom,"  said Dissanayake.

Addressed

President, All Ceylon Medical Officers Union, Dr. Gishantha Dasanayake, representing Intellectuals for Human Rights (IHR), Dr. Jinasena Hewage and Dr. Chandana Abeyaratne from the National University Teachers' Alliance also addressed the rally.

A large number of journalists were present among the large crowd that turned up to witness the protest.

This campaign to fight against media suppression is to be taken to the districts as well. Seminars are being organised to create awareness among the people on the present situation as well.

According to Dissanayake, everyone needs to unite to stand against the anti democratic acts and media suppression now taking place.