(LBO) – The calculation of subsidies to customer categories by the power regulator was flawed, as the cost of supply to bulk users was lower than retail and domestic customers who were at the tail end of the grid, a top energy expert has said.
“I submit to the commission that the calculation of subsidies in your paper is incorrect,” Tilak Siyambalapitiya, a top energy expert, told a public hearing in Colombo referring to a consultation paper prepared by the regulator on a proposed power tariff hike.
“Because you assume that the cost of supply is equal to all customers. All customers are not located in the same place in the network and therefore there cost of supply has to be accurately calculated.”
The Public Utilities Commission of Sri Lanka called a hearing to consult the public on a proposed tariff hike by state-run Ceylon Electricity Board on April 04. Many respondents said a tariff hike was needed by the proposed increase was too high.
They also said CEB was not transparent about costs, generators appeared to be inefficient and both should be independently audited.
Siyambalapitiya who was involved in developing Sri Lanka’s tariff methodology had used available numbers to work out costs. It is not clear why the regulator has not applied the methodology to work out the numbers.
Siyambalapitiya calculated the cost of supply to households which were at the end of a low voltage network at 27.86 rupees a unit, around the same rate that is charged in Singapore where most of the generation came from thermal combined cycles.
Even after a tariff increase domestic customers would get a 30 billion rupee subsidy and not 1.7 billion rupees as calculated by the regulator, he said.
Siyambalapitiya said the cost of supply to medium industry customers was 17.70 rupees and the proposed tariffs proposed to charge 16.00 rupees.
The subsidy that the industries received was much less than the 16.7 billion rupees estimated by the regulator.
The regulator calculated the subsidies based on an average cost, which was meaningless because the cost of generation varied based on the time of day, and cost of delivery and service changed based on where and at what voltage power was supplied at.
Very large customers, who were supplied at high voltage, cost 15.08 rupees to supply, medium sized customers cost 17.70 rupees, smaller industries and commercial customers cost 20.40 rupees, religious 25.74 and domestic 27.86 rupees.
“So therefore you need to re-calculate these numbers,” Siyambalapitiya said.
The regulator which calculated an average cost of 20.84 rupees based on allowed costs for the Ceylon Electricity Board said after a tariff increase said industries general purpose customers would generate a surplus of 14.7 billion rupees but all others would generate losses.
Siyambalapitiya said that hotels would receive a 316 million rupee subsidy was not correct. Large hotels had a daytime peak which was mostly based on air-conditioner use, which was off-peak for the grid when the cost of generation was lower.
Larger hotels were also bulk customers who cost less to supply and service.
Small hotels which were at the tail end of a low tension network and which cost more to supply were proposed a tariff of 22 rupees and a 15 percent surcharge which did not indicate a subsidy.