Power plant delays cost Rs 51 B

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By 2017-11-20

By Ishara Gamage

Sri Lanka will face a staggering Rs 51 billion annual financial loss due to implementation delays of the 2018-2020 power plant schedules in the long-term generation expansion plan of 2018-2037, Public Utilities Commission of Sri Lanka (PUCSL) has warned.
Releasing a four-page Report titled, "Financial impact of delay in implementation of power plants generation expansion plan - 2018-2037," power sector regulator PUCSL stated that any further delay will cost a whopping Rs 3.43 billion for each month.
Therefore, the PUCSL through this report has urged the monopolistic implementing authority Ceylon Electricity Board (CEB) to expedite the procurement of the relevant listed power plants in accordance with the approved schedule, as a matter of national importance.
PUCSL has been continuously monitoring the progress of the CEB in implementing the approved plan and has observed delays in the procurement process of power plants expected to be commissioned by 2020.

Meanwhile, the CEB Engineers Union has recently legally challenged the PUCSL proposed long-term generation expansion plan 2018-2037 and stated that PUCSL doesn't have legal power to introduce such a plan.
However, contradicting the CEBs strong engineers union opinions, the Government and PUCSL were pushing for the long-delayed CEB reforms, to avoid possible blackouts and to cut losses. The Government is also trying to introduce a cost-reflective electricity price formula as early as possible as suggested by the International Monetary Fund.

However, speaking at the recent Post Budget Forum, Deputy Secretary to the Treasury, S. R Attygala said that introducing a cost-reflective electricity price formula for the electricity sector might be a difficult task.

He said better CEB reforms were necessary to cut its mounting losses, before introducing such inflationary electricity price formulae.
"It has to be noted that these financial loss or cost overrun figures were merely the primary outcomes of implementation delays. The cumulative effect of implementation delays over the next three-year period could very likely trigger a power crisis that could seriously affect the national economy", PUCSL warned.

However, the power sector regulator does not recommend purchasing emergency power in the future to meet any capacity or energy deficit due to implementation delays of these upcoming power plants and is of the view that such costs should not be passed through to the consumers through tariffs.

"The Government may consider a change in industry structure if the generation plan implementation cannot be efficiently carried out within the current structure", the Report stated.

Implementation issues pertaining to power plants identified in Least Cost Long term Generation Expansion Plans (LCLTGEP) have been prevalent over the last 20 years.
According to PUCSL, many of the identified power plants were delayed and some were not implemented at all.
This has resulted in serious problems that have plagued the electricity sector over the past decade and seriously hampered its progress.

They said that cost overruns and load shedding were the most prominent and direct consequences, while the impact of these two factors on the economy of Sri Lanka and its competitiveness were secondary consequences.
Cost overruns happen because of the expensive emergency power procurement and over dispatch of existing expensive power plants. The financial loss due to non-implementation/delaying of approved power plants over the last 20years is enormous and the economic/impact of load shedding and high prices is even bigger.

"The issue of implementation delays or non-implementation of power plants is not some past phenomena, but something very much prevalent even at present", it stated.

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