POWER MAFIA EMPOWERED

Closing down of Public Utilities Commission

• Sri Lanka had not been able to get the best possible technology for power generation
• The PUCSL would call for tenders with the participation of all stakeholders before implementing an electricity project
• There are about 600 complaints a year regarding electricity services
• The power mafia comprises crooked businessmen, engineers, bureaucrats and politicians
• The lack of transparency adversely impacted investor confidence, which in turn negatively impacted the whole economy
• The Auditor General has also revealed that the electricity from diesel could have been purchases at Rs 18 when Rs 45 to Rs 65 was charged per unit

In a surprise move, President’s Secretary P.B. Jayasundera on December 1 wrote to Treasury Secretary

Before the PUCSL was established customer complaints were ignored and people had to resort to legal action to seek justice for their electricity needs (Pic AFP)

S.R. Attygalle instructing him to take steps to close down the Public Utilities Commission of Sri Lanka (PUCSL). The letter claimed the action would “create an efficient work environment to implement the power generation plan which has been lagging behind for some time.” It also recommended “consequential steps to absorb the technical staff to the Department of National Planning and also to deploy such staff to the Ministry of Power and to this office depending on their competencies to serve in respective places on 
planning and analytical work.” Jayasundera’s letter sparked a concern and uproar in political and civil society circles, especially among consumer rights groups. They warned that closing down the PUCSL would heighten corruption and increase electricity rates, placing even more burdens on consumers. 

Buffer against corruption

18 December 2020

The PUCSL was established under the Public Utilities Commission of Sri Lanka Act No. 35 of 2002. With powers under the Sri Lanka Electricity Act No. 20 of 2009, the PUCSL commenced work as the economic, technical and safety regulator of the electricity industry. It was also assigned to regulate the petroleum and water services industries, but laws in this regard have not yet been passed. 

The PUCSL has played a vital role in handling customer complaints and regulating corruptive electricity projects. The Commission was established to protect the electricity industry and customers. So its abolition would undermine its very purpose. The PUCSL Act places the Commission as an intermediary that ensures fair electricity prices and handles customer complaints. 

According to Ranjith Vithanage, President of the Movement for the Protection of Consumer rights, abolishing the PUCSL could plunge the entire electricity industry into a crisis. He said prior to the PUCSL, private competitors had engaged in bribery and other corrupt practices through contacts with politicians, engineers and businessmen.  “But when the Act was implemented, the PUCSL could function as a regulator and could prevent such illegal activities by private groups. Removing the PUCSL would allow competitors to re-enter the market without a regulatory body in place. The PUCSL works as a buffer that prevents illegal electricity transactions. The illegal entry of electricity providers could also create a monopoly, and lead to many issues regarding electricity prices,” Vithanage warned.

Massive losses

He added the annual average loss of the Ceylon Electricity Board (CEB) was around Rs 300 billion. “These losses are caused by the emergency purchase of electricity at higher prices due to sudden breakdowns or a lack of power plants in the country. Ultimately, the customer must bear the burden of these losses. Around 400MW of electricity is purchased a year, and the government wants to increase this to 700MW. This also impacts the cost of production of goods and services as electricity is used in the production process,” he said. 

"Sri Lanka’s power generation is greatly influenced by geopolitics, with China and India being the major players. Now, the US is also in the fray. This was possible because all procurements had not abided by tender procedures which should have been open to many stakeholders"

- Bandula Chandrasekara

Meanwhile convener of the Movement for Consumer Rights Kelum Amarasinghe said the PUCSL had created a system to purchase electricity from government-owned generators and had ensured they operated efficiently. “There had been no cases in the recent past where countrywide power failures were caused due to an electricity shortage. Even if there had been power cuts, they were due to technical issues,” Amarasinghe said. He added the PUCSL had never taken any measures that were detrimental to power generation. “When the PUCSL reviewed the 2018 CEB proposal to purchase 100MW of electricity for six months, it noted such an urgent procurement was not needed because there was heavy rain in May that same year. This saved the country Rs 9 billion.” 

Amarasinghe added before the PUCSL was established, customer complaints were ignored and people had to resort to legal action to seek justice for their electricity needs. “Customers and the CEB had to spend a lot of money for court procedures in addition to time wasted. So far the PUCSL has resolved about 10,000 cases. It was the PUCSL that implemented concessions in electricity bill payments during the COVID-19 pandemic,” he added.

Transparency

Bandula Chandrasekara, former Chairman of Lanka Electricity Company (LECO) and convener of the Forum of National Intellectuals clarified how closing down the PUCSL could affect the transparency of transactions in the electricity industry. “The CEB forms an electricity generation plan once every ten years. This plan is re-visited once every five years. This power generation plan must be implemented with transparency. Sri Lanka’s power generation is greatly influenced by geopolitics, with China and India being the major players. Now, the US is also in the fray. This was possible because all procurements had not abided by tender procedures which should have been open to many stakeholders. These are unsolicited projects which are in the hands of these global giants,” he said. 

Unsolicited projects 

Chandrasekara added Sri Lanka had not been able to get the best possible technology for power generation. “The best example is the Norochcholai coal power plant which is an unsolicited project. Previously there had been many competitive projects from India and Japan, but they were rejected. The result is we got a low technological power plant while large commissions were earned by some politicians and officials. This project has created many issues in terms of power transmission, which also caused the recent power failure that hit the entire country.”

"Customers and the CEB had to spend a lot of money for court procedures in addition to time wasted. So far the PUCSL has resolved about 10,000 cases. It was the PUCSL that implemented concessions in electricity bill payments during the COVID-19 pandemic"

- Kelum Amarasinghe 

Explaining further, Chandrasekara said the PUCSL would call for tenders with the participation of all stakeholders before implementing an electricity project. “There was a proposal to build the Fourth-Phase of the Norochchalai power plant.  On September 4 this year, the CEB sent this proposal to the PUCSL, but the Commission rejected the project as it had not abided by proper tender procedures,” he said. There had also been controversy over agreements regarding private diesel power plants in the last 20 years. “In 2016 the Parliament Committee on Public Enterprises (COPE) recommended that the Government purchase these private diesel power plants once their agreements had lapsed, and use of these plants only when needed. But this was not implemented, though the PUCSL had asked the Government to do so,” he revealed. Further, Minister of Power Dullas Alahapperuma had issued a Cabinet Paper to extend these agreements without approval from the PUCSL. “This can happen in future too,” Chandrasekara said.  

"The PUCSL works as a buffer that prevents illegal electricity transactions. The illegal entry of electricity providers could also create a monopoly, and lead to many issues regarding electricity prices"

- Ranjith Vithanage 

Investor confidence 

Chandrasekara warned the lack of transparency adversely impacted investor confidence, which in turn negatively impacted the whole economy. “There are many international institutions that fund local projects, and such illegal Government moves can harm investor confidence.” 
The PUCSL has also helped in creating a progression in transmission distribution systems. “These are examined and well managed by the PUCSL. It ensures a public consultation process that takes the public right to decide on electricity prices with PUCSL approval. With the abolition of the PUCSL, the customer cannot make complaints.  There are about 600 complaints a year regarding electricity services. It is the PUCSL that intervenes and provides solutions without taking them to court.  So solutions are provided to customer complaints within a short span rather than if they were taken to court,” Chandrasekara said.
Moreover, as the PUCSL was established through an Act in Parliament, it cannot be simply closed down with a letter.  “It is not possible to abolish the PUCSL just through a letter. If it is to be abolished, it can only be done through another Act in Parliament. Just sending a letter is not legal,” Chandrasekara pointed out.

Electricity Act 

In 2009 the Sri Lanka Electricity Act empowered the PUCSL to curb fraud and corruption in the country’s power industry. This was during the presidency of current Prime Minister (PM) Mahinda Rajapaksa, noted Sanjeewa Dhammika, the Electricity User’s Association Secretary. He added the PUCSL had been further empowered under Mahinda Rajapaksa’s Government in 2013 to follow a competitive system for purchasing electricity from the private sector by including the tender system for such purchases at reasonable prices under the Electricity Act.
Commenting on past decisions that could have been detrimental to the electricity industry, Dhammika said, “The Yahapalana Government proposed to amend Section 43 of the Electricity Act which would remove the power of the PUCSL to give final approval to agreements to purchase electricity without a tender procedure. PM Mahinda Rajapaksa, as the then Opposition Leader, led efforts to defeat this proposed amendment brought to Parliament in 2019.”

"The Yahapalana Government proposed to amend Section 43 of the Electricity Act which would remove the power of the PUCSL to give final approval to agreements to purchase electricity without a tender procedure"

- Sanjeewa Dhammika

Power mafia

Dhammika warned that groups involved in the power mafia were active again. “This power mafia comprises crooked businessmen, engineers, bureaucrats and politicians. Their aim is to gain billions of rupees through corrupt power deals. In the past five years this mafia influenced the government to sign contracts to purchase power from high-cost diesel power plants instead of low-cost power plants. The Auditor General has also revealed that the electricity from diesel could have been purchases at Rs 18 when Rs 45 to Rs 65 was charged per unit.”
He added, “This government, the President, PM and Cabinet will ultimately be helpless due to the arbitrary decisions of an official. The President and PM must understand this truth. Government authorities should understand that officials who were once deemed unfit for any public post are not at all suitable for a people’s government.”

Dhammika stressed that closing down the PUCSL would cause a proliferation of corrupt electricity transactions. He warned there would be a huge increase in electricity tariffs to cover rising costs due to such corrupt transactions, and urged that the PUCSL be protected. He called on the Government to strip the civic rights of corrupt secretaries who worked with the power mafia to close down the PUCSL.