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Challenges to Cost Reflective Tariffs: Regional Experience Sri Lanka’s Case and the

Challenges to Cost Reflective Tariffs: Regional Experience Sri Lanka’s Case and the Window of Opportunity. Tariffs for Transactions between Licensees : Features. All generation is licensed (CEB holds one, 10 IPPs, 120 Small PPs) The Single Buyer model is operational no real-time pricing

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Challenges to Cost Reflective Tariffs: Regional Experience Sri Lanka’s Case and the

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  1. Challenges to Cost Reflective Tariffs: Regional Experience Sri Lanka’s Case and the Window of Opportunity

  2. Tariffs for Transactions between Licensees: Features • All generation is licensed (CEB holds one, 10 IPPs, 120 Small PPs) • The Single Buyer model is operational • no real-time pricing • generation is PPA-based • Dispatchable (except small renewable energy power plants) • Single buyer and Transmission Licensee is CEB • Distribution is by five licensed entities, of which CEB owns four. • Wire Businesses are on a multi-year tariff methodology with an allowed 2% return on investment. • Generation pass-through is on six-monthly cycles (forecast for period n, adjusted for corrections in period n-2) • Cost reflective pricing commenced in Jan 2011.

  3. GOSL Subsidy Generators(CEB, IPP,SPP) 5,600 million LKR Shot-term debt repayment 11,767 million LKR 104,635 million LKR Single BuyerBulk Supply Transactions Account TL7231million LKR Ren Energy above avoided costs 1,132 million LKR 7,231million LKR 106,831million LKR 27,368million LKR 11,785million LKR 15,971million LKR 34,280million LKR 17,427million LKR DL16,864 million LKR DL27,782million LKR DL34,563million LKR DL43,698million LKR DL52,514million LKR 41,444million LKR 35,150 million LKR 21,991million LKR 15,482million LKR 18,485million LKR Tariffs: A Glimpse of Cost Reflective Tariffs between Licensees 2011Status: Operational but dead !

  4. Are the Allowed Losses Reasonable ? • Allowed losses (technical + commercial)

  5. Are the Wire business + supply costs efficient ? • Allowed revenue for wires and supply • Transmission allowed revenue excludes large CAPEX, which is separately added. By 2015, inclusive of large CAPEX transmission revenue is expected to be about 1.10 LKR/kWh.

  6. Are the Wire business + supply costs efficient ? • What should be done ? • Constant Monitoring • Benchmarking • Publishing results • Awards for improved management of costs and losses (?) • X-factor (improved efficiency factor) • Network loss management • Are we really so efficient ? • Bulk sales cause a loss of less than 1.5% • Therefore retail sales should be causing a loss exceeding 15% • Engineering models say it should be 5% !!!

  7. Generation Costs: Sri Lanka’s Window of Opportunity

  8. Cost structure of sales to end-users (national average)

  9. From Costs to Tariffs

  10. End-use Customer Tariffs: Costs and Income 2011

  11. Where are we in the path to cost reflective tariffs ? • The reform process began (and stopped !!!) • Customer categories down from 27 to 20 • Medium and large hotels unified into one category • Time of Use Tariffs mandatory for all • medium and large industries • medium and large hotels • Household blocks have been retained at 6, although the Govt policy may have caused blocks to be increased • Street lighting costs have been “socialised’ (all customers jointly pay for street lighting, estimated to be a load of about 0.25 LKR/kWh) • More reforms were planned in the revision dates • 1st July 2011, 1st January 2012, etc, BUT …….. • Nothing happened …… and • Sri Lanka will miss the LAST, LEAST PAINFUL opportunity to move to cost reflective pricing, if we do not act now.

  12. Thank You

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