by Dr. Tilak Siyambalapitiya
Now is the time to pay for the drama you Sri
Lankans watched and enjoyed for the past 10 years. Should we
build Norochcolai and Upper Kotmale ? From 1996 to date, the
Bishop of Chilaw and NGOs blocked the Norochcholai coal-fired
power plant, which was to produce by now, 900 Megawatt (i. e.
50% of your electricity) at half the price of oil. For ten long
years, the Bishop and NGOs did not allow Ceylon Electricity
Board (CEB) to build the power plant.
You electricity customers, never ever supported
the electricity planners. Your chambers of commerce and industry
were largely silent when power plants to produce cheaper
electricity were being repeatedly sabotaged by religious
leaders, environment NGOs and politicians. Perhaps you thought
that somebody should teach CEB a lesson, or you thought
electricity officials are all corrupt to recommend coal power
and hydropower to earn commissions. Some journalist even wrote
that all these power plants are unnecessary projects proposed by
So, now is the time to payback.
Of course, with each election, politicians both
blue and green, promised they would not build the Norochcholai
power plant. Leaving the specialists aside, Presidents, Prime
Ministers, Leaders of Opposition and the Bishop made statements
on environment, economics, logistics and engineering. The first
national politician to publicly announce in 1997 that the
project would not be built if he was elected to office, and
repeated it at each election prompting other politicians to
promise they too would not build the power plant, is still in
The case of Upper Kotmale is not different.
First it was the Environmental Foundation Limited (EFL) that put
the project through a series of legal cases, which caused the
project to be delayed by four years. Then the Consultant to the
project, the Governmentís very own Central Engineering
Consultancy Bureau (CECB) worked against the project for years.
Then emerged the political opposition, which took a further four
years to resolve. Today, Upper Kotmale would have produced 1.5
million units of clean energy per day at Rs 3.50 per unit, and
that was not to be. Today CEB produces the lost energy from
Upper Kotmale by burning fuel oil at three times the cost,
emitting not less than 6 tons of sulphur to the atmosphere each
day. And the environment NGOs want you electricity customers to
believe that they have done a great favour to the country and
The country went through two serious periods of
blackouts (1996 and 2001/2), caused the economy to dive to
negative growth, which too were not adequate to convince the
Presidents, leaders of opposition, the Bishop, the political
parties and NGOs to let the two projects proceed.
Finally it was the Government of 2004 that
decided to implement the two projects, come what may, which
resulted in the agreements being signed in 2005, and
inauguration of the site work in March and May this year.
The New Electricity Prices
The individuals and NGOs listed above are now
silent when your electricity bills increase. The projects they
opposed for a decade are now being built precisely in the same
manner they were originally planned, but at a significantly
higher cost. World prices of steel and cement, the two main
ingredients required to build any power plant, doubled in price
while Sri Lankans were happily debating about the two power
plants for ten long years. When the Bishop began his opposition
to Norochcholai in 1996, the difference in production cost
between Norochcholai and a diesel power plant, was a mere one
rupee for a unit of electricity. Today the gap is more than four
rupees, and you electricity customers are now paying for it. The
gap between Upper Kotmale and a diesel power plant is more than
five rupees for a unit of electricity.
Electricity prices have been increased from 1st
September for all customers, except those consuming less than 30
units per month. About 30% of the households are in this low
consumption bracket, but everybody else has to pay. If your
consumption is in the range of 100 units per month, your bill
will increase by about 17%. If you consume 200 units, the bills
will be up by 25%, and the increase will be 30% for customers
using around 300 units.
The biggest blow will be to commercial and
industrial customers. A medium-scale commercial customer (these
include offices, schools and hospitals, both state and private),
would see the bills rising by 31%, while demand charges have
been slightly increased, and fixed charges will remain steady.
The biggest blow is to medium and large industries, who will see
their electricity bills rising by levels up to 37%.
Of course, a part of these bills will be termed
as "fuel adjustment charges", on which there is no hope of
reduction until year 2015, when the full benefit of coal-fired
power plants and other hydroelectric power plants would be
available. Although Norochcholai is scheduled to produce
electricity from 2011, CEB would need at least 50% of its
electricity to be produced by coal, before electricity prices
are stabilised at regionally competitive levels. And that will
be in 2015 ! So, ten years of mistakes since 1995, corrections
applied in 2005, and if the on-going corrections are applied
vigorously, the results can be seen by 2015.
Electricity has been sold below cost from about
1995, but there was some recovery after oil prices dropped in
1998. Ever since 1999, CEB has been reporting losses. The
accumulated debts are said to be approaching the 100 billion
Generation, Highest Share of Cost
At the fuel prices prevailing in the last week
of August, the typical cost structure of electricity supply in
Rs per unit, would be as follows:
Average generation cost: 8.28, provision for
network losses: 1.62, network maintenance, routine upgrades and
overheads: 2.50, TOTAL=12.40. Any person looking at the above
costs, would agree that it is the generation costs that have to
be reduced, to manage the electricity prices. That is precisely
what electricity planners have been recommending, asking and
pleading for over the past two decades. Build coal-fired power
plants, build the remaining hydroelectric power plants. However,
professionals were pushed aside while politicians and Bishops
were making decisions. Or were rather not making decisions.
If Norochcholai and Upper Kotmale were allowed
to proceed on schedule, the average electricity supply cost
would have been as follows: generation cost: 5.00, provision for
network losses: 95 cts, overheads: 2.50, TOTAL= 8.45 Rs per
unit. This is exactly the price of electricity that prevailed in
CEB would have been making profits, not asking
for favours from the Government, customers would be happy.
Politicians would not have had to call the electricity sector, a
monster. But this was not to be.
There certainly is hope, hope of relief in
electricity prices. Norochcholai and Upper Kotmale projects are
proceeding. Housing for relocated families are being built at
both projects. Major civil works would begin in both projects
towards the end of this year. In addition, the Trincomalee
coal-fired power plant project is nearing agreement stage, but
there is a long way to go. If all go well, the price increase in
electricity that you will pay from this month can be withdrawn
gradually from year 2011, and fully withdrawn from year 2015.
Yes, Sri Lanka has been making mistakes with the electricity
sector for 10 years, and it takes nearly 10 years more to see
the benefits of the corrections now being implemented.
Forces against projects
Over 300 families are about to receive new
housing in Upper Kotmale, and 70 families are about to receive
new houses plus one-and-a half acres of land at Norochcholai.
Forces against the projects are still active. Processions are
being organised by NGOs and interested parties, generally from
outside the project areas. Various legal moves are being
contemplated and pursued against the two projects, which are
moving ahead in full compliance with all environmental laws of
The cheapest oil-burning power plant with CEB
costs 8 rupees a unit of electricity for fuel alone. If
Norochcholai was operational, it would have a fuel cost of 3.82
rupees per unit. Thus the saving is at least Rs 4.18 per unit of
electricity. Norochcholai was to produce 20 million units today,
if it was allowed to be built on time. Therefore, to compensate
for each day of delay, you electricity customers are paying at
least Rs 84 million per day.
Norochcholai delay costs 84 million rupees per
If Nororchcholai is delayed by one extra day, the electricity
customers will be called upon to pay an extra 84 million rupees
per day. The treasury will convert that money into hard
currency, and pay to buy more and more oil. Protesters and NGOs,
and perhaps some prospective power plant suppliers too, are
doing their best to force further delays on these vital power