How do Sri Lanka’s new electricity prices compare with those in other countries?

by Dr Tilak Siyambalapitiya

I once attended a meeting of the Energy Sector Committee of the Ceylon Chamber of Commerce, comprising industry owners and “thought leaders”, the modern phrase to refer to those who can influence decisions. Many “big names” in business and manufacturing were present. One question was raised by many participants: “You see,” said a big name in industry, “the main problem is that the government does not allow me to sell my surplus electricity to the industry, who is my neighbour”.

I was astonished. I asked him what surplus power he had got. “I have a diesel generator,” he shot back. When he was asked at what cost his generator produced electricity, he said, “I do not know; I must check with my technical staff.” To the question at what price does his neighbour buy electricity from the grid, he said, “How do I know?”

Finally, he did not even know at what price his own industry buys electricity from the grid. The discussion ended there.

So, the bottom line is that there is a dearth of information about costs and prices of electricity, an information gap the PUCSL (Public Utilities Commission of Sri Lanka) was expected to bridge.

So, here is the comparison of electricity prices across several countries in the region. (See table) It is not possible to provide comparisons in simple terms as some critics do with simple phrases such as “Sri Lanka is the country with most expensive electricity”. The pricing techniques are different. Metering policies are different. Some countries have time-of-use pricing, others do not. Some have demand charges based on contract demand, others charge on measured maximum demand. Some even charge for reactive power or energy.

Therefore, the only way to compare prices across different countries is to define several “typical” customers and calculate what their electricity bill would be if they are placed in different countries. I present the most recent calculation without comment, allowing readers to make their own assessments.

Pricing of electricity must be based on well-tested and relatively simple theories of costing and pricing. The two electricity suppliers, the CEB and LECO, or the regulator PCUSL, do not practice these principles, but simply use some arbitrary prices and a process of trial and error to target the income expected from the sale of electricity. The recent mishap with electricity prices for “religious places” was most likely the result of a hit-and-miss effort that awfully went wrong.

Readers may want to know why the “religious” electricity prices are not here in the comparison: the simple reason is that only a handful of countries in the world have special electricity prices for religious institutions. Sri Lanka now has religious institutions, which can graduate to pay the prices paid by commercial sector customers.