Tuesday, July 16, 2013

Time to adjust the ‘Fuel Adjustment Charge’

Dhanesh Wisumperuma

The Nation, 14-07-2013, News Features, p. 10

It is now nearly three months since the controversial electricity tariff hike and many of the consumers have already received two electricity bills prepared according to the new tariff. Although the tariff hike has somewhat affected the middle income families and they are in discussion, the protest campaign against the raise seems to be losing ground.

Meanwhile, this issue has been replaced by many other hot topics. It may be due to the fact that nearly half of the total consumers that actually required a relief are not affected by the tariff hike. Further to this, a section of the consumers who can afford the increased price hike do not care about the issue, i.e. the high income groups. However the middle income families who cannot change their electricity consumption patterns to a rational use are still affected.
Things have changed rapidly during the last two months in electricity consumption. The prevailing cooler weather pattern has reduced the use of fans and air conditioners and this has somewhat reduced electricity usage. Also some have been using electricity wisely, which can be also a cause for the reduction in power consumption.

Hydropower potential high, but not used in full?

With the onset of the south-west monsoon, heavy and continuous rains prevailed in the last few weeks. This wet weather resulting in an extended rainy period has benefited the power sector by an increase in the reservoir water levels. Most of the reservoirs that store water for hydro electricity generation are at spill level or near spill level. According to the Ceylon Electricity Board (CEB) website, the reservoir storage was over 94 percent on July 9, with the potential of generating 1183 Giga Watt hours of electricity. This is the highest reservoir storage that prevailed during this time of the year in recent times. It is almost three times higher than last two years.

This seems to be greatly beneficial to the CEB. On July 9, 76.9 percent of the total power generation came from hydropower. It also shows that the total thermal power generation has been reduced to about 18.4 percent while wind has contributed for about 4.7 percent. The thermal power contribution includes 2 percent of the total power generation provided by Independent Power Producers (IPP), which is the electricity purchased from the private sector. (It is still high during night time peak hours, when the consumption rises to about 1800 MWs) This is a reduction when compared to drought periods and the end result is that the huge expenses incurred on relying on thermal power (especially oil based thermal power both CEB owned and IPP, but mostly the second) have reduced drastically and the CEB is making profits.

However, there were recent media reports that indicated about malfunctioning hydropower turbines which have caused a closure of some. For instance both turbines at the Kukule Ganga Reservoir went out of operation causing a loss of 75 MW of cheap hydro electricity in mid June. A few turbines in some of the other reservoirs are also reported to be causing troubles; some are in danger of failing while some are closed for routine maintenance. The Public Utilities Commission has launched an inquiry of the closure of some of these turbines, as reported on July 5.

Media reported that the repairs to the Kukule Ganga turbines may take some time, which means a loss of 75 MW of electricity. However since the intervention of the minister one of the two turbines was in operation since last week. Kukule Ganga is a reservoir where there is a continuous water supply throughout most of the year. Such breakdowns of multiple hydro turbines can lower the hydropower generation and could force the CEB to purchase thermal electricity from IPPs, if the water level reduces in future. As reports suggested some sort of vested interest may be behind such a situation.

Meanwhile, according to CEB officials, it is not possible to use all hydro turbines when the demand is low during off peak hours. At such times some of the hydro turbines have to be switched off to avoid serious situations. This was due to the fact that some coal and wind power plants had to be kept in continuous operation.

Providing the benefit for consumers

With increased hydropower generation, there is a demand to reduce the electricity prices from various sectors of society – trade unions, political parties and individuals. It is clear that the CEB is profiting contrary to the estimates of expenses and income that were provided when they requested a price hike early this year. In simple terms, CEB is saving funds and it is an unexpected saving. Hence the request is to pass the benefit to the consumers. One report reveals the number of units of electricity generated using hydropower during the first six months have been 2600 GWh while it was estimated to be only 1143 GWh, which means the necessity of relying on costly thermal power was reduced during the last one and half months.

Amidst these circumstances, an organization working for the benefit of the consumers has already handed over a statement to the Public Utilities Commission of Sri Lanka requesting to reduce the electricity bill. The issue here is what are we going to reduce - the unit price, pricing system or the fuel adjustment charge?

The best option available for the government is to reduce the percentage of the fuel adjustment charge by a significant amount, which will reduce the electricity bill of the people. The existing fuel adjustment charge varies from 10 percent to 40 percent based on the number of units used. Further to that, introduction of a system of altering the fuel adjustment charge from time to time - half yearly or quarterly - is a viable option and acceptable.

As the burden of thermal power generation (which is a result of long term inaction of authorities as well as vested interests) was transferred to the consumers, the benefit of the low expenditure should also pass to the consumers. That becomes a responsibility of the government and PUCSL can act on this. It should also be noted that all electricity consumers should receive the benefit of the cheap hydropower, although it is agreeable to provide more benefits to low energy users.


No comments:

Post a Comment