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Minister gives tough warning to CEB and other big consumers
By Damith Wickramasekara
Soaring fuel costs have prompted the Government to impose tough conditions on supplies to state institutions, Petroleum Industries Minister Anura Priyadarshana Yapa announced yesterday. “If the bigger consumers in the state sector exceed the annual fuel quota issued to them, the Ceylon Petroleum Corporation (CPC) would withdraw credit,” he told the Sunday Times. In such a situation, he said, they would have to open their Letters of Credit on their own for imports.
Both the Ceylon Electricity Board (CEB) and SriLankan Airlines have in the past blamed the Ceylon Petroleum Corporation for not extending concessions to them. The CEB is in arrears of Rs. 28.3 billion while SriLankan Airlines owes Rs. 27.4 billion to the CPC. Others who have run heavy bills include the Sri Lanka Navy Rs. 6.7 billion, Sri Lanka Railways Rs. 5.3 billion, the Army Rs. 4.1 billion and the Air Force Rs. 1.8 billion.
Minister Yapa said he discussed the new plans with heavy consumers of oil and oil products at a recent meeting at his ministry. The latest CPC fuel price hike on February 24, Mr. Yapa said at a news conference last week, was the result of losses suffered by the CPC. The new measures were intended to reduce those losses.
From last Saturday, the price of diesel was increased by Rs. 6 a litre and petrol by Rs. 3.. The CPC plans to increase both low and high sulphur fuel used in power generation from April 1. The losses suffered by the CPC have been aggravated by the corporation having to pay Rs. 18 billion as interest on Letters of Credit opened so far to buy fuel for the CEB. The minister said he was initiating measures to ensure state institutions pay back their debts to CPC.
Private plants curtail production
By Namini Wijedasa
Two private sector oil power plants curtailed electricity production last week after the Ceylon Petroleum Corporation (CPC) refused to supply them with any more fuel on credit.
The crisis forced Power and Energy Ministry Secretary M.M.C. Ferdinando to intervene on Thursday evening. Following discussions with CPC, the required fuel stocks were temporarily released to the independent power producers. Power sector sources warned, however, that such interruptions could occur again due to a new CPC policy of demanding upfront payment for fuel once credit limits were exhausted. In the worst case scenario, this could lead to power cuts, they said.
“If the CPC’s policy is to not supply anybody once their stocks go dry, cost repercussions will be immediately felt,” one senior official said. “Also, if independent power producers don’t operate for some time, the Ceylon Electricity Board (CEB) will be forced to generate more hydroelectricity. This will result in hydro resources being depleted earlier than expected. That is when power cuts will be needed,” the official said
At present, with water in the reservoirs at comfortable levels, the CEB depends on these private producers predominantly to meet demand during peak hours. “But if there is inadequate electricity generated by these producers due to non-availability of fuel, it could also result in power cuts during peak periods,” the official said.
The CEB’s ‘Daily Generation and Reservoir Statistics’ report dated March 1, 2013, reveals that West Coast Power (WCP) and Heladhanavi Power Plant reduced generation “as they have not procured adequate fuel stocks”. The report, seen by the Sunday Times, said high cost thermal plants were operated to compensate for the electricity shortfall.
West Coast Power runs the 300 megawatt Yugadhanavi Power Plant at Kerawalapitiya. The Heladhanavi Power Plant in Puttalam produces 100 megawatts. Both are fired by heavy fuels and offer the cheapest rates among all independent power producers.
Power sector sources said that independent producers could not pay upfront for fuel because the debt-ridden CEB was not settling their dues. “All of us are helpless,” said U.D. Jayawardana, the Chief Executive Officer of LTL Holdings. “This will continue until the CEB’s cash flow improves and for that CEB has to go for a tariff increase.”
LTL has a stake in the Heladhanavi through a subsidiary company called Lakdhanavi which manages the plant.
Under the power-buying agreement, the CEB could delay payments by two months. But Mr. Jayawardana said that, for at least one-and-a-half years, there had been a four months backlog of payments at any given time. This made it impossible for independent producers to meet their own commitments to the CPC. The CPC has now informed these producers that they must pay upfront for fuel if they exceed their specified credit limits.
“How can they do that when nobody has the money?” asked a senior power sector source. Power sector sources said, however, that for the CEB to meet its commitments, a significant tariff hike was essential. The Public Utilities Commission of Sri Lanka (PUCSL) is expected to announce revised electricity prices within the next few weeks. Power sector sources hinted that prices could increase by around 25 per cent, as they did last year.
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