News
Amendments seek sweeping changes to 2024 Electricity Act
View(s):- Finance Ministry to play key role in setting tariffs
By Namini Wijedasa
The government’s new Sri Lanka Electricity (Amendment) Bill ties the independent regulator to consulting the Ministry of Finance when setting tariffs, whereas existing legislation—passed last year—states that tariffs are required to be set “as prescribed by the regulator in accordance with the national tariff policy”.
The bill to amend the Sri Lanka Electricity Act No. 36 of 2024 has been tabled in Parliament. The 2024 law sets up a National System Operator (NSO) responsible for real-time operation of the power system, including managing the national grid and balancing electricity supply and demand.
The existing Act also envisages the creation of a National Electricity Advisory Council (NEAC) as a full-time statutory body. However, Clause 3 of the 2025 Amendment Bill replaces the word Council in NEAC with a “committee appointed by the Minister”, allowing for increased political influence.
Clause 7 of the Amendment Bill then completely repeals the relevant section of the principal enactment relating (among other things) to the establishment of the NEAC.
The NEAC was tasked with advising the minister in formulating the National Electricity Policy in respect to matters such as reforms relating to the generation, transmission, distribution, trade, supply and procurement of electricity in Sri Lanka.
Its skilled staff were to be charged with making responsible and accountable recommendations to the minister through a board with defined expertise, including the establishment of competitive electricity markets and interconnections with regional markets.
Meanwhile, the 2024 Act assigned Ceylon Electricity Board (CEB) generation to four companies in the areas of hydro, coal, oil and wind. CEB distribution was to be with four companies.
Under the Amendment Bill, however, there will be a preliminary “transfer plan” under which one distribution company and one generation company would first be set up. CEB employees will be assigned to them. Completely state-owned (with boards and management), the two entities will handle all other distribution divisions and generation divisions, respectively.
In a final transfer, this generation company and distribution company are expected to be “further unbundled” into an unnamed number of companies. It is not clear what the role of the two entities will be after this last step is executed.
The transmission company, which was previously to have been 50 percent state-owned, under the Amendment Bill is fully state-owned. This will make it difficult to attract private capital, a sector analyst warned, adding that even in countries like India and Bangladesh, transmission companies list some shares on the stock exchange.
The amendment envisages the Lanka Electricity Company (Pvt) Ltd as a subsidiary of the distribution company, impacting its independence, which allowed better service to its customers. (The previous plan was to shift CEB-owned shares to the Treasury).
The 2024 Act provides for “decarbonisation” of the country’s electricity industry and “promotion of renewable energy and energy integration in accordance with Sri Lanka’s national policies and its international obligations whilst ensuring optimal use of natural resources”.
The amendment has changed this to read “minimise the carbon footprint of the Sri Lankan electricity industry with the view of achieving the government’s international commitments for decarbonisation, promoting renewable energy, and optimising the integration of indigenous energy resources in line with the national policies of Sri Lanka”.
It is unclear how replacing “decarbonisation” with minimisation of the carbon footprint remains consistent with Sri Lanka’s commitment to achieve net-zero by 2050. (Net-zero emissions means that the amount of greenhouse gases released into the atmosphere is balanced by the amount removed, achieving a state of equilibrium.)
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