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Sri Lanka’s electricity pricing policy is reviewed
in this paper. The electricity supply industry still remains
a State-owned monopoly in Sri Lanka. While the electric
utilities are financially non-reliant on the State, their
investment decisions and pricing policies are heavily controlled
by the Government through a mostly ad-hoc process. The paper
explains the present policies of electricity pricing and
metering, and highlights the weaknesses in the price structure
and in the price levels, in which significant anomalies
have remained for several years. Apart from the heavily
distorted price structure, specific problems remain in the
tariff for households, in the time-of-day tariff for industries
and in the classification of industrial/hotel customers.
The paper also highlights the absence of
in-depth analyses by the two utilities of their costs of
supply, and the inadequate correlation between the prices
and the costs. It also shows the weaknesses in the mechanism
for development, evaluation and approval of revisions to
the price structure, and calls for the establishment of
an independent regulatory body to examine pricing issues.
Table of Contents:
- Executive Summary
- Introduction
- Present Electricity Tariff Revenue
- Electricity Pricing Mechanism in Sri Lanka
- Utility Financing Issues and Current Realities
- Long Range Marginal Costs (LRMC)
- Policy Options and Tariff Reforms
- References
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