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