Friday, April 5, 2013

The Electricity tariff hike – what it means to the lower income families

There is a raging debate about the ethics and the basis of the huge rise in Electricity, which will see the poorest families of Sri Lanka, assumed to be in the under 60 units of usage a month (as opposed to my household which uses over 200 units on average!) have to pay a whopping 50% increase as compared with the bill they received in March.

This is because their rate has been hugely subsidized by the state where they pay something like (my figures are illustrative only to make the point) Rs15 per unit, and I pay over Rs40 per unit for ALL units I consume, and is not a step up rate. The minute you get on to the next tier, you pay at a higher rate for the whole number. My electricity bill is likely to rise by about 20% from Rs10,000 a month to Rs12,000 a month, while someone using 60 units is likely to see a bill rise from Rs1000 a month to Rs1500 a month.(an increase of 50%)

As I am on a higher tier, I pay about what it costs the CEB to generate electricity and all the inefficiencies of the State supplier. I am not subsidized. However the lower user is still subsidized by over Rs1500 a month even though his bill rises by 50%. So one can appreciate the extent of the subsidy he received previously. His bill should really be Rs3000 and not Rs1000 as now.

In giving a fair analysis of the issue, there has to be some way to plug the hole of Rs100B a year that is lost by the CEB. All Governments, but especially this Government, as it has gone for the most expensive alternatives in retrospect, have contributed to making bad choices with regards to building power stations and the costs to run them. It is also argued that the private suppliers of electricity are paid rates much higher than would be reasonable, as they were forced to do so to attract private players, when the state was unable to fill the demand, and they seized the opportunity and built thermal as well as mini hydros, so they could make a tidy return. However these agreements will lapse in a few years, and can be renegotiated at lower rates.

Given this background I will concentrate here only on the ethics of the massive hike in rates for the lower income households. It is simple arithmetic that the larger number of users of electricity, 40% fall into this category, and raising their tariff is the easiest way of obtaining the total increase in Revenue. It is estimated that this segment of the population will pay an additional Rs30B in electricity charges this year, as their consumption is inelastic. That is as they already use very little electricity relatively, and in my knowledge also have turned to LED bulbs to further reduce their usage, there is NO way they can reduce their consumption, and will HAVE TO pay the higher bills. It is this most vulnerable segment who will have to fork out.

The intellectual argument is whether it is fair for them to be burdened with the increase, or should more be piled on to the heavier users? The Government maintains that they have been subsidized heavily all this time (that is why they have kept this Govt. in power) and accordingly have cost the Govt. a huge loss, and now it is time for them to pick up some of that TAB.(pay for the free lunch)

The Opposition line is, and it is definitely politically motivated for political mileage, and if they word it sufficiently candidly can gain a huge political advantage, that it is unfair to burden the most vulnerable segment, as they are unable to reduce their cost, by lower consumption! They fail to say however how the deficit can be plugged! But as I mentioned earlier this Govt’.s bad policies led to this problem in the first place and therefore they must eat some of the crow and suffer the wrath of a furious public.

It is easier for me to reduce my usage and try not to permit an increase in my bill, by turning off a fan or using the washing machine less! It is so hot these days, not having a fan is a nightmare of sweat pouring down one’s face. If I retreat to Polonnaruwa, where I do not have electricity I will avoid the problem!

I also understand that the PUC has forced the Electricity Board to reduce their costs, which are also outrageous due to inefficiencies within their labor force with very highly paid professionals, who are reluctant to lose any of their perks. The answer is simply to pray that Hydro Reservoirs are full and our reliance on thermal is less. Norochcholai HAS NOT given the expected benefits because of many of the economies of scale have not helped reduce the cost due to the faulty nature of the plant, which due to bribes, commissions and inefficiencies in the technology is costing the Board twice its original estimate.

In conclusion, as the CEB is one of two state enterprises that show the largest losses, something has to be done to reduce them. Bad government has led to high cost Electricity production, and we the people are paying the price. Now it has finally dawned on the poor that even they have been living beyond their means all this time, and it is time for them to pay for the sins of the Govt. It is the wastage and inefficiencies in Corruption that we are all paying for today, and it is time the people of Sri Lanka realize that they have been fooled into a false sense of security by the untruths trotted out daily by the Govt. 

1 comment:

Anonymous said...

the power issue is a bread and butter issue that the masses understand. thus it can be used for immense political mileage by the opposition parties.

the government must therefore act quickly and put its house in order, and this requires a comprehensive 30-year plan for the energy sector in Sri Lanka including all options, but with emphasis on renewables. Give duty waivers for micro-energy production accessories like solar panels, windmills, biogassifiers, etc. Sri Lanka must make use of its position in every way, and perhaps invest in developing and mobilizing generators that can use the ocean waves as a regular source of power -- an infinitely renewable resource. of course, the opposition will criticize anything and probably say wave power harms the environment or tourism industry, but in sri lanka you must develop a thick skin and go with what works, as there are so many alternative motives when people say things.