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Apr 20, 2013 (LBO) - Ministers in Sri Lanka paid only 2,000 rupees for power a month regardless of the volume of use, former foreign minister Mangala Samaraweera told reporters in a shock revelation.
"I am aware of the situation, as I myself paid only 2000 rupees when I was a minister," he was quoted as saying in Sri Lanka's Daily Mirror newspaper.
He said ministers consumed large amounts of power and had floodlit gardens.
In contrast, a consumer using 91 units will have to pay 2,226 rupees from this month. It is not known how much minister will now pay for power.
Arbitrary
In Sri Lanka energy prices are not cost based but rulers adjust prices on an ad hoc basis usually after driving the country into balance of payments crises after taking bank credit to subsidize energy.
Samaraweera himself in 2004 helped scrap a monthly fuel price formula for petrol and diesel and gave the pricing power back to rulers, supporting claims by Janatha Vimukthi Peramuna, an opposition Marxist party, that the formula was 'plug'.
In 2004 after the formula was scrapped the rupee fell from mid 1990s to 105 to the US dollar as money was printed to subsidize oil, until a tsunami killed private credit growth and foreign aid helped ease state finances, helping strengthen the rupee.
At the moment without a transparent price formula, petrol is highly overpriced selling at over 50 percent of the import cost.
Though oil prices are now falling along with other commodities, rulers are able to keep domestic prices high without a transparent price formula to free citizens from arbitrary pricing.
There is also a well-designed mechanism through the Public Utilities Commission, the power regulator, to adjust power prices on a six monthly basis.
But rulers in 2011 sidelined the regulator and kept prices fixed in the face of low rainfall and rising oil prices and again drove the country into a balance of payments crisis.
This time the rupee fell from 110 to 134 to the US dollar until fuel and power prices were raised in February 2012 as part of measures to stabilize the rupee by ending money printing and credit growth. The rupee has since recovered to 126 to the US dollar.
Not Independent
Samaraweera charged that the power regulator was not independent and the April 2013 hike was decided by the Treasury before hand, which it had approved almost unchanged.
Harsha de Silva, another opposition legislator also slammed the regulatorfor meeting the President and other ministers shortly before the hike said it the agency had caved into pressure and not done its job.
He said the build-up of credit had to be reduced but the increase to consumers who used below 48 units would increase electricity poverty.
The regulator also set set conditions for more transparency at the CEB, which many respondents at the hearing called for, but which Samaraweera dismissed as 'eye wash.'
The regulator also trimmed 40 billion rupees in expenses filed by the CEB and allowed only 45 billion rupees in extra money to be recovered, a point which had not been clearly understood by consumers.
The inability of the power regulator make even small adjustments in the tariff which is now above cost for many households may have dented public confidence in the pricing procedure, analysts fear.
More than 90 respondents from places as far as Jaffna came to a public hearing and asked for the increase to be moderated especially for low users.
Reasonable
Unlike the elected ruling class who oppose all tariff increases to deceive citizens and ultimately depreciate the currency which pushes the prices of everything including food, many respondents said they understood the need for an increase but it was too large.
Observers say administrations in power resort to ad hoc large increases partly because of opposition from the rest of the ruling class even to reasonable increases.
The more economic literate at the public hearing said they understood that even subsidies given by the Treasury were ultimately paid by them and wanted the CEB to make plants efficient, reduce waste and be more transparent.
A statement by one respondent that he was opposed to even a 5 cents hike was greeted with laughter by the audience at the public hearing, indicating that no one expected tariffs to be unchanged.
But smaller users who had received highly subsidized power for years had been slapped with increases between 40 to120 percent.
Many were also concerned about the steep rise in the hike and the change from slab to block based tariffs that generates bills in excess of 1,000 rupees when a threshold is exceeded.
At 90 units, a user will pay 1,161 rupees or about 12.90 rupees a unit when a fixed fee is counted, which is still below an average cost of generation projected at a little over 20 rupees.
But at 91 units a domestic user will pay 2,226 rupees or and average 24.4 rupees a unit with a base charge, which was above the average cost of generation calculated by regulator.
A top industry analyst however had estimated that the cost of actual delivery to a home user was 27 rupees, the same price charged in Singapore, which has a system which is almost completely thermal.
In Singapore, prices went up 1.5 percent in April, after falling in the previous quarter compared to the 40 to 120 percent rises seen in Sri Lanka.
A tariff methodology devised in 2010 expected cost-based tariffs to be reached in stages with six monthly adjustments, not through shock changes, which undermine public confidence in the pricing system.
Update II
http://www.lankabusinessonline.com/news/Sri_Lanka_rulers_only_paid_Rs2000_for_power:_former_minister/1800613866
"I am aware of the situation, as I myself paid only 2000 rupees when I was a minister," he was quoted as saying in Sri Lanka's Daily Mirror newspaper.
He said ministers consumed large amounts of power and had floodlit gardens.
In contrast, a consumer using 91 units will have to pay 2,226 rupees from this month. It is not known how much minister will now pay for power.
Arbitrary
In Sri Lanka energy prices are not cost based but rulers adjust prices on an ad hoc basis usually after driving the country into balance of payments crises after taking bank credit to subsidize energy.
Samaraweera himself in 2004 helped scrap a monthly fuel price formula for petrol and diesel and gave the pricing power back to rulers, supporting claims by Janatha Vimukthi Peramuna, an opposition Marxist party, that the formula was 'plug'.
In 2004 after the formula was scrapped the rupee fell from mid 1990s to 105 to the US dollar as money was printed to subsidize oil, until a tsunami killed private credit growth and foreign aid helped ease state finances, helping strengthen the rupee.
At the moment without a transparent price formula, petrol is highly overpriced selling at over 50 percent of the import cost.
Though oil prices are now falling along with other commodities, rulers are able to keep domestic prices high without a transparent price formula to free citizens from arbitrary pricing.
There is also a well-designed mechanism through the Public Utilities Commission, the power regulator, to adjust power prices on a six monthly basis.
But rulers in 2011 sidelined the regulator and kept prices fixed in the face of low rainfall and rising oil prices and again drove the country into a balance of payments crisis.
This time the rupee fell from 110 to 134 to the US dollar until fuel and power prices were raised in February 2012 as part of measures to stabilize the rupee by ending money printing and credit growth. The rupee has since recovered to 126 to the US dollar.
Not Independent
Samaraweera charged that the power regulator was not independent and the April 2013 hike was decided by the Treasury before hand, which it had approved almost unchanged.
Harsha de Silva, another opposition legislator also slammed the regulatorfor meeting the President and other ministers shortly before the hike said it the agency had caved into pressure and not done its job.
He said the build-up of credit had to be reduced but the increase to consumers who used below 48 units would increase electricity poverty.
The regulator also set set conditions for more transparency at the CEB, which many respondents at the hearing called for, but which Samaraweera dismissed as 'eye wash.'
The regulator also trimmed 40 billion rupees in expenses filed by the CEB and allowed only 45 billion rupees in extra money to be recovered, a point which had not been clearly understood by consumers.
The inability of the power regulator make even small adjustments in the tariff which is now above cost for many households may have dented public confidence in the pricing procedure, analysts fear.
More than 90 respondents from places as far as Jaffna came to a public hearing and asked for the increase to be moderated especially for low users.
Reasonable
Unlike the elected ruling class who oppose all tariff increases to deceive citizens and ultimately depreciate the currency which pushes the prices of everything including food, many respondents said they understood the need for an increase but it was too large.
Observers say administrations in power resort to ad hoc large increases partly because of opposition from the rest of the ruling class even to reasonable increases.
The more economic literate at the public hearing said they understood that even subsidies given by the Treasury were ultimately paid by them and wanted the CEB to make plants efficient, reduce waste and be more transparent.
A statement by one respondent that he was opposed to even a 5 cents hike was greeted with laughter by the audience at the public hearing, indicating that no one expected tariffs to be unchanged.
But smaller users who had received highly subsidized power for years had been slapped with increases between 40 to120 percent.
Many were also concerned about the steep rise in the hike and the change from slab to block based tariffs that generates bills in excess of 1,000 rupees when a threshold is exceeded.
At 90 units, a user will pay 1,161 rupees or about 12.90 rupees a unit when a fixed fee is counted, which is still below an average cost of generation projected at a little over 20 rupees.
But at 91 units a domestic user will pay 2,226 rupees or and average 24.4 rupees a unit with a base charge, which was above the average cost of generation calculated by regulator.
A top industry analyst however had estimated that the cost of actual delivery to a home user was 27 rupees, the same price charged in Singapore, which has a system which is almost completely thermal.
In Singapore, prices went up 1.5 percent in April, after falling in the previous quarter compared to the 40 to 120 percent rises seen in Sri Lanka.
A tariff methodology devised in 2010 expected cost-based tariffs to be reached in stages with six monthly adjustments, not through shock changes, which undermine public confidence in the pricing system.
Update II
http://www.lankabusinessonline.com/news/Sri_Lanka_rulers_only_paid_Rs2000_for_power:_former_minister/1800613866
