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Electricity – Impact of Tariff

The Public Utilities Commission of Sri Lanka (PUCSL) is established under the provisions of the Public Utilities Commission of Sri Lanka Act No. 35 of 2002, to regulate the physical infrastructure sectors. It was be empowered to execute regulation only when the individual industry legislations are enacted and made effective. At present, the electricity, water service and petroleum industries are listed in the PUCSL Act.

The mission statement of PUCSL is to regulate all the utilities within the purview of the Public Utilities Commission of Sri Lanka, to ensure safe, reliable and reasonably priced infrastructure services for existing as well as future consumers in the most equitable and sustainable manner.

The administration of the provisions of the Sri Lanka Electricity Act, No. 20 of 2009 as amended vests with the PUCSL. The Electricity Act states the functions of the PUCSL in detail, and includes specifically advising the Government on all matters concerning the generation, transmission, distribution, supply and use of electricity in Sri Lanka. In addition National Energy Policy & Strategies Of Sri Lanka of 2008 recognizes the role of PUCSL in regulating the energy sector, including electricity and petroleum sub-sectors, to ensure effective implementation of the pricing policy.

As part of discharging its functions, on June 2015 PUCSL called for Expressions of Interest for individuals or firms to “Study on Impact of Tariffs and Formulation of Advice to the Government on the Use of Electricity in Sri Lanka”. A Request for Proposal was then issued in January 2016 to the short-listed firms. LIRNEasia (i.e. the “consultant”) was selected through this process to carry out a study to update the status regarding the use of electricity in Sri Lanka in relation to planned policy outputs and outcomes and also to identify target groups of consumers that deserve special consideration owing to social needs or commercial realities.

The specific objectives of the projects are three fold:

  1. Update the status regarding the use of electricity in Sri Lanka in relation to planned policy outputs and outcomes
  2. Assess the impact of electricity tariffs (both tariff levels and tariff adjustments over the period 2011-2015) in delivering such outputs and outcomes; an
  3. Advise the Government on the use of electricity in Sri Lanka in relation to general policy guidelines.

The client, PUCSL, then defines a series of activities that need to be completed in order to achieve the above-mentioned objectives:

  • Establish a framework of indicators to assess the progress against policy outputs and outcomes in regard to the use of electricity, specifically with a view to reviewing progress between 2011 -2015 and formulate targets for 2020;
  • Assess the impact of electricity tariff in delivering on planned policy outputs and outcomes over the period 2011-2015, taking into consideration,
    • whether basic electricity requirements of the population (consumer category and sub-category wise as appropriate) have been adequately and continually met, and
      • if not, to what extent they have not been met, why they have not been met as well as the impact of the tariffs (connection and supply) on the same, and
      • if yes, to what extent tariff levels have enabled them to enhance their living standards and provided opportunities for gainful economic activity.
    • the impact of tariff on the national economy, including
      • in relation to other relevant legislation and policies relating to national strategies and targets for sustainable economic growth and examine the impact on development policy outcomes;
      • in relation to the nature and pattern of economic activity of households and industries.
    • Project the desired 2020 energy scenario to address gaps and shortfalls in the     achievement of planned policy outputs and outcomes and the desired electricity-use levels (demand) and the required system expansion (supply);
    • Formulate a tariff/pricing policy in respect of the supply of electricity to achieve desired electricity use levels;
    • Identify “disadvantaged groups of consumers” by specifying the threshold level of individual household income for the provision of life-line tariffs;
    • Formulate a set of recommendations for consideration and action by the Commission to advise the Government on the use of electricity.; and
    • In carrying out the analytical tasks in respect of item (c), (d), (e) and (f) above, take into account of updated National Energy Policy & Strategies of Sri Lanka (2015-2020), or if not final at that stage of the study, the possible directions of the review.

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