LIRNEasia’s current cycle of research focuses on how mobile platforms can help improve customer relationship management in utilities. I have been contributing to the current debate on rationalizing the electricity tariffs in Sri Lanka based on the work Partha Mukhopadhyay and I did in relation to the recently concluded SAFIR core course and laying the foundation for disseminating the results of the research project when completed. Many of my interventions have been over electronic media, but here is a summary piece in LBO that is also being published in Sinhala in Ravaya next week.
Tariff design must contribute to bring down peak demand by around five percent. This is a policy objective pursued in many countries, especially in light of climate-change concerns. In our case, it is a necessity because that last five percent is busting the budgets of the government, the CEB, the CPC and of each household in the country.
If something is really important, one does not take half-hearted measures. One uses all the tools at one’s disposal. The most powerful tool is the price signal. The new tariff design that increases the unit price of electricity depending on level of consumption (e.g., a household with consumption below 90 units a month will pay LKR 8.50 per unit for all units, while a household with a consumption of 91 units will pay LKR 15 per unit, again for all units consumed), creates powerful incentives to reduce consumption. This must be supplemented by targeted messages reminding people to shift consumption from peak hours.
Demand side management can succeed if the price signals built into the new tariff structure are supplemented by incentives to high users. This will require additional investment in smartmeters, ICT based feedback mechanisms are so on.Ideally, investment in smart meters for a specified number of high-volume users could be condition of the tariff approval.
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