Retail Tariff Proposal for 2013

Ceylon Electricity Board

Distribution Licensee under the Licenses
EL-D-09-003
EL-D-09-004
EL-D-09-005
EL-D-09-006




March 2013

Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
Page | 3

Retail Tariff Proposal for 2013
1. BACKGROUND
1.1. This submission is made by Ceylon Electricity Board as the Distribution Licensees under
the Licenses EL-D-09-003, EL-D-09-004, EL-D-09-005 and EL-D-09-006 (hereinafter
collectively referred to as the CEB Distribution Licensees) and under the provisions of Sri
Lanka Electricity Act, No 20 of 2009 Section 30(2) (a) and Clause 3.2.1 of the Tariff
Methodology published by the Public Utilities Commission of Sri Lanka (PUCSL) of
December 2011.
1.2. Ceylon Electricity Board Act, No 17 of 1969 Section 38 requires as follows:
It shall be the duty of the Board so to exercise its powers and perform its functions under this
Act as to secure that the total revenues of the Board are sufficient to meet its total outgoings
properly chargeable to revenue account including depreciation and interest on capital, and to
meet a reasonable proportion of the cost of the development of the services of the Board.
The Transmission Licensee and CEB Distribution Licensees have taken this statutory
requirement in estimating their respective revenue requirements.
1.3. Clause 13 of General Policy Guidelines on the Electricity Industry for the Public Utilities
Commission of Sri Lanka, under the caption of Electricity Tariff states: A tariff policy shall
be formulated by the PUCSL with the objective of supplying electricity to all categories of
consumers at reasonable prices while ensuring financial viability of the sector. Furthermore,
Clause 14 of the same Guidelines states that: Average electricity price to each category of
consumers will be gradually made cost reflective. A conducive environment will be created to
fully utilize the Demand Side Management (DSM) opportunities arising from this change.
CEB Distribution Licensees were therefore generally guided by the aforesaid Clauses in
making this submission.
1.4. The CEB Distribution Licensees were also guided by the Transition Arrangements for
Electricity Customer Tariffs in Sri Lanka: An Interim Assessment of Gross Subsidy
requirements over 2011-2015
1
prepared by the PUCSL in June 2010 and furnished to the
Ministry of Power & Energy, which has subsequently been made available to the Ceylon
Electricity Board.
1.5. In addition to the above, Clause3.2.1 of the said Tariff Methodology states: Each
Distribution and Supply Licensee shall make a tariff filing to the Commission based on the
methodology established in this section before the beginning of the Tariff Period. Additionally,
once a year after the initial filing, during the Tariff Period, each Distribution and Supply
Licensee shall make a simplified filing for the purpose of adjusting the tariff based on the
SLCPI.
The CEB Distribution Licensees had several discussions with the Ministry of Finance in
presence of Ceylon Petroleum Corporation and the State Banks among other stakeholders
on 10
th
and 11
th
January 2013
2
to assess the impact on the Ceylon Electricity Board, in its
capacity of generation, transmission and distribution licensees, resulting from the proposed
increases of fuel prices
3
. It was concluded that the total budget deficit of Ceylon Electricity
Board for 2013 should be limited to Rs. 28 Billion, thus enabling it to meet its liabilities
towards the fuel suppliers and independent power producers. It was also noted that
independent power producers had themselves become liable to Ceylon Petroleum

1
Hereinafter referred to as Transition Arrangements for 2011-2015
2
Annex 1: Letter dated 18
th
January 2013 by Secretary, M/Finance
3
Annex 2: Letter dated 28
th
December 2012 by Secretary, M/P&E
Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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Corporation due to failure of timely settlement of their power purchase invoices by Ceylon
Electricity Board. It was due to inadequate revenue generation by Distribution Licensees at
least to meet the Transmission Licensees direct generation costs.
1.6. As such, this submission is made to realize total annual revenue of Rs. 222.31 billion to CEB
Distribution Licensees and the Transmission Licensee from the proposed tariff, thus
making Ceylon Electricity Boards sales revenue deficit for year 2013 to Rs. 33.97 billion.
The budget as approved by CEB on 7
th
January 2013 (on the basis of fuel prices proposed
from 1
st
April 2013 in December 2013) is annexed
4
.
1.7. Since the proposed Retail tariff is proposed come in to operation from 1st April 2013 and
therefore, an additional allowance of Rs. 12.21 billion has been made in compensation for
the period between January-February2013.
1.8. Through other revenues and cost reduction measures, the budget deficit of CEB would be
limited to Rs. 41.68 billion.

2. REVENUE REQUIREMENTS OF CEB LICENSEES
2.1 It has to be noted that the Licensees do not intend to recover the whole of the proposed
revenue requirement for the year 2013 by Retail Tariff. As agreed in Annex 1, the budget
deficit for the year 2013 will be subject to a maximum of Rs. 28 billion, while the rest of the
deficit and the present liabilities towards fuel suppliers and IPPs are proposed to be
recovered over the period 2014-2017.
2.2 The total capacity and energy cost of the Transmission Licensee, according to the amended
Bulk Supply Tariff Submission as annexed
5
is (for the period January 2013 to June 2013) Rs.
100.606 billion. Taking into account the anticipated Generation of 6,173 GWh in the same
period, the average cost of Generation alone is Rs. 16.30 per kWh. The assumptions made
in these estimates are listed under Clause 4 below.
2.3 The Transmission Licensee had also worked out the equivalent figures for July to December
2013 as well. The total capacity and energy cost of the Transmission Licensee, according to
the amended Bulk Supply Tariff Submission as annexed
6
is (for the period July 2013 to
December 2013) Rs. 108.864 billion. Taking into account the anticipated Generation of
6,403 GWh in the same period, the average cost of Generation alone is Rs. 17.00 per kWh.
The assumptions made in these estimates are the same as for item 2.2 above.
2.4 The Distribution Licensees used the approved Revenue Caps
7
applicable to January-June
2013 under the provisions of Clauses 2.3, 2.4, 3.1 and 3.2 of the said Tariff Methodology.
Adjustments had been made for January to December 2013 on the basis of the exchange
rate and SLCPI as listed under Clause 4 below.
2.5 A summary the Costs of the Transmission Licensee and the CEB Distribution Licensees for
2013 as determined on the aforesaid basis is shown below.


4
Annex 3: The CEB Budget as approved on 7
th
January 2013 (on the basis of fuel prices proposed from 1
st

April 2013)
5
Annex 4: PUCSL Submission Jan-June 2013 Addendum 2. XLXS
6
Annex 5: PUCSL Submission July-Dec 2013 Addendum 2. XLXS
7
Annex 6: PUCSL determination dated15
th
February 2013 for Revenue Caps of Transmission and
Distribution Licensees for 2013
Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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Year 2013 Amount Rs. Million
Energy Cost 170,064
Capacity Cost 39,402
Allowed Revenues
DL1 9,132
DL2 9,300
DL3 5,636
DL4 4,502
TL 8,611
Short term debt Included above
2.6 CEB Transmission Licensee estimated the Revenue secured form sales to Lanka Electricity
Company PVT Limited (hereinafter referred to as DL5) is as follows:

2013 Amount Rs. Million
Total Revenue to DL5 on new tariff 28,851
Approved Revenue Cap of DL5 2,914
Total Revenue to Transmission
Licensee from DL5
25,939

2.7 The average cost of supply on the basis of CEB Budget at the point of supply under this
proposal is Rs. 23.30 per kWh.

3. SALIENT FEATURES OF THE PROPOSED TARIFF STRUCTURES

3.1 Domestic and Religious Purpose use
The sub-categories depending on consumption present in Domestic and Religious Tariff
has been restructured, thus encouraging efficient use of energy. The consumers are now
able to achieve substantial financial benefits through efficient use of electricity.
Approximately cost-reflective average rates are made available to domestic
consumption approx. between 90-120 kWh per month.
Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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While making these proposals, CEB Distribution Licensees had been guided by the
analysis of domestic consumer billing data during the period March-December 2012,
8

when the Ministry of Power and Energy launched Energy Conservation Drive through all
Distribution Licensees.
It has been observed in Annex 7 that the domestic consumers over 60 kWh had an
increased level of consumption during this period, indicating that they are willing to pay
for the additional comforts. This has also been confirmed by the Study on Requirements
of Prospective Electricity Consumers and Fuel (electricity) Poverty & Affordability
Conducted by SPARC, University of Colombo for Public Utilities Commission of Sri
Lanka,
9
where it had been found that:
On average, a household (in the sample) spends 3.51% of household income on
electricity. This is smaller than the percentage of income spent on foods, education and
transport and closely comparable with the share on telephone.
In responding to questions on electricity affordability from non-electrified households
nearly 5% of households have expressed that they might not be able to pay the
electricity bill regularly and on average all non-electrified households are willing to
pay Rs. 320 per month on electricity.
Two new domestic tariff sub-categories have been introduced for 0-210 and 0-300
kWh/month. Those consumers will have above-the-cost rates, thus enticing such
categories for efficient use. Their monthly consumption levels provide flexibility for
conservation.
The proposed revision for Religious tariff only compensates the changes in total costs
resulting from the new consumption categorization. However, the Religious Tariff still
remains below cost, despite the rates were re-adjusted to result in the same total
monthly cost to the low-end consumers in that category.

3.2 General Purpose use
General Purpose consumers who are at supplied at Low Voltage , those > 42 kVA
demand (GP-2) and those who are metered at High Voltage end (GP-3) are now afforded
with Time-of Use tariff, which was available to similar consumers in Hotel and Industrial
Categories. This will enable them to plan their electricity consuming activities so as to
minimize their overall costs.
In addressing the needs of small-scale General Purpose consumers, the General Purpose
use rates were kept unchanged for use below and at 210 kWh/month. A new sub-
category was introduced for General Purpose consumers from 211 kWh/month.
The monthly Fixed Charges of consumers who are at supplied at Low Voltage and > 42
kVA demand (GP-2) and those who are metered at High Voltage end (GP-3) were
retained un-changed, while marginal increases were recommended for other Low
Voltage consumers in pursuit of cost-reflectivity criterion.
The Peak time rates have been increased to reach approximately the level of average
cost of supply. This will encourage such consumers to avoid using the costly peak
energy. The Licensees notice that the present peak rates are neither reflective of the cost

8
Annex 7:Results from the Energy Conservation Drive in April-November 2012
9
http://www.pucsl.gov.lk/english/wp-
content/themes/pucsl/pdfs/fuel_poverty_affordability_april_2011.pdf
Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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of supply nor provided sufficient incentive for consumers to move away from using
expensive grid power during such hours.
The Fuel Adjustment Charge rates presently applicable are proposed to be retained and
at the same rates, due to the proposed increases in fuel prices.

3.3 Industrial Purpose use
It is observed that the Industrial Consumers are presently supplied at a rate well below
the cost, and therefore, bringing them to the cost-reflectivity in this revision itself would
not be prudent. Therefore, the revision proposed is only in pursuit of gradual cost-
reflectivity for that Category by 2015.
The Fuel Adjustment Charge rates presently applicable are proposed to be retained and
at the same rates, due to the proposed increases in fuel prices.
The Peak time rates have been increased to reach approximately the level of average
cost of supply. This will encourage such consumers to avoid using the costly peak
energy. The Licensees notice that the present peak rates are neither reflective of the cost
of supply nor provided sufficient incentive for consumers to move away from using
expensive grid power during such hours.
3.4 Hotel Purpose use
Monthly Fixed Charges of consumers who are at supplied at Low Voltage (H-1) and > 42
kVA demand (H-2) and those who are metered at High Voltage end (H-3) were retained
or marginally increased to reach at the cost-reflectivity criterion.
The Fuel Adjustment Charge rates presently applicable are proposed to be retained and
at the same rates, due to the proposed increases in fuel prices.
The Peak time rates have been increased to reach approximately the level of average
cost of supply. This will encourage such consumers to avoid using the costly peak
energy. The Licensees notice that the present peak rates are neither reflective of the cost
of supply nor provided sufficient incentive for consumers to move away from using
expensive grid power during such hours.

3.5 Government Educational Institutions and Hospitals Purpose use
The tariff formulation as published on 15
th
February 2012 by the PUCSL for Government
Educational Institutions and Hospitals has not been proposed for revision, considering
the non-profit nature of their operations and the social benefits afforded by these
institutions.
The Fuel Adjustment Charge rates presently applicable are proposed to be retained and
at the same rates, due to the proposed increases in fuel prices.

4. ASSUMPTIONS MADE IN REVENUE CALCULATION FOR 2013
4.1 The Energy Cost and Capacity Cost components were calculated based on the assumption of
63% dry scenario in the energy dispatch forecast for 2013. The detailed calculation of Bulk
Supply Tariff for January-June 2013, including the above costs were submitted to PUCSL by
Ceylon Electricity Board, as the statutory Transmission Licensee, on 29
th
October 2012 and
the Addendum thereto submitted on 2
nd
January 2013. With the favorable year-end storage
Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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of 2012 these assumptions were revisited and a further addendum is submitted herewith
10

for January-June 2013.The summary of assumptions made are as follows:

a. Anticipated net generation for the year 2013 is 12,576 GWh
b. For Puttalam Coal Power Plant availability of 85% distributed over the year
c. Fuel Prices
Diesel = 115 Rs./liter, Low Sulfur Furnace Oil = 100 Rs./liter,
Naphtha = 90 Rs./liter, Furnace Oil = 90 Rs./ liter, Heavy Fuel = 90 Rs./ liter
d. GT7 to be made available by 1
st
February 2013 after Maintenance
e. 63% dry inflow
11
: from METRO for 50-Yr Statistical inflow data including Upper
Kotmale and considering planned rehabilitation and maintenance of hydro power
plants
f. Starting storage for 2013 = 1000 GWh
g. The maximum generation using Naphtha = 550GWh
h. NCRE generation = 700 GWh
i. Jaffna Peninsula to be connected to the main system via 33kV network
j. Parameters used for indexation
LKR/USD CPI PPIU
December 2010 110.30 147.2 157.6
December 2011 112.97 154.4 161.2
December 2012 131.50 168.6 163.6

4.2 The definitions of the existing tariff categories will remain as defined by the Clause 9 of the
Decision Document on Electricity Tariff published by PUCSL in January 2011, and
subsequently amended by the Notice dated 15
th
February 2012.



10
Annex 4; Annex 5
11
63% Dry inflow means at a confidence level of 63% the inflow would be available in each month to
achieve a total inflow of 3,800 GWh in year 2013.
Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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5. RETAIL TARIFF PROPOSAL
5.1 Domestic
Consumption
(Block)
Existing Rate Proposed
Existing Proposed Unit
Charge
Rs/kWh
Fixed
Charge
Rs/month
FAC
%
Unit Charge
Rs/kWh
Fixed
Charge
Rs/month
FAC
%
0-30 0-30 3.00 30.00 25% 5.00 30.00 25%
31-60 0-60 4.70 60.00 35% 6.00 60.00 35%
61-90 0-90 7.50 90.00 40% 8.50 90.00 40%
91-120 0-120 21.00 315.00 40% 15.00 315.00 40%
121-180 0-180 24.00 315.00 40% 20.00 315.00 40%
>180 0-210 36.00 315.00 40% 24.00 315.00 40%
0-300 26.00 315.00 40%
0- >300 32.00 315.00 40%
Revenue realized (Rs. Billion) 40.58 69.92
12


5.2 Religious
Consumption (Block) Existing Rate Proposed
Existing Proposed Unit
Charge
Rs/kWh
Fixed
Charge
Rs/month
FAC
%
Unit
Charge
Rs/kWh
Fixed
Charge
Rs/month
FAC
%
0-30 0-30 1.90 30.00 0% 1.90 30.00 0%
31-90 0-90 2.80 60.00 0% 2.50 60.00 0%
91-120 0-120 6.75 180.00 0% 3.50 180.00 0%
121-180 0-180 7.50 180.00 0% 5.00 180.00 0%
>180 0- >180 9.40 240.00 0% 7.00 240.00 0%
Revenue realized (Rs. Billion) 0.386 0.372

12
Annex 8
Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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Non-Domestic
Category
Existing Proposed
Unit
Charge
Rs/kW
h
Fixed
Charge
Rs/mont
h
kVA
Charge
Rs/kVA/
month
FAC
%
Unit
Charge
Rs/kWh
Fixed
Charge
Rs/mont
h
kVA
Charge
Rs/kVA/
month
FAC
%
General Purpose
GP1-1< 210 kWh/m 19.50 240
25%
19.50 240
25%
GP1-2> 210 kWh/m 21.50 240
GP2 3000 850 3000 1100
Peak 19.40 25.00
Off-Peak 19.40 14.50
Day 19.40 20.50
GP3 3000 750 3000 1000
Peak 19.10 24.00
Off-Peak 19.10 13.50
Day 19.10
19.50

Government Educational Institutions and Hospitals
GV1 14.65 240 0%
or
25%
13

14.65 600
0% or
25%
GV2 14.55 3000 850 14.55 3000 1100
GV3 14.35 3000 750 14.35
3000 1000
Hotel Purpose
H1 19.50 240
15%
22.00 600
15%

H2 3000 850 3000 1100
Peak 16.90 24.00
Off-Peak 9.10 10.00
Day 13.00 15.00
H3 3000 750 3000 1000
Peak 16.4 23.00
Off-Peak 8.85 9.00
Day 12.60 14.00
Industrial Purpose
IP1 10.50 240
15%
12.50 600
15%

IP2 3000 850 3000 1100
Peak 13.60 21.00
Off-Peak 7.35 7.00
Day 10.45 11.30
IP3 3000 750 3000 1000
Peak 13.40 24.00
Off-Peak 7.15 6.00
Day 10.25 10.50
Revenue realized
(Rs. Billion)
113.26 126.08


13
FAC is determined depending on the purpose of use.
Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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6. REVENUE ESTIMATE SUMMARY
Domestic Revenue
Rs. Billion 69.92
Religious Revenue Rs. Billion 0.37
Non-Domestic Rs. Billion 126.08
Total Revenue from CEB DL1-4 Rs. Billion 196.37
Revenue from Sales to DL5 Rs. Billion 25.94
Estimated Total Revenue realized from sales 2013 Rs. Billion 222.31
Other Revenues Rs. Billion 4.50
CEB Revenue Requirement by approved Budget
2013
Rs. Billion 256.28
CEB new revenue not realized January-March 2013
(Estimated)
Rs. Billion -12.21
Deficit for year 2013 Rs. Billion 41.68

7. APPROVAL REQUIRED FROM PUCSL
7.1 It has to be noted that the Licensees do not intend to recover the whole of the proposed
revenue requirement for the year 2013 by Retail Tariff.
7.2 Therefore, Ceylon Electricity Board seeks approval of the PUCSL for the Retail Tariff
Proposal made under Clause 5 above, subject to fulfillment of the requirements of Section
30(4) of the Sri Lanka Electricity Act.
7.3 Ceylon Electricity Board seeks approval of the PUCSL to make this proposal operative with
effect from 1
st
April 2013.



General Manager
Ceylon Electricity Board
Authorized Person under the Licenses EL-D-09-003, EL-D-09-004, EL-D-09-005, EL-D-09-006 and EL-T-09-002



Retail Tariff Proposal for 2013
By Distribution Licensee under the Licenses EL-D-09-003;EL-D-09-004;EL-D-09-005 and EL-D-09-006
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Annexes:
1. Letter dated 18
th
January 2013 by Secretary, M/Finance
2. Letter dated 28
th
December 2012 by Secretary, M/P&E
3. The CEB Budget as approved on 7
th
January 2013 (on the basis of fuel prices proposed
from 1
st
April 2013)
4. PUCSL Submission Jan-June 2013 Addendum 2. XLXS (by CD Copy)
5. PUCSL Submission July-Dec 2013 Addendum 2. XLXS (by CD Copy)
6. PUCSL determination dated15
th
February 2013 for Revenue Caps of Transmission and
Distribution Licensees for 2013
7. Results from the Energy Conservation Drive in April-November 2012
8. Workbook CEB Revenue 2013 March7.xlsx calculating the proposed revenue for 2013
(by CD Copy)