Hon. Kumara Jayakody - Minister of Energy

¶ 01 Hon. Speaker, the answer is as follows.

¶ 02 1. For 2024, the Ceylon Electricity Board (CEB) reported total revenue of Rs. 615,019 million and total expenditure of Rs. 470,624 million. After adjusting for non-cash items including profit from sale of shares and unrealized exchange gains, the operating profit for the year was Rs. 106,601 million (Annex 01).

¶ 03 As shown in Annex 02, this profit was primarily used to service CEB debt. Accordingly, the CEB settled a significant portion of long- and short-term debt, including bank interest of Rs. 40,258 million, and Rs. 56,006 million of principal payments on trade and other debts. In total, Rs. 96,264 million from profits was used for debt servicing.

¶ 04 Detailed breakdown of the total expenditure of Rs. 470,624 million is in Annex 03. Of total expenditure, administration costs were 3.09 per cent and financial costs 4.63 per cent (Rs. 14,557.35 million and Rs. 21,710.84 million respectively).

¶ 05 Tariff revisions are determined by the Public Utilities Commission of Sri Lanka (PUCSL), an independent entity, focusing on overall costs to pass on benefits of lower tariffs to consumers. The Government does not interfere.

¶ 06 Under the PUCSL-approved Long-Term Generation Expansion Plan 2025-2044, planned non-conventional renewable energy (NCRE) capacity is 1,848 MW, while as of June 2025 installed NCRE capacity is 2,695 MW, exceeding the plan. Additionally, contracted ground-mounted solar capacity for 2026 and 2027 is 237 MW and 426 MW respectively, both exceeding planned targets of 220 MW and 250 MW (Annex 04). This demonstrates that integration of NCRE has been encouraged.

¶ 07 NCRE tariffs are determined under standardized power purchase agreements on a cost-plus-margin basis, alongside competitive bidding. Due to technology shifts, capital cost structures, intermittency, availability, and fuel costs, comparing thermal generation prices directly with solar/wind is not equitable, though globally thermal costs are higher.

¶ 08 A technical committee appointed by the Ministry of Energy, with representation from the Ministry, CEB, Lanka Electricity Company (Pvt) Ltd, SLSEA, PUCSL and the Central Bank, calculates tariffs quarterly using an agreed formula, considering: - Capital cost (CIF value of panels/inverters, exchange rate, taxes) - Plant factor - Annual interest rates on debt - O&M costs (20-year escalation) - Return on equity Levelized Cost of Energy is computed for a 20-year term, and tariffs implemented upon CEB Board approval.

¶ 09 Battery Energy Storage Systems (BESS) were initially introduced on a 10-year operating cycle; in the latest tender this was extended to 15 years. Pricing based on a 10-year operation does not disadvantage consumers or storage providers. Considering current technology and 2.5% annual degradation, terms have now been extended to 15 years. The Ministry of Finance has issued the relevant Gazette. Further, the 46% import duty on batteries imposed up to 15 October has been fully waived for BESS of 1 MW and above under the bonded warehouse facility.

¶ 10 In addition to the above debt servicing from 2024 profits, PUCSL effected a clawback of Rs. 62,956 million in the January and June 2025 tariff revisions, resulting in a 20.08% reduction in consumer tariffs from 18 January 2025. While this provided temporary consumer relief, it adversely impacted CEB’s 2025 financials. Consequently, CEB recorded an operating loss of Rs. 18,474 million in the early months of 2025. To address this, PUCSL approved a 15% tariff increase effective 12 June 2025. CEB has submitted a further tariff proposal for the period July–December 2025, seeking a 6.8% increase; after public consultation, PUCSL approved maintaining the prevailing tariff without amendment for that period.

¶ 11 Annexes containing Tables 01–04 were tabled.