CEB deals and misdeeds

Last week, The Island reported exclusively on CEB’s surprise move to purchase emergency power in 2012 and the questionable manner in which CEB had extended the Aggreko contract in Jaffna for another year after calling for tenders.

The Acting Chairman of CEB Pasan Gunasena responded to our articles of December 22 and 23, 2011 confirming that CEB was planning to purchase 100 MW of emergency power. Mr. Gunasena, in his reply we published on December 26, 2011, had not denied the contents of our reports.

He had taken the position that the decision to purchase emergency power was recommended by CEB General Manager after a scientific study, and had cited several reasons in support of this decision. Nothing in Mr. Gunasena’s reply contradicts our position that CEB possessed adequate generation capacity to meet the country’s electricity demand in 2012, even under adverse hydro conditions.

Indeed, the present Minister of Power and Energy Patali Champika Ranawaka has been assuring the public repeatedly that CEB did have adequate thermal capacity to supply country’s demand for electricity if there is a monsoon failure. We find it ironic that the Acting Chairman of CEB has chosen to dispute this position taken consistently by his Minister.

Before responding to Mr. Gunasena’s claims, we would like to offer the following explanation as to how we arrived at our conclusion.

The National Grid is served by thermal and hydro generation plants owned and operated by CEB as well as those belonging to independent power producers (IPPs). Naturally, in a drought situation, CEB makes every effort to preserve the water in its reservoirs as long as possible by minimizing hydro power generation. However, hydro generation cannot be totally eliminated since a minimum amount of hydro capacity has to be maintained at different times of the day for technical reasons.

Under dry conditions, major part of daily electricity demand is met by thermal power, both CEB and privately owned, and the balance is supplied by hydro. The actual amounts of hydro and thermal power to be used is computed monthly and updated daily, based on best available data (such as cost of generation, plant availability, reservoir capacity, expected rainfall, agreed water releases from different reservoirs, among other things). This hydro-thermal balance is a complex process requiring sophisticated computer modeling that has been practiced by CEB for many years.


A careful examination of CEB’s published data on plant availability and reservoir storage shows that CEB does not require emergency power to meet the projected electricity demand in 2012.

As explained below, CEB-owned thermal plants at its two major stations, Kelanitissa and Sapugaskanda, have the capability to produce about 13 million units per day. (These data are taken from Generation and Reservoir Statistics published by CEB’s System Control Centre)

In addition to these plants, Lak Vijaya Coal Plant at Norochcholai can inject further six million units daily into the System. Accordingly, the thermal plants owned by CEB have the ability to generate around 13 million units of electricity daily, even If the small gas turbines are not operated.

Further, based on current CEB data, following private power plants connected to the National Grid can generate additional 16 million units daily.

As per the above statistics published by CEB’s System Control Centre for 2011, the total thermal generation (CEB-owned and IPP) capability of the System is around 29 million units per day (excluding small gas turbines). The current daily demand for electricity is around 30 million units on average. If one makes a reasonable assumption that this figure will increase to 32 million units per day in 2012, CEB’s hydro reservoirs will have to provide only about three million units per day under this scenario. However, hydro plants need to generate close to five million units per day to maintain system stability.

After allowing for possible plant breakdown (for example, unavailability of Fiat GT), there should be no serious problem in supplying daily electricity demand in 2012, even if the monsoon rains are delayed. At present, reservoirs have around 660 million units (GWh). Even if hydro generation is at 6 million units daily, there will be sufficient water for 110 days, or until end of April, assuming zero inflow. This, however, is an extreme condition, as there will be some inflows into the reservoirs even under very dry conditions.

According to CEB records, the reservoir capacity in the beginning of 2009 was 608 million units while the average daily demand in 2009 was about 27 million units. While there is an increase of about 5 million units in the daily demand between 2009 and 2012, CEB also has increased its generation capacity by more than 300 MW (which amount to daily generation of about 8 million units) after 2009, with the addition of Norochcolai Coal Plant (300 MW) and Combined Cycle operation at West Coast Plant at Kerawalapitiya (100 MW). The Upper Kotmale Hydro Plant, which was scheduled to commence operations in January 2012, should bring in additional capacity of 150 MW in 2012. The present capacity is adequate to meet CEB’s daily demand in 2012 even without Upper Kotmale becoming fully operational in the second half of 2012 (as stated by Mr. Gunasena). Indeed, CEB did not impose power cuts even when reservoir levels dropped to about 170 million units (less than 15% capacity) in May 2009. (By end-2009 the reservoir storage had increased to 950 units)

Emergency power was first introduced in 1996 by the then government as a solution for long power cuts imposed in 1996. This contract was given to Aggreko on a special approval of the Cabinet, based on a recommendation of a high powered committee. Aggreko was contracted again in 2001-2002 when power cuts were imposed again (since early 2002, CEB did not impose power cuts until last June). Aggreko was not brought in 2007 to supply power to Jaffna Peninsula as claimed by Mr. Gunasena, but it never left Sri Lanka after its first entry in 1996.

The Island reliably learns that the proposal by Minister Ranawaka to purchase 100 MW of emergency power was taken up by the Cabinet at its last meeting held before Christmas but was set aside because several ministers had objected claiming it would be an enormous burden on the Treasury. The Cabinet is expected to make its decision on this matter late this week.

A document circulated under the signature of Minister Ranawaka in January 2011 confirms the fears expressed by the Cabinet. According to this document titled "Deepado Hothi Chakbudo," CEB has been making profits until 1996. Many agree with the Minister that the emergency power purchased was the main reason for CEB’s current financial problems. Because CEB was unable to recover the cost of emergency power, as well as cost of thermal generation from CEB and IPP plants over the years, the losses continued to mount. These losses had started to reduce from 2009, mainly because of many concessions given by the Government, including servicing of long term loans, removal of customs duty on most major imports by CEB, and subsidy on fuel supplied to CEB and IPPs. According to the above document, these losses had reduced by Rs. 22,659 million from 2008 to 2009 (from Rs. 33,869 million in 2008 to Rs. 11,210 million in 2009). The losses had reduced by further Rs. 16,272 million from 2009 to 2010 allowing CEB to post an operational profit of Rs. 5,063 in 2010. However, the euphoria over "profits" was short loved as increased thermal generation in 2011 will force CEB to post substantial losses in 2011.

Mr. Gunasena has stated that the reservoir capacity at the beginning of 2012 was expected to be 800 GWh but has reduced to about 600 GWh. He does not explain why CEB was unable to achieve the expected capacity even after reservoirs were almost overflowing at the beginning of 2011 (reservoir capacity was 1,110 GWh on January 1, 2011). He also does not explain why the Upper Kotmale plant, which was scheduled to come on line in January 2012, is being delayed. It appears also that he is unaware that overloading of substations and resulting voltage drops are a reality in several part of the country. In any event, we do not understand why CEB has to purchase emergency power to solve low voltage problems caused by inadequate substation capacity.

Mr. Gunasena also presents a highly distorted picture of what actually happened in the Aggreko contracts of 2011 and 2012. Secretary, Ministry of Power and Energy called explanations from the former Chairman Vidya Amarapala because he had violated accepted Government Tender Guidelines in signig the 2011 contract. To our knowledge, Secretary has not withdrawn that letter of explanation even after Minister Ranawaka made a submission to the Cabinet in April 2011 to obtain covering approval for Mr. Amarapala’s actions. Mr. Gunasena does not explain why this approval was not sought before signing the contract in December 2010. He also does not explain why Northern Power has been allowed to operate continuously, If it has violated the power supply agreement with CEB as he claims.

The truth, however, is that tenders were called for 2012 and Aggreko was among the five bidders. However, the price offered by Aggreko was higher than its current price, and that offered by several other bidders. In any case, Aggreko’s bid had been disqualified by the Technical Evaluation Committee (TEC). The qualifying bid by another company was recommended by the TEC but the CEB Board of which Mr. Gunasena is a member took a decision to offer the contract to Aggreko anyway, at the current price (which was less than the price given in the selected bid). While this decision may have saved some money to the Government, the process lacks transparency and is a complete violation of The Tender Guidelines of the Government. The point is that when Mr. Gunasena says that Aggreko had submitted the lowest offer, he is not exactly telling the truth.

Mr. Gunasena has also forgotten to mention another important fact. When extending the Aggreko contract for another year, CEB also gave Aggreko additional 5 MW (2011 Aggreko contract signed by former Chairman Vidya Amarapala was for 15 MW and it was increased to 20 MW in the 2012 contract). Amarapala’s successor Prof. Wimaladarma Abeywickrema. need to explain why CEB waited until September 30 to call for tenders to install 20 MW of power, including generators, fuel storage tanks, grid connections and all other facilities within less than one month to commence commercial operations on January 1, 2012. If CEB was genuinely interested in selecting a contractor other than Aggreko, it could have at least given the others a fighting chance by allowing more time.

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