Features of the Sri Lanka Electricity Act No

Features of the Sri Lanka Electricity Act, No. 20 of 2009 as amended in August 2013 Bandula S. Tilakasena Enrich Life through POWER

A brief history of Electricity Legislation in Sri Lanka 1882 The first electric light seen in Ceylon from SS Helios, a German Ship sailed in to the Colombo Harbour on 26 th June 1882 1890 The first premises in Ceylon lit by an electric lamp: The Billiard Room at Bristol Hotel in Colombo Fort 1895 Electricity Ordinance No. 5 of 1895 enacted. This act facilitated distribution of electricity only 1902 The first scheme of electrification in Colombo by Boustead Bros. 1905 The first scheme of electrification in Kandy by Kandy Lighting Co.

A brief history of Electricity Legislation in Sri Lanka (contd. ) 1906 Electricity Ordinance No. 36 of 1906 enacted, which enabled local authorities to operate electricity supply schemes. Veyangoda, Gampaha, Jaela etc get their own electricity supply schemes. Facilitated and regulated supply and use of electricity for lighting, traction and other purposes 1922 The Government purchases Boustead Bros. for £ 245, 000 1928 Department of Govt. Electrical Undertakings was established 1950 Electricity Act No. 19 of 1950 enacted 1950 Laxapana Power Station Hydro Electric Scheme Stage I (25 MW) commissioned.

A brief history of Electricity Legislation in Sri Lanka (contd. ) 1969 Ceylon Electricity Board Act No 17 of 1969 enacted. The functions of the DGEU were taken over by the Ceylon Electricity Board. 1983 Lanka Electricity Co. Pvt Limited was established to take over the ailing local authority distribution networks. Initial share capital was provided by CEB and UDA 1998 First independent Power Project (51 MW) commissioned by Asia Power Pvt Ltd at Sapugaskanda

A brief history of Electricity Legislation in Sri Lanka (contd. ) 2002 Energy Supply (Temporary Provisions) Act, No. 2 of 2002 enacted by the Parliament 2002 Electricity Reform Act, No. 28 of 2002 enacted by the Parliament 2002 Public Utilities Commission Act, No. 35 of 2002 enacted by the Parliament The objectives were: (a) To ensure an adequate supply of electrical energy, petroleum and other energy requirements; (b) To regulate the provision of electrical energy, the petroleum supply and the utilization of other energy resources

A brief history of Electricity Legislation in Sri Lanka (contd. ) 2002. 12 Electricity Reform Act No. 28 of 2002 enacted by the Parliament 2003. 04 Certain Chapters of the Act became operative 2004. 04 Trade Unions oppose further action under the act 2005. 12 A concept paper to map out the future of the electricity industry was prepared 2006. 04 Two bills to amend Electricity Reform Act No. 28 of 2002 and Ceylon Electricity Board Act, No 17 of 1969 published in the Gazette These bills were found unconstitutional by the Supreme Court

A brief history of Electricity Legislation in Sri Lanka (contd. ) 2008. 02 Sri Lanka Electricity Bill published in the Gazette 2009. 04. 08 Sri Lanka Electricity Act, No. 20 of 2009 passed by the Parliament, incorporating the amendments proposed by the Ministerial sub-committee and the Trade Unions 2013. 08. 07 Sri Lanka Electricity (Amendment) Act No. 31 of 2013 passed by the Parliament

Distribution Licensees Ceylon Electricity Board DL 1 Ceylon Electricity Board DL 2 Ceylon Electricity Board DL 3 Ceylon Electricity Board DL 4 Lanka Electricity Co. (Pvt) Ltd DL 5

Main expectations from the Sri Lanka Electricity Act 2009 • Cost-reflective Tariffs & Charges (s. 30) • Licensees being able to finance the licensed activities (s. 4) • Facilitation of Consumer Services (s. 4) • Facilitation of construction of new Generation Projects, Transmission lines and Distribution lines (s. 52) Enrich Life through

Administration of the Act Administration of the licenses under this Act is vested in the Public Utilities Commission of Sri Lanka.

General Policy Guidelines to be issued by the Minister Section 5 • If any policy guideline issued by the Minister results in the need for a licensee to subsidize the provision of any service of a public utilities industry to any socio-economic group or to a geographical area, then PUCSL, in implementing the policy guidelines, is required to ensure that : – The Government compensates such regulated entity for all loss and expenses caused to that regulated entity by reason of its compliance; and – adequate financial provision is made by the Government before such regulated entity undertakes any necessary activities.

Prohibition on un-licensed supply of electricity Section 7 Unless exempted under Section 10, a person shall have to have a license to generate, transmit or distribute and supply electricity. Unlike in the Electricity Act, even for self use, a person will have to either obtain a license or an exemption from the PUCSL. Penalties are introduced for contravention of these provisions.

Participating in a bidding process for the generation of electricity: Section 8 The bidders in bidding processes for generation of electricity will be confined to the persons identified in Section 9 (1) (c). Note: the conditionality of Section 43 with this provision in Section 8 Enrich Life through

Exemptions : Section 10 The PUCSL is empowered to exempt persons or categories of persons from the requirements of obtaining a licence for generating or distributing electricity, having regard to: • The manner in which electricity generated or distributed or • The quantity of electricity generated or distributed

Eligibility to apply for a license Section 9 • Section 9(1) : In order to be eligible to obtain a generation license (for generation capacity above 25 MW) a person will have to confirm to certain requirements. • Ceylon Electricity Board, which was exempted from a license under the Electricity Act, has now been made a licensee. • Section 9(2) stipulates that no person other than CEB shall be eligible for a transmission license. • Section 9(3) identifies the persons who shall be eligible to apply for a distribution license.

Eligibility to apply for a Generation license Section 9 (1) • The Ceylon Electricity Board; • A local authority; • A company, in which the government, a public corporation, a company in which the government holds more than 50% of the shares or a subsidiary of such a company, holds such number of shares as may be determined by the Secretary to the Treasury, with the concurrence of the Minister in charge of the subject of Finance.

Eligibility to apply for a Distribution license Section 9 (3) • • The Ceylon Electricity Board; A local authority; A company, in which the Government holds more than 50% of its shares; or A society registered under the Co-operative Societies Law, No. 5 of 1972. Enrich Life through

Security Deposits: Section 28 The power to levy a security deposit is available to the distribution licensee under Section 28 of the SLEA. However, under Section 28(3), unlike the present security deposit, these deposits are required to be paid interest at a rate fixed by PUCSL. Enrich Life through

Prerequisites for Tariff Determination in the legislation • PUCSL Act : Section 30 (2)(a) Government compensates Licensees for compliance with GOSL Policy Directions • Section 30 (4) of SLEA and S 30(2)(b) of PUCSL Act Upon being satisfied of adequacy of funds being provided by the Treasury to bear the cost of any subsidy approved by the Government to subsidize Costumers… • Cross subsidies are recoverable from Customer Enrich categories Life through

Tariff : Section 30 • Be set by the relevant licensee in accordance with a cost reflective methodology approved by the PUCSL. • Permit the relevant licensee to recover all reasonable costs incurred in the carrying out of the activities authorized by its license on an efficient basis, • Be approved by the PUCSL in accordance with the policy guideline approved by the Cabinet of Ministers under Section 5;

Tariff : Section 30 (contd. ) Notwithstanding any other provision of this Act, the PUCSL may: • Upon being satisfied of the adequacy of funds being provided by the Treasury to bear the cost of any subsidy approved by the Government to subsidize consumers; and • Considering any cross subsidy recoverable from such categories of consumers as determined by the PUCSL, • set tariffs and charges to be levied by the licensee, which reflect such subsidies. Enrich Life through

Modification of Licenses by Agreement The procedure for modifications of the licences by agreement with the licensee is specified. Enrich Life through

Modification of licenses without agreement of the licensee (Section 33) • A procedure for modifications of the licenses without the agreement of the licensee is specified in this Section. • This long procedure however provides for representations by the licensee and the persons affected by the modification. • The licensees have a right to appeal to the Court of Appeal any such modification made under this Section.

Enforcement Orders (Section 34) • In order to secure compliance with the licence, PUCSL can make an Enforcement Order • Notify the persons affected by the Order • Duty on the licencee to comply with the Order • Failure to comply is an offence • PUCSL may also secure compliance through Courts Enrich Life through

Power of PUCSL to vest management and control of a licensee in another authority or person: Section 38 • As a result of failure to comply with an enforcement order or due to insolvency, PUCSL is empowered to vest the management and control of undertaking of licensee in another authority or person. • In the cases of the licencee being a person established by law, the PUCSL only makes recommendations to the Minister, to whom the activities of that person is assigned.

Resolution of disputes: Section 39 • Resolution of disputes between a tariff customer and the licensee, or between a licensee and another licensee, or any other affected party shall now be referred to PUCSL. • The powers conferred in the PUCSL are primarily to mediate in the dispute. • PUCSL is required to mediate and resolve or it may refer the dispute for arbitration or to be determined by the courts.

Consumer Protection: Section 40 • Standard of performance for supply of electricity • Standards of overall performance and efficient use of electricity • Consumer Affairs Authority Act not to apply • Consumer obligations are not addressed to

Provision of new generation plant and extension of existing plant: Section 43 (as amended) • Extension of or addition of new generation plants shall be authorized by the PUCSL. • The transmission licensee is required to prepare guidelines related to procurement of new generation plants or to extend any existing generating plants. Enrich Life through

Amendments to Section 43 • Proposal for new generation plant have to be in accordance with the Least Cost Long Term Generation Expansion plan. • However, despite any approval given by Cabinet or permit for that had been issued by SEA before April 2009 shall also be referred to PUCSL approval. • Upon such approval the transmission licensee is required to call for tender to develop new generation plant under the rules that may be made by the Commission. Which means, even though they are not reflected in the Generation Expansion plan Enrich Life through

Amendments to Section 43 (contd. ) However, (subject to Section 6) this competitive procedure is not applicable for generation plant : § that were being developed in April 2009 in accordance with LTGEP, and received the approval of the Cabinet § Had SEA permit in April 2009 § Where approval of the Cabinet had been received on the basis of an offer received from foreign Government or § to meet an emergency situation Enrich Life through

Amendments to Section 43 (contd. ) The transmission licensee is required to negotiate with such persons who had availed of the previously mentioned exemptions Upon recommendation of the Transmission Licensee, PUCSL has the power to approve once it is satisfied that the recommended prices meet the requirements of least cost principles. Enrich Life through

Offences (as amended) • Extraction of electricity to be an offence (Section 49) • Improper use of electricity to be an offence (Section 50) • These offences are similar in nature to the Sections 65, 66 and 67 of the Electricity Act. • However, originally only the offences under the Section 49 and 50 of the SLEA are made cognizable and nonbailable.

Amendments to Section 50 The offences related to meters, which were previously in the Schedule I to the act, had now been made cognizable offences. Because of this, no prior notice is required to investigate the offence identified under Sections 49 and 50 of the Act. Enrich Life through

Acquisitions of immovable property In the case of acquisitions of immovable property for generation and transmission Licensees, Section 52 of the SLEA will now apply. This provision avoids legal intervention of persons to the processes stipulated in the Land Acquisition Act.

Schedule I: Powers of the licensee • These include same powers, which were conferred by licensee under the Section 5 of the Electricity Act. However, the specific power to use natural water supplies is not available now. • Powers in relation to alterations of any pipes, telecommunication apparatus, electrical plants etc. , • Provides for a tedious procedure for acquisition of way leaves and immovable property and payments of compensation thereof.

Schedule I: Powers of the licensee • The powers of the Government Agent under the Section 15(10) of the Electricity Act have now been vested in the PUCSL. However, the powers of making orders under subsection 15(11) now lies with the Minister, under the item 3 (3) of Schedule I of the SLEA. • The effect of this deviation is that even for trivial purposes, an order by the Minister will be required. Thereafter, the provisions of the Land Acquisition Act related to servitudes will have to be followed. This tedious procedure replaces the simpler procedure that was available under the Sections 14 to 18 of the Electricity Act, where the final decisions related to entry on land compensation were made by the Government Agent Enrich Life through

Schedule I: Powers of the licensee • The powers of determination of compensation of the Government Agent under the Section 17 of the Electricity Act have now been vested in the PUCSL. (Ref. Schedule I: Item 4(5) of the SLEA). • The situation appears to have become more complicated owing to the vesting of certain powers in the Commission, from previous powers of a Government Agent / Divisional Secretary. Enrich Life through

Schedule I: Amendment of powers of the licensee on Way leaves • The powers of determination of compensation of the Government Agent under the Section 17 of the Electricity Act have now been vested in the PUCSL. (Ref. Schedule I: Item 4(5) of the SLEA). • The situation has become more complicated owing to the requirement to follow the provisions of the Land Acquisition Act. Enrich Life through

Schedule II: Electricity supply code This Schedule specifies the requirements of an electricity supply code, where certain rights of the tariff customers and the relationship between the tariff customer and the licensee are defined. Enrich Life through

Schedule II: Electricity supply code (contd. ) • The item 8 of this schedule requires a notice to be given for entry to premises, in case of any purpose under this Act. Therefore, the licensees’ investigations for the offences will be severely hampered by this notification requirement. • In relation to the offences related to tampering with meters under the Item 8 of Schedule III, the licensee is unable to discontinue the supply until the offender is convicted. • In relation to the offences under Section 50 (Improper use of electricity) e. g. by-passing of meters, the licensee is unable to discontinue the supply.

Schedule II: Electricity supply code (contd. ) • Although the amount of fines stipulated for these offences have been increased, the punishment of imprisonment has been removed. • The offences under the Item 8 of Schedule III, which have been non-bailable and cognizable offences under the Electricity Act, are no longer non-bailable and cognizable under the SLEA. This removes a major deterrent for such offences that was available in the Electricity Act.

Schedule III: Use of Electricity Meters This schedule prescribes the manner in which electricity meters are to be used by the distribution licensee and the obligations of persons in relation to the meters.

Schedule IV: Preservation This schedule defines the obligations of the licensees or those persons exempted from licenses, towards the environment and the natural beauty of the countryside.

Transitional provisions • Existing licences are valid for 6 months • CEB has been issued with six provisional licenses, valid for 6 months • Regulations already made under the Electricity Act continue to be effective

Transitional provisions (Contd. ) • Ceylon Electricity Board is enabled to hold all three types of licenses and provisional licenses. The procedure for issuing of the liceneses is prescribed in Section 65 (2) and (3). • Ceylon Electricity Board’s provisional licence is valid only up to 8 th October 2009

Transitional provisions (Contd. ) • Powers of the Ceylon Electricity Board has been amended. The effects of these amendments are that the Board’s powers referred to in Sections 12(a), (d), (h), (l) and (n) shall now be exercised in accordance with the terms and conditions of the appropriate licences. • Furthermore, Sections 14, 15 and 16 of the CEB Act and the Parts II and V are now repealed, since they are redundant or have been amended by the SLEA. • Notwithstanding the repeal of Part V of the CEB Act, the tariff fixed by the CEB will continue to be in force until such tariff are amended by any other written law.

Conditions of the Licenses, Rules and Regulations • Terms and Conditions of the Licenses – License fees • Rules made by the Commission • Regulations Enrich Life through

Where were the reversals of expectations? • Reversals of the Road Map for Tariff Rebalancing • Determination of consumer tariff categories • Complication of way leaves acquisition • Licensees not being able to finance the licensed activities • Non adherence to the pre-requisites for determination of cost-reflective tariff Enrich Life through

For more information bandula. tilakasena@ceb. lk Q&A Enrich Life through POWER

Duties and Responsibilities of the Licensees Enrich Life through POWER

General Conditions of all Licenses § Authorized business activities § Provision of information to the Commission § Decisions, Orders, Directions and Determinations by the Commission § Development and compliance with Technical and Operational Codes § Prohibited Activities § Payment of levy § Assignment § Revocation § Environment; Health and Safety § Insurance § Dispute Resolution

Generation License § Generation Plant and Equipment § Separation of Accounts for Generation Business § Power Purchase Agreements § Transfer Tariff § Central Dispatch

Transmission License § Separate accounts for: Transmission Business Bulk supply Operations Business § Prohibition of cross-subsidies § Disposal of Relevant Assets § Economic purchases of goods, assets and services § Compliance with standards of performance § Connection to the Transmission System § Provision of information to Distribution Licensees Contd.

Transmission License § Development of the Transmission system § System capacity, central dispatch and merit order § Economic purchase electricity and Ancillary Services § Bulk Supply Tariff § Procurement of new generation plant § Power Sales Agreements

Distribution License § Separate accounts for Distribution Licensee § Disposal of Relevant Assets § Economic purchase of Goods, Assets and Services § System capacity § Specific conditions for distribution § Connection to the distribution system Contd.

Distribution License § Provision of information to the Transmission Licensee and to other Distribution Licensee § Development of Licensee’s Distribution System § Specific conditions for supply § Discrimination in supply Contd.

Distribution License § Supply Tariff Schedule § Distribution Supply Tariff Agreement § Supply Service Code; Record of Licensee Performance § Estimation of energy supplied

Provision of information to the Commission • • Monthly Performance Data Licensee Information Submission System Tariff and Charges Filings Procedural Issues n

General Conditions of all Licenses § Authorized business activities § Provision of information to the Commission § Decisions, Orders, Directions and Determinations by the Commission § Development and compliance with Technical and Operational Codes § Prohibited Activities § Payment of levy § Assignment § Revocation § Environment; Health and Safety § Insurance § Dispute Resolution

Generation License § Generation Plant and Equipment § Separation of Accounts for Generation Business § Power Purchase Agreements § Transfer Tariff § Central Dispatch

Transmission License § Separate accounts for: Transmission Business Bulk supply Operations Business § Prohibition of cross-subsidies § Disposal of Relevant Assets § Economic purchases of goods, assets and services § Compliance with standards of performance § Connection to the Transmission System § Provision of information to Distribution Licensees Contd.

Transmission License § Development of the Transmission system § System capacity, central dispatch and merit order § Economic purchase electricity and Ancillary Services § Bulk Supply Tariff § Procurement of new generation plant § Power Sales Agreements

Distribution License § Separate accounts for Distribution Licensee § Disposal of Relevant Assets § Economic purchase of Goods, Assets and Services § System capacity § Specific conditions for distribution § Connection to the distribution system Contd.

Distribution License § Provision of information to the Transmission Licensee and to other Distribution Licensee § Development of Licensee’s Distribution System § Specific conditions for supply § Discrimination in supply Contd.

Distribution License § Supply Tariff Schedule § Distribution Supply Tariff Agreement § Supply Service Code; Record of Licensee Performance § Estimation of energy supplied

Provision of information to the Commission • • Monthly Performance Data Licensee Information Submission System Tariff and Charges Filings Procedural Issues n