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Text of a letter sent to Minister of Power and Energy Karu Jayasuriya by the Citizens' Trust, Energy forum and ITDG - South Asia

We wish to express some concerns related to rural electrification, poverty alleviation and the power sector reforms policies currently under review and shortly to be gazetted in Parliament, following on some discussions that arose at a workshop organized by us.

Citizens' Trust is a public interest organization whose areas of particular concern include access to information on public matters, and transparency and accountability on the part of commercial enterprises serving the public. It is authorized to promote reforms of the law and enforcement of the law for the public benefit, as well as public discussion and dissemination of information on matters relevant to its objects.

ITDG-South Asia has worked over a decade on providing alternative energy options for off-grid rural communities by developing technologies and demonstrating to communities, local government bodies, and private sector and state organisations. Identifying and addressing macro issues which impinge upon the space for and the viability of these options has always been a concern.

Energy Forum is an NGO working to promote renewable and distributed energy options to alleviate poverty, to address energy capacity deficiencies, and to protect the environment.

As a network of individuals and organizations from government institutions, the private sector, NGOs, utilities, universities, and research institutions, the Energy Forum serves as a network hub for non-partisan energy information and research and specialized in grass roots community awareness raising.

On May 8, 2003 these three organizations collaborated in a workshop based on a six-month consultative project by Citizens' Trust analyzing the recent power crisis and the likely impact of proposed reforms. We are grateful to the many distinguished persons from the various power and energy related sectors who gave of their valuable time to share information and ideas at this workshop. However certain areas of concern remain, and the note that follows is intended as a summary of our post-workshop concerns in this sector.

Currently, Sri Lanka is at the beginning of a process of reform of its electricity sector. This is a timely exercise for the country.

However, there are concerns about the impact of the reforms on the poorer communities in Sri Lanka, particulary as the reforms only focus on the main grid electricity system. Over recent years in Sri Lanka, considerable progress has been made towards the establishment of an environment and a market for decentralised energy supply (micro hydro, solar, wind and bio-fuels) to supply the needs of poor and remote communities. There is concern that the reforms and the current policies will have negative effects on the progress of these decentralised, community based schemes, unless mechanisms are set in place to address them. Some of the details of the concerns are as follows:

* There appears to be no National Energy Policy for Sri Lanka. There are instead two documents setting out, respectively, power sector policy guidelines and a policy for rural electrification. These two documents in any event post date the gazetting of the two key power sector reform laws, namely the Electricity Reforms Act and the Public Utilities Commission Act. This begs the question as to what extent there is actual policy formulation based on scientific and socio-economic study, or whether "policy" in this context is merely a rationalization of existing law.

* In any event, the published rural electrification policy does not take into account the power sector reforms and the implications it would have. Similarly, the power sector guidelines do not refer to rural electrification. Therefore, there should be a comprehensive energy policy that includes rural energy issues, and how they will be addressed. Furthermore, although there are policies, there are no strategies for rural electrification.

* According to the policy, Sri Lanka can only achieve 80% of electrification through the national grid. This leaves 20% of consumers who will not have access to the grid and can only be supplied through off-grid systems. The power sector reforms do not clearly specify how they intend to promote rural electrification. This can lead to uncertainty and ultimately, barriers for rural communities to access electricity.

* There are a number of off-grid systems that currently provide electricity. We believe it is important to incorporate suitable measures into the reform process from now, so as to clarify and ensure the status of these off-grid systems in the reformed power sector.

* The off-grid community owned electricity generation systems do not have a legal status as only CEB is currently mandated to generate and distribute electricity. These systems however are recognised and promoted by the national and provincial governments.

* The proposed reforms prevent a single licence holder from both generating and distributing electricity. Exemptions are mentioned in the policy guidelines, what do these exemptions imply? Will the off-grid systems owned by rural communities be able to apply for the exemptions. Will these exempted licence holders be covered by the regulator?

* The proposal to give one distribution company exclusive distribution rights to a geographical area will have serious implications on such community owned systems. The legal status of these systems in relation to the reforms needs to be clarified so as to ensure that decentralised distribution systems outside of the grid will be allowed.

* Electricity is a devolved subject. Currently, the Provincial Councils (PCs) and local authorities play an important role in rural electrification.

There are significant numbers of off-grid systems that are promoted by Provincial Councils, especially in Uva, Sabaragamuwa and South. The policy guidelines do not refer to this link. Can there be a link established between the Public Utilities Commission (PUC) and the PCs to look after the interests of communities in the promotion of village level off-grid systems to access electricity.

* A separate issue is that grid-connected mini hydro schemes use the water resources that belong to the surrounding communities which directly and indirectly conserve and manage these resources. There is an unethical situation created by mini-hydro projects using community owned resources without giving back any benefit to the community (income or electricity connections). Can part of the profits generated from the profits be invested in economic and social development of the communities surrounding these sites?

* Various government departments and donors are planning certain initiatives in energy, rural energy, renewable energy etc.

Are these consistent with the policy guidelines and Government interests? There seems to be poor or no co-ordination. Can this be addressed?

* The Power Sector reforms envisage, with the unbundling of the CEB and the distribution of the CEB functions amongst 5 companies, that CEB assets will be transferred to the new companies, while liabilities will be transferred to "Z" company that will remain with government (per Mr. N. Wickremasuriya, Manager, Power Sector Reforms). Does this mean that the liabilities of CEB will remain as a public liability that has to be met by the Government?

This means that people who will never have access to the grid connected system will also indirectly have to pay for these liabilities. Given the emphasis on the level playing field and fairness of tariffs, how can this be avoided?

* In the event of the new electricity distribution companies being sold to the private sector, will the profits generated by the sale of these companies be utilized to set off CEB debts/liabilities? If this is to be possible, appropriate legal mechanisms must be set in place at the time these companies are created and CEB assets transferred to them.

It is our earnest hope that the above facts would be given serious consideration when formulating the Power Sector Reforms Policy due to be constituted very shortly.

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