• CEB’s distribution operation to be unbundled into five independent units, including LECO
• PUCSL says it will enhance transparency and efficiency of electricity sector
• CEB Engineers Union and other labour unions allege unbundling is aimed at privatisation of CEB

Undertaking the first major reform in Sri Lanka’s electricity sector since 2002, the Public Utilities Commission of Sri Lanka (PUCSL) this week announced plans to complete the stalled unbundling of the Ceylon Electricity Board’s (CEB) distribution operations into four independent units over the next couple of weeks, with an aim to enhance efficiency and transparency of the country’s electricity sector.

“In order to bring efficiency, we need to move forward with the unbundling process. This is a large organisation employing over 22,000 people. Initially, we won’t be able to go for competition in generation. However, as similar to the teleco sector, unbundling will allow the units within the CEB to compete among each other, resulting in an efficient service at the lowest production cost to the consumer,” PUCSL Chairman Janaka Ratnayake said.

Despite the partial unbundling of the CEB following the electricity sector reforms carried out in 2022, with Electricity Reforms Act No. 28 of 2002, the four CEB-owned distribution licensees and transmission licensee have not yet been made independent of each other.

The Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA) have recommended the unbundling of the CEB in several studies. 

“The next stage of reform requires establishing six independent companies out of the CEB’s generation, transmission and four distribution licensees. The organisation culture in the government-owned company LECO needs to be replicated in the CEB’s distribution licensees by creating corporate entities that report to the CEB holding company. 

The functional business units currently established within the CEB are adequately staffed and organised to enable the formation of six corporate entities. The corporatisation need not involve privatisation, if political decision makers do not wish to involve private capital more fully in the sector, provided the state-owned firms operate as independent commercial companies,” ADB said in a report published in 2015.

However, the CEB Engineers Union (CEBEU) and other labour unions affiliated to the CEB allege that the unbundling of the CEB units is aimed at privatisation of the organisation.

With the completion of the unbundling of the CEB’s distribution operations, there will be five independent licensees in power distribution, including LECO.  

Meanwhile, the PUCSL announced that it would direct the CEB to introduce an independent audit system for the process of purchasing electricity in order grant proposed revision in electricity tariffs.

Accordingly, Ratnayake noted that an independent third party reputed firm is likely to be appointed to undertake to provide monthly audits.

Further, the CEB will also be required to cut its operational costs by 10 percent, which will be invested in renewable power generation projects.