The Public Utilities Commission of Sri Lanka (PUCSL) has said generation capacity costs should not be passed on to consumers in the proposed electricity tariff revision for the fourth quarter of 2026.

Presenting its position at a public consultation at the BMICH in Colombo on 5 November, the regulator described the inclusion of such costs as “basically unacceptable”.

The PUCSL drew a line between existing and new power purchase agreements (PPAs). It said existing agreements might require capacity payments to continue until they expire, but that no new capacity costs should be permitted.

Figures in the presentation put generation energy costs at Rs. 101.343 billion and generation capacity costs at Rs. 19.946 billion. Transmission costs were shown as Rs. 5.140 billion, Bulk Supply Operations and Business costs as Rs. 529 million, battery energy storage system capacity charges as Rs. 703 million and finance costs as Rs. 2.272 billion. The table totalled Rs. 129.933 billion.

The National System Operator (NSO) meanwhile indicated that no tariff increase was required for the October to December quarter. It reportedly based this on current reservoir levels and forecasts of above-average rainfall linked to El Niño conditions.

The final decision rests with the PUCSL, which is expected to consider the submissions made at the consultation before it determines the tariff that will apply.

Background

Capacity payments are amounts paid to power plant owners for keeping generating capacity available, separate from the cost of the electricity actually produced. They have long been a contentious part of generation costs.

The PUCSL’s preliminary assessment had already reduced the increase originally sought by the NSO from 2.88 per cent to 1.46 per cent. The NSO had projected a revenue shortfall of Rs. 4.4 billion for the quarter. The PUCSL estimated the total cost of electricity supply at Rs. 157.3 billion against expected revenue of Rs. 154 billion.

The Commission’s review also involved adjustments to generation capacity costs submitted by Electricity Generation Lanka, and to additional expenditure linked to the use of substandard coal during the second quarter.

Public consultations of this kind are part of the regulatory process. They allow consumers, industry representatives and other stakeholders to challenge the assumptions and expenditure items included in a tariff submission before a decision is made.

What it means

For households and businesses, the outcome will determine whether electricity bills rise in the final quarter of the year. The NSO’s position that no increase is needed, and the PUCSL’s objection to passing on capacity costs, both point to the cost items that will decide the final figure.

The regulator has not yet announced its final tariff decision, so the bills consumers pay for the quarter will depend on that determination.