Democratic Socialist Republic of Sri Lanka Power Subsector Review
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Report No 5713- DemocraticSocialist Republic of SriLanka PowerSubsector Review Public Disclosure Authorized July25, 1986 ProjectsDepartment SouthAsia RegionalOffice FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Document of the 'VorId Bank Public Disclosure Authorized This documenthas a restricteddistribution and may be used by recipients only in the performanceof their official duties.Its contents may not otherwiise bedisdosed without WorldBank authorization. SRI LANKA POWER SUBSECTOR REVIEW Currency Equivalents Mid-1983 US$1.00 = SL Rs 23.53 SL Rs 1.00 = US$0.043 Mid-1984 US$1.00 = SL Rs 25.44 SL Rs 1.00 = US$0.039 End-1984 US$1.00 = SL Rs 26.20 SL Rs 1.00 = US$0.038 End-1985 USR1.00 = SL Rs 27.20 SL Rs 1_nn = US$0.037 WEIGHTS AND MEASURES . kilometer (km) = 0.621 mile I ton = 1.102 short ton (sh ton) 0.984 long ton (Ig ton) 1 kilowatt (kW) = 1,000 watts (W) 3 1 megawatt (MW) = 1,000 kilowatts (10 kWa 3. gigawatt = 1,000,000 kiiowatts (10 kW) I kilowatt-hour (W h)= 1,000 watt-hours 3 1 megawatt-hour (MWh) = 1,000 kilowatt-hours (10i kWh) I. gigawatt-hour (GWh) = 1,000,000 kilow3att-hours (106 kWh) 1 kilovolt (kV) = 1,000 volts (10 V) I kilovolt-ampereb(kVA) = 1,000 volt-amperes (VA) 1 megavolt-ampere (MVA) = 1,000 kilovolt-amperes (103 kVA) ABBREVIAIIONS AND ACRONYMS ADB - Asian Oevelopment Bank AMP - Accelerited Mahaweli Program CEB - Ceylon Electricity Board CPC - Ceylon Petroleum Corporation DGEU - Department of Government Electrical Undertakings ECT - Energy Coordinating Team GOSL - Government of Sri Lanka GTZ - German Agency for Technical Cooperation HV - High Voltage LV - Low Voltage LECO - Lanka Electric (Private) Company LRAIC - Long-Run Average Incremental Cost LRMC - Long-Run Marginal Cost MASL - Mahaweli Authority of Sri Lanka MMD - Ministry of Mahaweli Development MPE - Ministry of Power and Energy MV - Medium Voltage WMP - Water Management Panel CEB's Fiscal Year is the calendar year FOR OFFICAL USE ONLY This report was prepared by N.C. Webb (Economist),R. Sharma (Financial Analyst), D.T. O'Leary (Engineer/SystemsPlanner) and W. Kupper (consultant) on the basis of missions undertaken in September-October and December 1984. S. Nukherji (Consultant) also contributed to the report. Th dcument a renstictedditbuto and may be uud by recipnts oy in the prfomanc oftheirofficia dues Itscontents my nototerse bediced withutWodd Bankautdhoriai. ABSTRACT The principal purposes of this report are to update and extend the Bank's knowledge of Sri Lanka's power subsector, and to identify the principal issues in that subsector and the options open to the Sri Lankan authorities to deal with those issues. The report first reviews briefly the institutional organization of the energy sector and the country's energy resources whose development may have an impact on the power subsector, and recomxends, among other things, a closer involvement of the Ceylon Electricity Board (CEB) in both the long term and operational planning of the Mahaveli-Ganga River Complex. The organizational structure of the power subsector is then examined, and attention is drawn to the need to increase the autonomy of CEB and to strengthen its management capability. Measures to improve both demand forecasting and planning the development of the power subsector are discussed, including the collection of detailed data on consumer characteristicsat all voltage levels, increased use of sensitivity analysis in generation system planning, and improving the data base on potential hydropower projects. A detailed review of the system for electricity pricing indicates a number of weaknesses in CEB's existing tariff structure and the tariffs of some licensees. A number of recommendationsare made, including that the basic tariff rates in CEB's tariff should be based on average hydrological conditions in order to improve the signalling function of tariffs, and that the size of the 'lifeline' block in the tariff for domestic consumers should be reduced. It is also proposed that a load management study should be undertaken to identify both price and non-price measures to prevent a deterioration of the system load factor as a result of the projected increase in the relative importance of consumption by consumers in the domestic and licensee tariff categories. Finally, the proposed investment program for the development of the subsector between 1985 and 1994 is evaluated in the light of Sri Lanka's existing and projected financial and resource constraints. Recommendationsare formulated to increase resource mobilizationby increasing tariff rates and to reduce arrears owed to CER. July 1986 SRI LANKA- POWERSUBSECTOR REVIEW Table of Contents P-age I. INTRODUCTION ................ ............ ...................... I II. ENERGY SEC OR ........ .................................. 10 A. Institutions ............................................ 10 B. Energy Resources ........................................ 11 Hydropower ......................................... ,,,,,,,,,,11 Fuelwood ......... ............................... 14 C. Energy Supply and Consumption .. ............................14 Energy Consumption ....................................... 17 Petroleum Product Pricing ................................ 18 III. ORGAz6IATIQNAL STRUCTURE ....... .. ......................... 20 A. Power Subsector Organization ............................... 20 B. Ceylon Electricity Board ................................... 20 Organization......................................... 20 Autonomy ............................ 23 Staffing............... .. ....................... 24 Conditions of Serqice ....... .............................. 24 Training ........................ 25 C. Organization of Electricity Distribution and Lanka Electric Company ........................................... 26 D. Rural Electrification ... .ooo ....... o....--....... 28 E. Transfer of Power Projects from Nahaweli Development Authority to CEB ... o ......... ............... ... 29 -"i- Page rv. HISORICAL TRENDS IN THE COESUHEF-IONAND SUPPLY OF ELECTRICITY.. 32 A. Past Trends in Electricity Consumption .............. ....... 32 Availability of Electricity Consumption Data ............. 32 Growth of Overall Consumption ..... .......................32 Electricity Supplied by CEB _ .. 33 Electricity Consumption by Sector ........................ 33 Load Characteristics ...... ...............................35 B. Past Trends in the Supply of Electricity .............. ..... 36 Generation ...............................................36 Losses ... 37 Transmission ........... 39 Distribution ........... 39 V. FORECAST CONSUMPTION AND SUPPLY OF ELECTRICITY .. 41 A. Growth of the Economy.41 B. Future Electricity Demand .. 41 CEB Load Forecast .. 41 Improvements to Demand Forecasting .. 43 C. Future Electricity Supply .. 44 Generation .. 44 Fuel Requirements .. 46 Transmission and Distribution . .46 Losses .. 47 D. Power System Planning.48 Institutional Responsibility ... 48 Generation... 48 Operation Planning .......................- ...... 50 Operational Planning Issues Related to Nahaweli Projects.. 50 -lll- Page VI. ELECTRICITY PRICING ............................................. 54 A. Institutional Responsibilitv for Tariffs .................... 54 B. Historical Review ....... ................................... 54 C. Economic Costs of Supply ..................... ............. 55 D. Existing Tariffs Rates ...... ............. ............. 59 CEB Tariffs .......... ...................... 59 1984 Tariff Study and Existing Tariff Rates .............. 60 Fuel Adjustment Charge ................................... 61 Lifeline Rates ............ ............................... 62 Licensee Tariffs .............. ........................... 63 E. Structure of Existing CEB Tariffs .......................... 64 F. Future Tariff Policy ........ ...... 66 VII. INVESTMENT AND FINANCING .......................................68 A. Past Investment . ...... ................................ 68 B. Financing Past Investment .... ..............................71 C. Project Implementation . .................... .74 D. Investment Program and Financing Plan .75 AWE 1 Attachments 1. Organization of the Energy Sector Prior to November 1982 ..... 78 2. Organization of the New Energy Coordinating Team (ECT) ....... 79 3. Organization of Ceylon Electricity Board ..................... 80 4. Energy Balance 1978 (in tons oil equivalent) ................. 81 5. Energy Balance 1983 (in tons oil equivalent) ................. 82 6. Sales VoLume of Petroleum Products 1970-1984 .................. 83 7. Salary Allowances Paid to CEB Personnel ...................... 84 8. Polgolla Project - Transfer of Assets of the Ukuwela Power Station to CEB by the Mahaweli Development Board .......... 87 AlNNEK2 Tradeoffs Between Irrigation and Power Generation in the Nabaveli Ganga Complex Page A. Background ..................................................... 90 B. System Studies ............................................ ...... 93 Water Resources MKnAgement ...............-..... 93 CEB's Procedures for Calculating the Annual Mix of ThermaL and Hydrogeneration ................................ 98 The Transbasin Diversion Study ............................ - 98 C. WeeklyOperational Planning ....................... ...... 100 D. Staffing ............ , ..... ¢-o........ .......... .......... 101 Attachments 1. The Nahaweli Complex in 1990 ................................... 102 2. Schematic Layout of Mahaveli System ...........................