[The Island] Electricity generation moving as planned by saboteurs


BY Dr Tilak Siyambalapitiya

There is only one “decision” on which the current President and the Prime Minister agreed with each other wholeheartedly: that is to cancel the Sampur power plant, in 2016. It was a decision to kill, and not to develop, the electricity sector. Even a decision to kill a project would have been compensated, at least partially, if the duo swiftly commenced a systematic approach to build a gas import terminal and gas-fired power plant, but that was not to be.

On 15th May 2016, a state-owned newspaper “proudly” announced: “Sampur shelved: Coal plant off the table” and continued to say, “The CEM has arrived at several decisions which include negotiating the need for a coal power plant (sic) and replacing it with a cleaner model like LNG”. “They have also decided to suspend all activities including tenders that have already been called.”

Given the several technical inaccuracies in the above statement, it could not have been drafted by a person with any knowledge of engineering, but by a politician, but it achieved its objective. The Deputy Minister of Power, who only a few months ago had been specially assigned through a special gazette notification, the task of getting the Sampur power plant project going, was in tears, as he later said.

The aforesaid statement would have brought immense joy to many: (a) the decision-makers of Cabinet Committee on Economic Management (CEM), (b) the anti-coal lobby, (c) contractors-in-waiting, to supply diesel power plants.

The confused public who do not know the actual motive of the cancellation would also have been pleased since the only coal-fired power plant in the country was undergoing numerous outages, generating bad publicity. So why have another one, the common man may argue, happy that another one will not be built. Moreover, residents of Sampur would have rejoiced that the environment had been saved. The President and the Prime Minister seem to know a lot more than engineers, economists and scientists, to have special meetings and decide themselves, about power plants. Just imagine how concerned they are about the country, her people and the electricity supply!

We have seen and heard similar statements, precisely when the same individuals were at the helm, not at the Power Ministry but on various dubious “committees” of the government:

1992: “HE the President advised me to instruct CEB to refrain from proceeding with the Mawella coal-fired power plant”, said the Secretary to the President, in a letter to CEB. A committee called the “Power Committee” was sitting at that time, chaired by the Secretary to the Treasury. So, the President decides, not the engineers.

2002: “The Prime Minister called the Japanese Ambassador to his residence and said that the CEB has misled both the previous government and the present government. The Prime Minister has informed the Japanese Ambassador that the government has decided to cancel the Norochcholai coal power plant.” This time the committee behind it was called the “Energy Supply Committee”. So the PM decides, not the engineers.

2016: Precisely by the same individuals as in 1992 and 2002 who sat in various dubious committees outside the Ministry of Power and Energy, dictate to the Ministry on how to run the electricity supply system. And each time they failed the country miserably. This time the committee was called the “Cabinet Committee on Economic Management”.

So, after the decision, in 2016, which brought tears to the Deputy Minister of Power, following the “tradition”, the Prime Minister appointed yet another a “committee” and all its members, except one, had no experience, at all, in the subject of electrical power systems, and the committee report came out precisely as expected “build gas power plants; bury Sampur”. What else can you expect of a committee appointed after the decision is made?

Although the “bond committee” report was challenged, this committee’s recommendations went unchallenged. With little knowledge of the media on matters that are electric, the committee report was not even published widely.

To add insult to injury, the Cabinet Committee on Economic Management has since been abolished by the President. Now there is another committee: “National Economic Council”. So now, who is responsible for the mess created by CEM in the power sector?

Who killed the power sector?

So, who killed the electricity supply industry? The President says that he did not. The CEM or the inner Cabinet or what remains of it says it does not exist; the Ministry of Energy says CEM did it, the CEB says we did not do it. The Public Utilities Commission of Sri Lanka (PUCSL) says that the killing power plants was “government policy” but the President says he did not say so, and it was “not government policy”.

So, the electricity generation is moving in the direction the saboteurs wanted it to. The retired oil power plants are been reived; companies are writing reports on how one oil power plant is more expensive than the other; the PUCSL is not approving contracts as regards oil power plants; there are accusations and counter accusations against oil power plants; in the end,

it is oil and more oil; more oil power plants have to be purchased on an emergency basis to avoid continuing blackouts in view of elections to be held towards the year end; such emergency procurements will be approved by Cabinet and the PUCSL instantly, without batting an eye lid.

Mark my word; there will be a lot of “emergency power” in 2019 and in 2020.

Procuring emergency power is also very good—not for the electricity customer or the taxpayer but the decision-maker.

Are we really building a gas terminal?

Natural gas prices declined since 2013. A feasibility study was concluded, in 2014, and gas power plants entered the planning cycle and subsequently the national long-term generation plan in 2017. The government began “negotiating” with various parties to build gas terminals and gas power plants whereas the Electricity Act says power generation has to be procured on a competitive basis. News items such as the following appeared during the 2015-2018 period:

BOI Chairman: “We have received six proposals for gas terminals and negotiating with all of them”.

CEM: We are negotiating to form a joint venture between India, Japan and Sri Lanka.

President: I have received a proposal from a Korean Company to build a gas terminal; here it is. It will be a take-or-pay contract.

China: We will build a gas terminal in Hambantota

So, the number of gas terminals being contemplated by various arms and individuals of the government is nine, but none has reached the construction phase. All proposals and their hidden sponsors within various government committees try to evade the competitive bidding process. The spoils too attractive to shared. So, bury the National Procurement Commission, procurement policies and the Electricity Act!

The large Indian market so far has only four gas terminals; three of them hardly used, owing to the higher costs of gas compared with coal and renewables. Politicians at all levels in tiny Sri Lanka are toying with nine gas terminal proposals! This game will become more aggressive in the run-up to elections, for obvious reasons.

All these games are played while the country is paying for oil to run power plants. More are on the way. The share of electricity produced from oil reached a 20-year low of 18%, in 2015, and now it has risen back to 34% by 2017, and will surely exceed 50% by 2020.

In 2020, the Central Bank will write in its annual report: “Bad weather has caused more oil to be used for power generation!” Will they dare say “the cancellation of Sampur and not building a gas terminal was the reason”?

Kill an ongoing project, then call friends and ask for proposals for gas plants and confuse all the dubious proponents by accepting all nine proposals whereas the need is for just one. All this, they do, knowing very well that procurement has to be through competitive bidding, as stated in the law.

Since the planned power plants are not allowed to be constructed with government’s meddling with the next best solution to build a gas import terminal, by year 2020, the additional oil consumption for power generation would be, at least, 400 million litres. At today’s costs, it will be at least Rs 32,000 million. This cost will be passed on to electricity customers, not only in 2020, but year after year.

Did someone say the Central Bank bond issue (the scam) was the biggest financial irregularity in the country’s history? Isn’t Rs 32,000 million lost to the country year after year bigger than Rs 11,000 million, which is said to be the loss due bond scams?

When will a Presidential commission to probe meddling with power plant projects be appointed? The Commission can begin work with the 15th May 2016 decision of the CEM, as the first piece of evidence.

Swiss Challenge

Numerous newspaper articles claimed that the real reasons for the October 26th fallout between the two individuals sharing power was the gas terminal contract. Since we are not privy to what goes on in the inner rooms of the Presidential Secretariat or the Temple Trees, it is hard to say yes or no. However, within days of the October 26th fallout, an official newspaper advertisements appeared requesting alternative proposals for the gas terminal, to be submitted within five weeks. The advertisements, obviously published by the arm of government that remained in power, tell us all about it.

The advertisements literally said that we (meaning the surviving arm of the government) had got a proposal for an LNG terminal, and anyone could match that could send counter proposals within five weeks. The terminal is at least a 300-million-dollar investment; and what is more; against all advice and protests from almost all who know the energy industry, the President was asking for proposals to match the take-or-pay contract offered to him by a Korean Company. The total value of the contract would have been 5,000-million-dollars, if the deal went through, when there was no government!

Surely, no company of repute would even attempt to send a counter proposal to finance and build a 300-million-dollar asset in five weeks! Even a building contractor takes two weeks to send his pricing to build a 10-million-rupee house! Here, we have a government which has received a proposal from an interested party, which was not solicited (meaning there was no tender process in the first place) now trying to rush the proposal through by inviting counter proposals in five weeks so that there will be no counter proposals. Respectable companies with worldwide experience in building gas terminals must be laughing at the Sri Lankan way of handling multi-million dollar projects.

And the end result? There will be no gas terminal, someone in the Cabinet will shoot it down, because the procedures were not followed.

So, that’s how our President and Prime Minister agreed on the cancellation of the Sampur power plant and disagreed on the gas terminal. The government will go down in the history as the administration that cancelled all power plants and did not build a single power one.

In fact, it is not the government that decides which power plants to build and where. Such decisions in other countries are made by technocrats. The government ensures that laws are made and adhered to. Here, such decisions are made by all-knowing politicians, and the result is obvious.

The on-going blackouts are only the beginning. The power generating system is planned to meet customer demand even when hydropower is low and when a large generator is out of order. But when politicians do not allow the construction of new power plants, and tinker with plans and projects, then crises are to be expected when the rainfall gets low and a power plant goes out of order.

Then, the weather or the power plant can be blamed for the blackouts!

The game (of meddling with power plant projects) is the same, and this time around, the players are the same as in 1992, 1997, 2002, and the result: more blackouts, higher costs and a nation eternally in a power crisis!


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