Thursday, December 16, 2010

Public Representations on the Consultation Paper: PUCSL Public Hearing for tariff setting 2010- 2011 June

Members of the commission and my dear friends,
The Government policy is to subsidize the electricity for poor, which is highly commended since electricity is a basic need.
1.       My question is, does this proposed tariff structure subsidize the real poor of our country?
Take a real example of a household that I know of 8, living in a cramped flat near Colombo. They need fans for ventilation. Assume they have 8 fans of 100W working for 8 hours. That and only that  fans will contribute 200 units per month. Now the minimum bill that they get will be 300 units. The total bill is over 8000. Now  there income is around 20000. 40% of income is for electricity. The irony is that there is a surcharge of 10*300 , 3000 on their bill? Does using more electricity always imply that the household is not poor?
Now take this household that I know of consisting of 4 in a sub urban area, well ventilated and spacy , so no fans r required. Being educated they use efficient energy management plans to keep the bill in about 75 units. In effect they are subsidized by to the amount of Rs 825/= , is this fair? Well suffice it to say  the income of this household is 150,000/=
Does using less electricity always imply that the household is poor?
The irony is that the poor family is effectively subsidizing the rich family…
Are the people who are using more electricity responsible for supplying the basic needs of the poor people of our country? My belief is that it is the responsibility of the government.  Therefore this huge cross subsidy must stop if we are to have a healthy electricity industry with cross reflective tariff.
Now how should be determine if a household need to be subsidized? This subsidy is similar to Samurdhi. The subsidy must be decided on a case by case basis with a proper evaluation method which includes, income of the family , number of dependents etc. , This is fair since the electricity subsidy amounts to at least Rs1000/ month and not a negligible amount. In fact I suggest that the subsidy for the household thus chosen should be even subsidized more, implementing the government policy thoroughly.

2.       Repercussions of having a highly cross subsidized electricity sector is that it will b adversely (resulting in an extremely skewed electricity charge sectorwise) affecting the informal SMEs of our country. They will use over 300 units and will find it difficult to compete with imports or the mass scale industries.  Since informal SMEs is the life blood of our economy it is imperative that we address this concern.

3.       25% reduction of tariff for 25 percent in electricity rates has been effected as a concession to places of religious worship, government hospitals, schools, vocational training centers and universities.

These places should be subsidized agreed. However as the institutions are large consumers, blindly giving large concessions will only worsen the rampant mismanagement of energy. It is widely known that they exploit the subsidy and waste electricity (since they do not feel the real cost).

My proposal is to have a upper limit for the subsidy which is evaluated by PUCSL in a case by case basis.  (The measurement might be floor area, number of students, etc). If it is exceeded the institutions need to be fined by having a higher price for electricity. Similarly concessions must be given (e.g.:  10% discount) for better management.

(Even if not evaluated in a case by case basis having an upper ceiling for units consumed  to the Rs 10.5 charge is a must)
Assuming 1000 units of usage the subsidy will be over Rs 10,000/=. Per annum Rs 120,000, since this is a significant subsidy a case by case evaluation each year to decide the individual concession/fine is justified.

This action will force these institutions to look forward to energy conservation and even hire dedicated energy managers.

Thank you!