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emergency power
14 June 2019
2034.
It is alleged that this decision had been taken to procure 200MW from Turkey
without calling tenders at a much higher price than that of the prices the CEB
is now in the process to procure 100MW from three selected companies after
competitive bidding. These three companies are from the UK, Dubai and
Hong Kong.
According to the documents this newspaper is in possession of, these three
companies have agreed to supply electricity for six months within the price
range of Rs.28.43 to Rs.30.63 per kW, although the proposed plan by the good
governance administration to procure 200MW from M/s Karadeniz Holdings
from Turkey under an emergency situation is approximately Rs.35 per kW
including government taxes.
According to Sri Lanka Electricity Act, when the Cabinet determines that
there is an emergency situation it warrants procuring of emergency power, at
least cost, and allows the Ceylon Electricity Board (CEB) with the approval of
the Public Utilities Commission of Sri Lanka to procure emergency power
bypassing Government procurement guidelines.
The prices of the three bidders from the UK, Dubai and Hong Kong are -
lowest bid submitted for 24MW for Pallekele Grit Sub-station for six months
was M/s Aggereko International Project Ltd; of Glasgow, Scotland, the UK
for Rs.30.20 per kW. 10MW for Galle Grid Substation was M/s Aggereko
International Project Ltd; of Glasgow, Scotland, the UK for Rs.30.20 per kW,
10MW for Mahiyangana Grid Substation was M/s Altaaqa Alternative
Solutions; of Dubai, UAE for Rs.30.58 per kW, 08 MW for Polonnaruwa Grid
Substation was M/s Altaaqa Alternative Solutions; of Dubai, UAE for
Rs.30.63 per kW, 24MW for Hambantota Grid Substation was M/s V Power
Holdings Ltd; of Hong Kong for Rs.28.43 per kW and 24MW for Horana
Grid Substation was M/s V Power Holdings Ltd; of Hong Kong for Rs.28.70
per kW
It is in this backdrop, the cabinet of ministers has given the approval to
procure 200MW emergency power based on an emergency situation without
following procurement guidelines from Turkish ship mounted power plant
(Powership) from M/s Karadeniz Holdings for six months, which will cost the
country approximately a staggering Rs.15 billion.
On 11 April 2019 Karadeniz Holdings has submitted a proposal for the
immediate supply of 200MW power ship. On the same day, Prime Minister
Wickremasinghe in a confidential note to the Cabinet requested its approval
to announce a calamity situation in the country to make way for the CEB to
purchase power from the Turkish Company on an emergency basis without
calling tenders.
The confidential note dated April 11, 2019, to the Cabinet (Ref:
PMO/NC/12/2019) under the heading- Measures to be taken to overcome the
challenges in the provisions of an uninterrupted power supply and
continuation, Premier Wickremesinghe states that under his chairmanship,
the Ministerial Committee has decided to determine that there is an
emergency situation and there is a need to procure emergency power for an
uninterrupted power supply.
The letter further states, ‘Reference is requested to the cabinet decision no:
19/1185/113/040 dated April 9, 2019, which appointed a Ministerial
Committee under my Chairmanship to submit recommendations to the
cabinet on the measures to be taken to overcome the power crisis.
‘Accordingly, the Ministerial Committee met on April 10, 2019 and decided to
determine that there is an emergency situation under Section 43(4)(c)(ii) of the
Sri Lanka Electricity (Amendment) Act No: 31 of 2013 which compels the
Minister of Power, Energy, and Business Development to purchase emergency
power.
‘The relevant Section of the Sri Lanka Electricity (Amendment) Act No: 31 of
2013 states, ‘to meet any emergency situation as determined by the cabinet of
ministers during a national calamity or a long term forced outage of a major
generation plant where protracted bid inviting process outweighs the potential
benefit or procuring emergency capacity required to be provided by any
person at least cost’.
"In 2016, the PUCSL had forecast a possible power shortage in 2018/2019, as
none of the major power plants identified in the LCLTGEP except for the
Norochcholai, Colombo Barge and few other hydropower plants have not
even started commencing the construction work"
Subsequent to this move, by letter dated March 29, 2019, to the Chairman and
General Manager CEB by Secretary Ministry of Power, Energy and Business
Development Dr. B.M.S. Batagoda states that the Cabinet has authorised him
to grant approval to award the contract to the selected bidders subject to the
covering approval for the Cabinet of Ministers.
The letter states: ‘Supply of 100MW of Supplementary Electrical Power to
CEB on a short term basis for 6 months to mitigate the power shortage
envisaged due to insufficient power generation to the system
‘This has reference to the Cabinet Memorandum No: 05/ 2019/ PE dated
January 11, 2019, and the Cabinet decision No: 19/0173/113/001 dated
January 14, 2019, on the above procurement.
‘The Cabinet has authorized the Secretary to the Ministry to grant approval
to award the contract to the selected bidders subject to the covering approval
for the cabinet of Ministers. On March 6, 2019, Hon. Minister has informed
the Cabinet that the Ministry does not intend to procure additional power on
short term basis as decided by the cabinet at its meeting held on January 22,
2019, expecting to manage the power situation without procuring
supplementary power.
‘However, with the experience, we had during these two weeks power
situation further aggravated which resulted in power cuts. The Government
policy is not to allow power cuts at any cost. The people are very unhappy
about the power cuts situation and criticizing the government, Ministry and
the CEB. This is very bad for the power sector. Already the impact of the
economy during the last few days of load shedding is very severe, particularly
the loss of confidence in investors. Therefore on March 26, 2019, it was
decided at the Cabinet Meeting to take all measures to avoid power cuts. The
cabinet also appointed following committee- Ministers Ravi Karunanayake,
Kabir Hashim, Daya Gamage and Dr. Harsha De Silva to propose urgent
remedial measures to avoid power cuts.
‘Based on these decisions the Prime Minister convene a meeting with the
committee on March 27, 2019, at the parliament complex with the
participation of officials of the ministry and CEB.
"It is in this backdrop, the cabinet of ministers has given the approval to
procure 200MW emergency power based on an emergency situation without
following procurement guidelines from Turkish ship mounted power plant"
‘At this meeting, it was decided to take all possible measures as decided by the
Cabinet including the reactivation of the suspended procurement of 100MW
supplementary power. The Minister instructed to procure this 100MW for six
months even though tenders called for one year. Since this is national
importance to avoid power cuts this ministry convened a meeting on March
28, 2019, with recommended bidders to supply 100MW supplementary power.
‘All three bidders agreed to provide supplementary power at their selected
sites for six months. Accordingly, you are hereby authorized to issue letters of
intent and sign the power purchase agreements with the following investors
for a six month period at the terms and conditions which they have agreed.
‘Since cabinet has originally authorized this ministry to award the contracts
subject to the covering approvals of the Cabinet. This Ministry will take
action to obtain covering approval of the cabinet to award the contracts.
‘the cabinet has approved to undertake this procurement under Section 43.4
(C)(ii) of Sri Lanka Electricity (Amended) Act No: 31 of 2013 so that there is
no necessity for calling tenders. However please inform the PUCSL on this
procurement which is made as an emergency power procurement. Dr. B.M.S.
Batagoda.
Meanwhile the CEB issuing a report dated April 11, 2019, sent it to the
subject Minister on immediate power requirement and possible
interconnections, for necessary actions to cater the supply shortage for the
years 2019- 2021.
It further states: ‘The approved Least Cost Long Term Generation Expansion
Plan (LCLTGEP) 2015-2034 has identified 1x300MW natural gas operated
combined cycle power plant to be commissioned by 2019. Also, the approved
LCLTGEP 2018-2037 has identified the requirement of having 1x300MW
natural gas operated combined cycle power plant to be commissioned by 2019
and 2021 respectively.
As there was no proper response from the CEB, the PUCSL has brought this
to the notice of the Sectoral Oversight Committee of the Parliament. When
the PUCSL informed this to the Cabinet Committee on Economic
Management by letter dated November 18, 2016, it had been referred to the
Sectoral Oversight Committee. As a result, line Ministry Secretary by letter
dated June 15, 2017, has requested the CEB to appoint project managers in
order to carry out the stalled work but nothing happened thereafter.
A Member of Parliament who is one of the members of the Sectoral Oversight
Committee of the Parliament told this newspaper that the reason for the non-
compliance of the LCLTGEP is solely because of a particular union in the
CEB. “There is a mafia in this sector. This union is powerful and work hand
in glove with many companies in the power sector and they want these
companies to get the power plant contracts. If these companies do not get the
tenders, this union takes every possible step to hinder the projects. In this
particular low-cost power plan project, the Parliament Oversight Committee
has unearthed the exact reasons for non-implementation of this plan. It is high
time that the Government calls explanation from these officers rather than
allowing them to ‘flourish’ by granting the necessary approvals to go ahead
with their goal- to procure emergency power,” the MP said.
Meanwhile, questions have been raised as to why the CEB Engineers Union is
accusing the PUCSL of sabotaging their plans to build new power plants and
that was the reason for them to restrict power supply before the Sinhala New
Year.
Highly reliable CEB official under the strict condition of anonymity told the
Daily Mirror that they are not surprised as to why the Ministerial Committee
on April 11, 2019, after granting permission to purchase 100MW following
tender procedure decided to determine that the country is in a calamity and
needs to purchase more emergency power. “We are neither facing a national
calamity nor a long-term forced outage of a major generation plant. The CEB
in one of its reports had informed the Minister that the immediate capacity
required to meet the country’s demand for the coming six month period is
470MW and need to procure this immediately to avoid power cuts. Why
couldn’t the Government in January take a decision to purchase a higher
capacity emergency power rather than going only for 100MW and a few
months later 200MW without following a tender procedure?
“It is a known fact that a certain high profile group in the CEB and the
Ministry do not want to implement the low-cost power plants though it is
beneficial to the country’s economy and the electricity consumers, but not
benefit them ‘personally’. Even the politicians know this well. In such a
background, why cannot this ministerial committee call explanation from
these officers who have failed to implement low-cost power plants since 2016,”
sources said.
Meanwhile DGM Eng. N.S. Wettasinghe has sent an e-mail to the President
CEB Engineers Union on May 3, 2019 asking what their stance is in procuring
emergency power from Turkish ship on short term basis whether the union is
withdrawing their TU Action with PUCSL of this procurement or accepting a
procurement carried out without a proper competitive tendering procedure to
which there was no response from the EU.
High cost of emergency power
Ceylon Electricity Board’s
(CEB) power purchase data shows clearly how costly emergency power is,
compared to the prices they could have purchased it from least-cost power
generation plants.
Chairman PUCSL Saliya Mathew’s letter to General Manager CEB, Y.M.
Samarasinghe further states, ‘The PUCSL approved the LCLTGEP on
September 15, 2016, and it is the sole responsibility of the transmission
licensee to adhere to approved LCLTGEP and take immediate steps to
implement it, given the criticality of the power supply during 2017-2020.
‘The Commission observes, that the transmission licensee has deviated from
the approved LCLTGEP according to the letter dated November 11, 2016.
Delay in implementation of the power plants from the approved LCLTGEP
will result in failure to meet the electricity demand during the 2017-2020
period.
"It is high time that the Government calls explanation from these officers
rather than allowing them to ‘flourish’ by granting the necessary approvals to
go ahead with their goal- to procure emergency power"
“ Since May 2018, the Ceylon Electricity Board has not provided any data to
PUCSL. Therefore, PUCSL is facing greater difficulty to analyse and
determine the gap between the exact demand and the supply. There were
instances where we rejected the emergency power requirement due to non-
availability of electricity shortage as such. One classic example is the
emergency request in 2016. When the CEB requested to purchase 60 MW in
2016 on a short term basis, this Commission analyzed the data and sought for
clarification to identify the real need. In that process, CEB accepted that the
proposed short-term power purchase is not required. So, if we had required
data to analyse the current situation we could have assessed and verified the
said shortage without any delay and the process also will be very transparent
for anyone. CEB’s power plant procurement is guided through a transparent
process stipulated in the Sri Lanka Electricity Act. PUCSL, being the
regulator for the industry, is responsible for ensuring that the CEB purchases
power at the least cost because the cost of power purchases is borne by the
poor tariff consumer at the end of the day. According to Section 43 (2) and
section 43 (4) of the Electricity Act, CEB should obtain prior approval from
the regulator in order to procure any power plant. As of today, we have not
received a request to purchase emergency power from Turkey,” Herath
stated.
All attempts to contact Secretary Power, Energy and Business Development
Dr. B.M. S. Batagoda for a comment failed. Although a text message was sent
seeking a comment the Ministry Secretary till the paper went for
publication.
Posted by Thavam