JAAF Denounces PUCSL-Approved 66% Electricity Tariff Hike

● JAAF is perplexed by PUCSL overlooking the industry’s submissions and cautions.
● Current tariff increase based on speculative increasing demand, despite trends
showcasing reduced demand
The Public Utilities Commission (PUCSL) granted approval to a 66%
electricity tariff hike effective 15 th February 2023, resulting in exponential increases in costs in
the apparel industry, which in turn threatens the continuity of operations, competitiveness and
sustainability of a USD 5.5 billion industry, which remains the backbone of Sri Lanka’s economy.
The current increase is a further 31% with overall increase of 165% since June 2022. This
translates to an increase in manufacturing costs of close to 5% just on electricity.
The Joint Apparel Association Forum (JAAF) is perplexed and surprised that the written and oral
submissions presented by the industry on tariff hikes to the PUCSL public consultation have
simply been overlooked. It discerns that the approved tariff hike was effected devoid of
stakeholder consensus and done simply as a tick-box exercise to concede to legal processes.
The following are the industry-relevant cautions and proposals submitted by the Secretary
General of JAAF Yohan Lawrence at the PUCSL public consultation:

1.) Overestimation of demand by CEB – As highlighted by JAAF numerous times, Q4 of
2022 experienced a 15-20% decline in orders (reduction in demand) due to the
continuing global recession. JAAF estimated this downturn of economic activity to
continue into the 2H of 2023. With this abrupt fall in demand, the industry faced shorter
working hours and decreased demand for electricity. PUCSL’s documentation too
acknowledged that electricity generation in January 2022 was much higher than in
January 2023. However, the then-proposed tariff increase was based on an increased
electricity demand as estimated by the Ceylon Electricity Board (CEB), which was not
quantified taking the January 2023 pattern into account.
JAAF raised caution stating that the overestimation of electricity demand will result in
higher projected costs and requested the CEB and PUCSL to hold off on electricity tariff
revisions until an accurate assessment of electricity demand was made. JAAF further
requested the CEB to lower its own generation costs before tariff adjustments.
JAAF iterated that with the country’s single biggest industrial exporter facing a
reduction in demand, an electricity tariff increase based on an unsubstantiated
increased electricity demand makes limited sense.
2.) The impact of increased tariffs on competition – It is vital that Sri Lanka apparel
remains competitive with other apparel manufacturing nations and in the international
market. With last year’s electricity tariff increases, Sri Lanka stood on par in US dollar
terms with regional giants like India, Bangladesh, Vietnam, Indonesia and Thailand
offering USD 9 to10 cents per kWh. Meanwhile, African countries including Benin and
Togo which are aggressively pushing for foreign investments offer a much lower rate of
USD 8 cents per kWh.

With the increases that have gone through, this will leave Sri Lanka with a tariff of
around 12cts per kWh, which will undoubtedly make Sri Lanka uncompetitive and
unattractive to investors.

3.) Impact of repetitive off-peak tariff increases on Sri Lanka apparel – As highlighted
by JAAF during the previous tariff hike, off-peak tariff increases defeat the very purpose
of having an off-peak tariff slab, which is to incentivize businesses to operate during off-
peak hours.
The off-peak tariff was increased from LIKR 6.58 / kWh to LKR 15 in 2022. The new
PUCSL document suggested an off-peak increase of LKR 34 / kWh from LKR 15. This
denotes a 400% increase in less than 12 months.
JAAF highlighted that Sri Lanka needs to grow a dedicated textile sector, especially with
the government investing heavily in the Eravur textile zone. Fabric mills must operate 24
hours a day to attract investors. Therefore a 400% increase in off-peak tariffs is counter-
productive to the objective of growing a textile base in Sri Lanka. JAAF further stressed
that this increase will discourage companies moving to off-peak operations creating an
unnecessary incentive to sustain peak production and thereby increased electricity
generation, which is in stark contrast to any basic economic rationale.
4.) Renewable energy and rooftop solar- JAAF urged the CEB to urgently scale up the
commissioning of renewable energy including rooftop solar, aligned with the
government’s commitments to generate 70% of the country’s energy requirements from
JAAF emphasized that Sri Lanka needs a commercially viable tariff for Net Plus. The
apparel industry has installations of about 200 MW of solar power. However, these
companies have not been paid for the last 7 to 8 months. In the event CEB is unable to
honour delayed and future payments, JAAF urged the existing companies to be
permitted to move to Net Metering. JAAF illustrated that this will immediately eliminate a
cash flow burden from the CEB, allowing the increase of the solar footprint, which will in
turn reduce demand on the burdened national grid allowing the CEB to generate
electricity at a lower cost.
5.) Power wheeling – JAAF has been lobbying for power wheeling for an extended period
of time. This is the single biggest catalyst in the move to renewable energy and will
undoubtedly be a conduit for investment in the sector. Increased private investment in
renewables will reduce the load on the CEB allowing the SOE to reduce its pricing given
to the consumer.
JAAF urged the amendment of the CEB Act to be expedited to allow for power
Taking these facts into consideration, JAAF would like to express deep concern on the
government’s decision to increase the industry electricity tariff rates by 30%. JAAF urges the
government to consider facts and data when making policy decisions of this scale and nature.

At a juncture where the apparel industry is confronting a decrease in demand, electricity tariff
increases based on speculative increased demand is blatantly inessential and will only burden
an already embattled industry that binds the country’s economy in these unprecedented times.

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