AG pulls plug from Ravi's plans: Two new committees to buy power
The Government has set up two committees to procure 500mw of electricity after the Attorney General (AG) shot down an earlier proposal to buy 200mw of “emergency power” from a barge-mounted plant without following tender procedures.
The appointment of the new technical evaluation committee ( TEC) and Standing Cabinet appointed procurement committee (SCAPC) is the continuation of a saga dating to when Ravi Karunanayake became Power and Energy Minister in January this year.
Since then, he has submitted multiple Cabinet papers seeking approval for varying quantities of emergency power without any scientifically backed data on how much the country really needs. In May, Cabinet sanctioned a proposal to buy 200mw from a Turkish Karpower barge to be connected at Kerawalapitiya for six months; and another 200 Karpower barge to be connected in Galle for nine months.
However, the power purchase agreement ( PPA) submitted by Karpower International DMCC of Duabi ( UAE) for the 200mw barge-mounted power plant to be connected in Galle was sent to the AG’s Department for an opinion by the Ceylon Electricity Board (CEB).
The CEB’s Additional General Manager ( Transmission) has already expressed concerns
regarding this PPA. He has said, for instance, that the deal has not been specifically approved as an “emergency procurement” under the Electricity (Amendment) Act.
The relevant section of the law approves the purchase of electricity outside of tender procedure only “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 outweigh the potential benefit or procuring emergency capacity required to be provided by any person at least cost”.
The CEB was earlier advised by the AG that emergency power could be procured on these grounds alone. But there is no evidence, the Department observes, that “Cabinet has been apprised of the above opinion”.
“Accordingly, it is re- iterated that the determination of an ‘emergency situation’ by the Cabinet of Ministers should be done only where there is: a) a national calamity; or b) a long-term forced outage of a major generating plant,” the AG’s latest opinion states.
“Prior to July 2019, no material had been provided to establish that a national calamity or a long-term forced outage of a major generating plant has occurred,” Senior Depuity Solicitor General Milinda Gunetilleke has observed.
“The Cabinet Memoranda and Decisions submitted do not reflect a decision made by the Cabinet that there is a national calamity or a forced outage which is recognised as an emergency situation in terms of the above provision,” he states.
The CEB, too, has not submitted any material to state that such a situation has arisen, the AG observes. “Moreover, observations have been made at several instances that the said extra capacity requirements are due to delays in procurement and commissioning of power plants identified in the Least Cost Long- Term Generation Expansion Plan...,” Mr Gunetilleke says.
Administrative delays in procurement do not qualify as a basis for procurement of the barge- mounted plant under the law, the AG’s Department affirms.
The Department has, however, provided the Government with an option. A Cabinet decision of July 7, 2019, records Megapolis and Western Development Minister as stating that water levels in the reservoirs used for electricity generation were depleted owing to the drought and a power shortage towards the end of the year could not be avoided.
This criterion may form the basis for a decision by the Cabinet that would qualify under the law if the Cabinet of Minister determines on the basis of relevant material that the procurement may proceed. But the CEB is statutorily obliged to engage in the process “independent of the Cabinet of Ministers”.
In terms of available documents, the envisaged unit cost of purchase has been submitted by Karpower as Rs 26.20 but the price per kilowatt hour unit is adjustable according to the US dollar exchange rate. In this regard, the Finance Minister has said “no undertaking can be given to the effect that the taxes and the exchange rate will remain static during the six month period”.
Subsequent observations by the Megapolis Minister also set out certain hidden costs and say that the actual cost of a unit of power and 70 percent plant factor would consequentially be Rs 39.664. This again does not satisfy the requirements of the law.
The AG’s Department stresses that the CEB must negotiate with Karpower and also that the approval of the regulator, Public Utilities Commission of Sri Lanka (PUCSL), is mandatory. This is a rap on the knuckles of the Power and Energy Ministry which had hoped to sign the PPA “pending approval” by the PUCSL.