The Public Utilities Commission of Sri Lanka (PUCSL) has substantially reduced its preliminary estimate of the electricity tariff increase for the fourth quarter of 2026, exposing significant discrepancies in power-sector cost projections and raising fresh questions about the accuracy and accountability of electricity supply expenditure.
The regulator has revised the proposed tariff increase from an initial 2.88% to 1.46% after identifying questionable and potentially inadmissible cost components in submissions made by the National System Operator (NSO) and other electricity sector licensees.
Although the proposed adjustment is considerably lower than initially anticipated, the latest assessment highlights continuing weaknesses in electricity cost forecasting and the possibility of consumers being required to finance expenditure that does not qualify for immediate recovery through electricity tariffs.
According to the PUCSL’s consultation document, the NSO’s revised bulk supply cost forecast for the quarter, submitted on October 7, amounted to Rs.125.94 billion, compared with Rs.134.16 billion in its original September 4 submission.
The reduction was mainly attributed to lower projected generation energy costs, revised from Rs.105.58 billion to Rs.98.31 billion, while generation capacity costs declined from Rs.19.94 billion to Rs.18.98 billion.
Initially, the regulator calculated a revenue shortfall of Rs.4.44 billion, requiring a 2.88% tariff increase. However, following its preliminary scrutiny, this was reduced to Rs.2.25 billion, bringing the proposed adjustment down to 1.46%.
One significant adjustment involved Electricity Generation Lanka (EGL), whose generation capacity costs were reduced by Rs.669 million. The PUCSL identified the increase as arising outside the framework of the relevant Power Purchase Agreement.
More importantly, the regulator excluded Rs.1.07 billion claimed by Electricity Distribution Lanka (EDL) for loan repayments associated with the Supporting Electricity Supply Reliability Improvement Project (SESRIP).
The Commission maintained that capital expenditure relating to work in progress cannot be recovered through tariffs before the relevant assets are completed and capitalised.
This decision raises an important public-interest issue: electricity consumers should not be made to finance unfinished infrastructure projects through premature tariff recovery.
Another contentious issue concerns the additional costs arising from substandard coal used during the second quarter. While the NSO estimated the financial impact at Rs.2.86 billion, the PUCSL’s own assessment placed it considerably higher at Rs.4.38 billion.
After adjustments, the Commission estimates fourth-quarter electricity supply costs at Rs.156.66 billion against projected revenue of Rs.154.03 billion under existing tariffs.
However, the regulator has not reached a final determination. It intends to examine projected hydroelectric generation, fuel prices and the utilisation of battery energy storage systems before deciding on the adjustment.
The proposed generation mix assumes major hydro will contribute 32.34% of electricity generation, with other renewable sources accounting for 28.81% and coal 25.68%.
The PUCSL has questioned whether the projected 1,551 GWh of major hydro generation is realistic, given its dependence on above-normal rainfall during October–December.
It has also sought further information on the proposed connection of 160 MW of battery storage capacity, for which Rs.703 million has been allocated, without adequate monthly charging and discharging estimates.
The public consultation scheduled for November 5 provides consumers and stakeholders an opportunity to challenge the underlying cost assumptions.
Ultimately, the central issue extends beyond whether electricity tariffs increase by 1.46% or 2.88%. It concerns whether consumers are being charged only for justified, efficiently incurred and independently verified electricity supply costs
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