Regulator rejects move to pass CEB voluntary retirement cost to consumers, throwing Sri Lanka’s IMF-linked power sector reforms into funding uncertainty and raising fresh questions over electricity tariff hikes.
Sri Lanka’s power sector reform agenda has hit a sudden obstacle after the Public Utilities Commission of Sri Lanka refused to allow the transfer of nearly Rs. 8.8 billion in voluntary retirement costs to electricity consumers. The disputed sum relates to payments owed to 2,010 Ceylon Electricity Board employees who opted for voluntary retirement under a restructuring program tied to broader fiscal reforms.
In a letter dated February 20, Energy Ministry Secretary K.T.M. Udayanga Hemapala informed the Treasury Secretary that Cabinet had previously approved recovering the estimated Rs. 8,831 million cost through electricity tariffs. Acting on that decision, the Ceylon Electricity Board incorporated the amount into its January 2026 tariff proposal submitted to the regulator. The proposal also outlined a five year credit facility to manage repayment.
However, the Public Utilities Commission rejected the inclusion of the voluntary retirement scheme cost in the tariff structure. The regulator’s stance was reaffirmed during the recent IMF review mission held on January 26 with officials from the Ministry of Energy and the CEB.
The decision effectively prevents both the CEB and its newly formed successor entities from raising funds through consumer tariffs to meet voluntary retirement obligations. Under the regulator’s position, such recovery mechanisms are not permitted within the approved tariff framework.
The funding dispute emerges amid ongoing IMF backed power sector reforms. As part of restructuring the CEB’s debt, the IMF and the regulator have already agreed to recover Rs. 71,830 million through electricity tariffs over 15 years. In this context, the Ministry has proposed offsetting the Rs. 8.8 billion retirement cost against that projected revenue stream. The government has indicated it may directly release funds to ensure the reform program proceeds without disruption.
