COLOMBO — Former Energy Minister argues that water used to compensate for reduced coal-fired electricity generation carried an economic value that was excluded from official loss calculations.
Former Energy Minister Patali Champika Ranawaka has challenged the calculation of financial losses caused by substandard coal imports, alleging that approximately Rs. 2.2 billion in hydropower opportunity costs has been omitted from the assessment.
Making submissions to the Public Utilities Commission of Sri Lanka (PUCSL), Ranawaka argued that hydropower used to compensate for reduced electricity generation at coal-fired power plants had been assigned no additional cost, despite the potential economic value of conserving reservoir water for future electricity generation.
His observations concern calculations associated with 19 coal shipments supplied through Trident during the 2025–2026 procurement period, alongside five additional shipments considered in the assessment.
Ranawaka maintained that the exclusion understated the wider financial impact of the coal procurement controversy.
Breakdown of the Reported Losses
According to the figures presented by the former minister, the identified costs associated with substandard coal included:
- Rs. 7.099 billion: Additional expenditure arising from increased coal consumption because of inferior fuel quality.
- Rs. 93 million: Additional maintenance costs, including expenses associated with ash removal.
- Rs. 8.572 billion: Expenditure on electricity purchased or generated from alternative sources to compensate for reduced coal-fired generation.
Together, these three components amount to approximately Rs. 15.764 billion.
However, Ranawaka argued that the calculations failed to account for the economic value of hydropower generation used to replace part of the electricity shortfall.
The total reduction in coal-fired electricity generation was assessed at 197,673 megawatt-hours (MWh).
Of this amount, approximately 35,209 MWh was supplied through hydropower.
Ranawaka questioned why that hydropower contribution had been assigned zero additional cost in the relevant calculations.
He described the omission as a serious error that could materially affect the assessment of the losses.
Why Reservoir Water Has an Economic Value
The former minister rejected suggestions that hydropower should carry no additional economic cost because reservoirs were overflowing during the period concerned.
According to Ranawaka, reservoir levels had not reached their maximum capacity when the additional hydropower was generated.
He also referred to the operating characteristics of the Mahaweli and Kelani hydroelectric systems, which function through interconnected reservoirs and power stations.
These arrangements, commonly described as cascade systems, allow water released from an upstream reservoir to contribute to electricity generation at downstream facilities.
Ranawaka argued that the presence of a full reservoir at one location did not necessarily mean that additional water had no economic value elsewhere in the system.
His central contention is that water used to compensate for reduced coal-fired generation might otherwise have been conserved for later use.
During periods of lower rainfall, stored water can reduce the need to generate electricity using more expensive fuels such as diesel or furnace oil.
Using water earlier than necessary could therefore impose an opportunity cost, even when no additional payment is made at the time of generation.
Rs. 2.2 Billion in Additional Costs Claimed
On that basis, Ranawaka estimated the economic value of the hydropower used to replace lost coal generation at approximately Rs. 2.2 billion.
If accepted as an additional, non-overlapping cost, this would increase the combined figure derived from the three reported components from approximately Rs. 15.764 billion to Rs. 17.964 billion.
The additional amount remains Ranawaka’s assessment, rather than an independently established financial loss.
Determining the appropriate value would require examination of reservoir storage levels, rainfall conditions, electricity demand, alternative generation costs and the operational limitations of the hydropower system during the relevant period.
It would also be necessary to establish whether the proposed amount overlaps with any costs already included in the existing calculations.
Ranawaka has urged the PUCSL to incorporate the economic value of the additional hydropower generation when determining the overall financial consequences of the substandard coal supplied during 2025–2026.
The dispute highlights an important distinction between the immediate accounting cost of generating electricity from hydropower and the potential future economic value of the water consumed.
Whether the additional Rs. 2.2 billion should be included will depend on the methodology adopted and the supporting operational evidence.
The PUCSL’s assessment of that argument could therefore influence the final calculation of the financial impact associated with the coal procurement controversy.
