CEB union shocked over Finance Ministry's move to procure LNG out of the bidding process

The Ceylon Electricity Board ( CEB) Engineers’ Union has raised objections regarding the Finance Ministry’s appointment of a technical committee to negotiate the unsolicited proposal from the US- based New Fortress Energy ( NFE) to supply liquefied natural gas ( LNG) to West Coast Power Plant (WCPP).

The committee is also mandated with renegotiating the terms of an existing power purchase agreement ( PPA) between the CEB and WCP Ltd (WCPL). This places it at odds with the Power Ministry and the CEB which have already initiated a competitive bidding process to procure LNG for all existing and future power plants around Colombo (including WCPP). It is now at a final stage.

Expressing shock at the Finance Ministry’s “unwarranted move” to appoint the committee, the CEBEU has written to the Power Ministry Secretary warning that “any unsolicited procurement which might badly affect the ongoing bidding process should not be encouraged”.

“One of the main objectives of this committee is said to be negotiating terms of the existing PPA between the CEB and WCPL,” the letter states. “As you are well aware, the PPA contains very sensitive parameters which finally account for payments running into billions of rupees. Hence, any amendments to this PPA (if required) should be made very carefully, as per the procurement rules and regulations of the country.

Under the Electricity Act, the transmission licensee is bound to purchase electricity at “least cost”. “Generally, the fuel cost represents the major portion of an electricity unit,” the CEBEU says. “The condition of ‘least cost’ can only be fulfilled by procuring LNG for the WCP through a competitive bidding process. However, it is not clear as to how the CEB and the PUCSL ( Public Utilities Commission of Sri Lanka) can justify the ‘ least cost’ of this plant if LNG is procured through an unsolicited proposal.”

The union has also said the composition of the technical committee is “very strange”. It includes two retired CEB officers “who cannot be held responsible for their actions”. The Chairman is also a retired officer currently functioning on a six-month contract at the ministry. And there is a member from LTL Holdings, the operations and maintenance contractor of WCCP, in the committee.

“We are of the view that these actions are taking place against your conscience, too,” the union tells the Power Ministry Secretary. “But as the Chief Finance Officer of the Ministry, you are responsible for ensuring that a legitimate procedure is adhered to by the institutions under your purview.”