The Sri Lanka energy sector will soon be restructured to improve efficiency, according to industry sources.

This sector is currently controlled by the Ceylon Electricity Board (CEB), the state-owned generation and transmission monopoly, and Lanka Electricity Company (LECO) which handles distribution.

Under the restructuring plan, the two organisations will be divided into separate areas of generation, transmission and distribution. Further divisions will be made in generation between hydro and thermal. It is planned that a single entity will handle transmission, and many different entities will handle distribution. It is also planned to set up an independent regulatory commission to enforce standards.

A new electricity act to facilitate this process within a regulatory framework is also on the cards.

Sri Lanka currently loses about 18 per cent of power in transmission and distribution, and this is considered to be unacceptably high. Currently, only 52 per cent of Sri Lankans have access to electricity. As penetration continues to grow, and as consumption per capita rises, total power demand will rise. It is estimated that power demand will grow at a rate of 8-10 per cent per year.

CEB has estimated that approximately $2.5 billion will be needed over the next decade to meet this demand. Of this, $1.5 billion would be for generation, and $1 billion for transmission and distribution. Sri Lankan officials have pointed out that international lending agencies who funded projects in the past are now practising a policy of not lending funds to sectors that can attract private sector participation, creating a need for financing in the power sector.