Foreign Affairs

The Electricity Tariffs, Populism And Smarter Consumption: Some Reflections

pradeep Jeganatan Colombo Telegraph

Dr. Pradeep Jeganathan

In midst of the noise of populist political posturing on the electricity tariff increase, there has also been, as always, a considerable amount substantial discussion on the issue. While a number of OpEds have been edifying, and of our legislators, Harsha de Silva‘s lone, yet richly informed analytical voice has been most stimulating, I do feel there is an aspect of the matter that has still not drawn attention. In the paragraphs below, I will attempt to delineate this.

I will not go over all the numbers here, yet suffice to say that simply throwing out percentages of the increase does not paint a worthwhile picture. For example telling us that a 30 unit consumer’s bill will rise, 52% is a great, factually correct but misleading headline – that may allow the reader to miss, the fact that for nearly half the electrified households in Sri Lanka (0-30), this increase will amount to Rs. 75/=. Consider at this point that a loaf of bread is 60/=, a packet of milk powder 400/=, and the cost of mobile telecommunication perhaps 400/=, to say nothing of other utilities. Tub thumping about a 75/= increase of one utility is neither here nor there. On the other hand, electricity subsidies, unlike many others are beautiful and elegant since they are not easily transferable to an affluent consumer. Comparing this to the old style ration books, which were, and the new style car permits that are, would clinch the case. In any event this small increase comes in at some thing like Rs. 575 million, which again given the CEB short fall of nearly 60 Billion, is neither here nor there.

The brunt of the increase in rupee terms is borne by the lower-middle band 90-180 consumers. A 150 unit household will see its bill rise, from 2850/= to 4515/=. That’s not just 58%, its also Rs. 1,670/= or so. A 180 unit household will see its bill go up to 5130/= an increase of only 33% and rupee addition of 1275/= ( Yes, the rate of increase decreases with consumption. All figures have been rounded off, and are rough).

That’s a lot.  For a family of four, in the urban service sector, living on some thing like 40,000/= a month, spending some thing like 12% of its income on one utility is a heavy burden, given others like cooking gas, water and telecommunications. Transportation while not a household utility is another thicken slice of the families budget.

So what should be done? Indeed one can agitate for a reduction; but unless this cost is recovered, those very households will see price inflation in other segments of their monthly basket of goods.

Promoting energy efficiency is the other way to go. Indeed if we are to accept and live with the form capitalism we have, it seems rather contrary to suggest as some do that the answer is to discourage consumption. That may be one model of using resources, but its silly to impose it in electricity consumption and promote it in other areas.

For example are we to have a sliding scale of pricing for personal miles flown each year? In this model, if you’ve flown 10,000 miles this year your next ticket would be twice the price of your old one. On the contrary, airlines encourage frequent fliers, by giving them perks. At the bottom of this system of capitalism – which is flawed but still viable – is the idea that flying becomes more energy efficient each year. So its not that you fly less. You fly more, at lower energy cost.

Returning to the lower-middle band of 90-180 customers of the CEB, we can make the same kind of argument, which a false, child like populism is masking. What does that mean? Well, we only speak of light blubs when we speak of energy efficiency. Since lighting is so basic, it seems safely populist to speak of moving from incandescent lighting to CFL or LED lighting. Yet is it unclear, if these well known new technologies are supported by duty waivers.

But once we leave lighting behind we will find that a household in the 90-120 band has both a refrigerator and a television. 40% of Sri Lankan households have a fridge, 80% a TV. But in the lower-middle band I speak of ownership of these appliances has to be pretty universal. It stands to reason; or else where would the units go? What is the average energy efficiency of these appliances as used in the lower middle band? I am not sure any one knows – but we can guess estimate that the turnover cycle among this consumer is long – unlike with the affluent who may turn over their appliances every 3-5 years. Older appliances are far more inefficient than new ones.

Let us look at some numbers. Switching from a 17” CRT TV to a 15” LCD TV (which has the equivalent viewing area), will save 13+ units a month, if daily viewing is set at an avarage 8 hours a day. With a refrigerator, switching from a 8 CF model that’s 20-10 years old to a fresh model, will save more than 50 units a month.

Lets say a savings of 59 units a month. Our 150 unit household is down to 91, and their bill is back down to, 2,225/= or from 4,500/=. A reduction of huge proportions. Our 180 unit household is down to 121 in this simple calculation (the reductions could be higher if the TV and/or fridge was bigger); and their bill is now 3,500 down from 5130. (If 60 units were used as the savings, the drop would even larger, but perhaps misleading, because of the quantum jump at the pricing bands).

No doubt its not that simple; new appliances do have a considerable capital cost. Yet, there is little doubt that home appliance chains sell new low end TVs and fridges by the truck load; the question is how does a consumer learn about her choices?

Shouldn’t we be rating household appliances on an efficiency scale? Shouldn’t such rating be regulated, just as the ingredient listing on a can of fish or packet of sausages is regulated? Shouldn’t there be huge duty concessions for the highest energy band? Shouldn’t consumers be told at the point of purchase, this model will cost you so much a month to run, the other one more?

We don’t seem to doing any of this. At the very top end of things, several retailers advertize energy efficient air conditions. But even they do not actually tell us what the power consumption of the model is. If you walk into one of the large home appliances chains in Sri Lanka  – there are three big ones – and ask casually or other wise (I’ve tried both) – what the power consumption of the reverent appliance is, you will find that the sales staff are clueless. In fact, when recently at the service center to pick up an appliance, I asked the technician in front of me, at the testing table, what was the power consumption of a LCD TV he was testing. He looked blank. I rephrased the question a number of ways; he looked about the back of the TV and said, ’220.’ Yes he did. He was pointing to a white sticker that said, the appliance was rated for 220-240 A/C. For the uninitiated, the rated voltage of an appliance has nothing to do with its power consumption; if a trained repairmen is as clueless as a sales person on these matters, I am very much afraid the consumer may be quite lost. We really need to do better.

My numbers are rough, and I am skeptical, to say the least, about the great project of consumer capitalism. But that’s where we are. Populist protests mask this because consumer capitalism seems dirty, and unworthy of street protests. I think we need to grow up, and for the time being at least, simply consume  smarter.

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