The Finance Minister spoke of the social responsibilities of privatised entities and said reminded the House of the Prime Minister’s call that Independent Power Producers (IPPs) standardise their rates so as not to burden Tenaga Nasional Bhd (TNB) and consumers.
At the opening of the 11th Conference of the Electricity Power Supply Industry last Monday, the Prime Minister said that the price of IPP power to the Tenaga Nasional should be such that Tenaga Nasional is not burdened with having to buy power at a high cost and subsidising the cost of power supply to the rural areas. He further added that the government might have to call a halt in the construction of more IPPs.
The biggest problem is not the problem of having too many IPPs but ensuring a level playing field where IPPs are not given government protection to demand exorbitant selling rates to Tenaga Nasional and Malaysian consumers.
It is an open secret that Tenaga Nasional is very unhappy with the power purchasing agreements it had been forced to conclude with the various as well as most recently, for the electricity to be generated by the Bakun dam.
In 1995, Tenaga Nasional’s payments to IPPs constituted 40 per cent of Tenaga Nasional’s operating costs, with Tenaga unable to dispose of its own excess supply of electricity which it generates at below 10 sen per unit and yet being forced to buy from IPPs at high rates. In one example of this “take-or-pay” contract imposed on Tenaga Nasional, Tenaga will have to pay YTL 75 per cent of the energy produced at 15.5 sen per unit even if it does not require any electricity from it.
It has been reported that as a result of an inequitable contracts, one IPP, YTL Power Generation Sdn. Bhd., could make RM800 million in one year - almost half of what Tenaga was making.
The unfairness of such an arrangement to Tenaga Nasional is secondary to the larger question of the unfairness to the Malaysian consumers, as these IPP profits are finally paid by the consumers and not by Tenaga Nasional in terms of high power tariffs.
As Tenaga Nasional has not be allowed a completely free hand to conclude the power purchase agreements with IPPs, it had been forced to agree to high selling rates demanded by the IPPs, which varies as follows:
IPPs Power sold to Tenaga
(sen per unit)
Genting Sanyen Power Sdn. Bhd 11.8
Port Dickson Power Sdn. Bhd 13.0
Powertek Bhd 13.1
Segari Energy Venture Sdn Bhd 13.5
YTL Power Generation Sdn Bhd 15.5
Bakun Hydroelectric Corp Bhd. 16.5
As the cost of generating power by Tenaga Nasional is well below 10 sen per unit, a Privatisation Watchdog Commission should be set up to look after the interests of the consumers to recommend the standardised rate for the electricity which the IPPs should charge to Tenaga Nasional and the consumers - and bring them more in line with the electricity rates charged by Genting Sanyen Power Sdn. Bhd. at 11.8 sen per unit.
The Government should also seriously consider the proposal that the generation of power be deregulated, so that power producers - including plants run by Tenaga - all compete on the open market.
In Thailand, the Electricity Generating Authority of Thailand (EGAT) invited open bids for power supply from private firms and received offers for as little as 10 sen per kilowatt hour - a far better rate than that offered by IPPs in Malaysia.