Subsidise consumers, not the IPPs

The federal government should stop boasting that it is using earnings from Petronas to benefit the people in Sabah.

KOTA KINABALU: The federal government must come clean and disclose the ‘secretive content’ on its agreement with Independent Power Producers in the country.

MP for Tawau Chua Soon Bui said the Energy, Green Technology and Water Ministry must explain why it is unable to reveal the details of the Power Producers’ Agreements (PPAs) that it has with the IPPs, especially those in Kota Kinabalu, Sandakan and Tawau.

She said the government’s failure to disclose the nature of the contracts has raised suspicions and encouraged the public to question the justification for the recent power tariff hikes in Sabah where electricity supply already limited.

Chua who is Sabah Progressive Peoples Party (SAPP) vice-president said Sabahans and Malaysians in general deserved to know the truth on the energy commissions of the industries and IPPs in the past and the future.

She accused Tenaga Nasional Bhd (TNB) and Sabah Electricity Sdn Bhd (SESB) of failing to justify the recent increase in the power tariffs.

She said the ministry was making a mockery of Prime Minister Najib Tun Razak’s Government Transformation Program (GTP) by “telling half truths and expecting the public to accept it as the whole truth.”

“The outcry by the people of Sabah seems to have fallen on deaf ears all this while, and the ministry, the TNB and SESB continue to mislead the people with the partial truth,” she charged.

The opposition MP reminded the government that despite the increased rates, electricity supply in the state was still insufficient and inefficient and had set back its industrial development.

Obligated to pay IPPs

It was recently disclosed that the government and the power utilities had entered into lopsided agreements with IPPs.

It is understood that there are two types of payments in the PPAs with the IPPs – capacity payment and the energy payment.

Payment is guaranteed for 21 years based on the IPP’s construction cost. The higher the construction costs, the higher is the capacity payment.

The capacity payment is to be paid by TNB/SESB in Sabah, (or TNB in Peninsular Malaysia) to the IPPs.

This is regardless of whether or not the plant is producing.

The IPPs are paid based on Equivalent Availability Factor (EAF) on its monthly testing.

It was revealed that the initial financial model of IPPs was done at the EPU with TNB and SESB having no chance or choice to negotiate the tariffs with the IPPs.

As for the capacity payment, as long as IPPs are on standby, SESB or TNB are obligated for full payments on the capacities of the plants every month based on the tested EAF, and not based on the consumed amount.

This system guarantees all IPPs in the country millions of ringgit in profits every year with consumers footing the bill.

Chua described the contracts as lopsided and tantamount to “robbing the poor to enrich the privileged few”.

Pointless boast

Federal energy minister Peter Chin however disagrees. He told parliament recently that the government is not subsidizing the IPPs.

But Chua sees this as a blatant lie and contended that “the PPAs are already ensured huge profits enjoyed by the IPPs.”

She also said that it is pointless for the government to keep boasting that Petronas can make more profits by its sale in the international market and its revenue would benefit the people.

“Then why isn’t Petronas morally obligated to the Malaysians in Sabah when Sabah is an oil producing state?

“Isn’t it true that any increase of gas or fuel prices is borne by TNB/SESB and the consumers rather than the IPPs?

“The IPPs continue to pocket the billions of ringgit of huge profits at the expense of the people,” she said.

Noting that Peninsular Malaysia now has an excess of 40% electricity supply, she said it is inevitable that the TNB will pass on the 40% excess production cost to consumers.

Consumers in Sabah pay for the difference in the capacities of the IPPs although they have been proven to be incapable of producing their maximum capacity.