No power tariff hike if Pakatan rules

PKR says this can be achieved through contract renegotiation with the IPPs.

PETALING JAYA: PKR promised today to slash power rates by throwing in a new deal with the independent power producers (IPPs) including reducing its profit which the opposition had described as “obscenely high”.

Wong Chen, the party’s investment and trade bureau head, said under the current contracts, the IPPs’ return of investments (ROIs) stood at a whopping 19% and a Pakatan Rakyat government would reduce it to 10%.

This means the national power company, Tenaga Nasional Bhd (TNB), would save up to RM2.6 billion annually and gives it a breathing space to service its huge debt

TNB recently said it has a relatively low operating income and it is RM23.1 billion in debt. Much of it is due to the volatile fuel prices and in particular coal.

The government’s efficiency unit Pemandu said TNB must jack up its tariff rates to at least 41% in the near future or an increase every six months for up to five years to offset its growing debt.

Wong, however, argued that rate hikes are not necessary if the ruling coalition has the political will to force the IPPs, seen as politically well-linked, to accept a fairer and just deals.

Some are owned by renowned tycoons like Syed Mokhtar Al-Bukhary and Ananda Krishnan who are accused of making their fortunes through their close relations to the Barisan Nasional government.

High profit

“Even if the ROI is at 10%, which is the global benchmark, it is still a lot of money for them. What we want is to cut their obscene profit,” Wong told reporters at the party’s headquarters here.

He added that bond repayments and finance costs are already factored in the 10% ROI and the government’s reasons not to renegotiate with the IPPs – to honour the current contracts – was unacceptable.

The BN government had also failed to justify the staggeringly high power reserve margin of 38% given to the IPPs, said Wong.

For every 1% of reserve margin, a sum of RM483 million is lost as stranded investment. The bloc said it will cut the margin to 20%.

An 18% slash would save up to RM870 million a year for TNB. Add up to the RM2.6 billion saved from the reset ROI of 10% for the IPPs, it will mean the national power company would save RM3.47 billion a year.

Wong projected that the new deal will double its annual net profit to RM5.61 billion annually.

“These higher profits could then be used to pare down debts. Most importantly, the pressure to increase electricity tariffs for consumers should also evaporate,” he said.