Ministry: IPPs don't enjoy subsidies

Contrary to popular belief, independent power producers (IPPs) do not benefit from fuel subsidies, said Energy, Green Technology and Water Ministry senior director Azhar Omar.

During a special briefing in Parliament yesterday, Azhar said fuel costs were borne by Tenaga Nasional Bhd (TNB), which supplies fuel to the IPPs. He said this allowed consumers to enjoy cheap electricity.

“All this while, people have been talking about subsidies. I believe that this is a misconception by the public because IPPs don’t enjoy any subsidies.

“What they are doing is turning fuel into electricity. Any fuel cost is absorbed by TNB and transferred to the consumers.

“Thus, any government fuel subsidy is meant to ensure that the tarif is low. In principle, the subsidies are enjoyed by the public, not IPPs,” he said.

TNB is contractually bound to buy electricity from a large number of IPPs which use fuel that is subsidised by tax payers, regardless of how much electricity reserve is produced.

Pakatan Rakyat said that should it come to power, they will reduce the reserve from 38 percent to 20 percent, which would help TNB save up to RM870 million annually and increase the national utility’s profits.

Former TNB executive chairperson Ani Arope had also wrote extensively in his book that IPPs were awarded highly favourable contracts at TNB’s expense.

Meanwhile, Malaysian Programme Officer for Power Electricity Reform (MyPower) chief executive oficer Abdul Razak Abdul Majid, who was also present at the briefing, said the tariff hike will save the government RM4 billion.

He added that even so, the government will still be spending RM14 billion to subsidise the country’s electricity supply.

MyPower is a special-purpose entity under the Energy, Green Technology and Water Ministry.

Ministry chief secretary Loo Took Gee, who chaired the briefing, said the saving will benefit the rakyat in different ways.

“With the RM4 billion extra, we can channel it back to the rakyat for other purposes,” he said.