IPPs deny profiteering from electricity sale
An association representing all 14 independent power producers (IPPs) in the country has denied that its members are profiteering by selling electricity to national electricity company Tenaga Nasional Bhd (TNB) at an exorbitant price.
"The rate of return (ROR) is reasonable and had been agreed (upon)," said E Thurumanathan (far right in photo above), council member of the Association of Independent Power Producers (Penjanabebas).
However he refused to divulge the average ROR of IPPs when further pressed.
Thurumanathan was at a press conference chaired by Peter Chin, the Energy, Green Technology and Water Minister, at his office in Putrajaya today.
The 90-minute press conference was called to explain issues related to the gas subsidy provided to the power industry and IPPs.
Representatives of TNB, Petronas, the Performance Management and Delivery Unit (Pemandu) and the Energy Commission were also present.
Thurumanathan revealed that ROR of IPPs had been stated in the power purchase agreements (PPAs) and agreed to by both the government and TNB.
Chin agreed with this.
However the PPAs, signed between the IPPs and TNB have a non-disclosure clause and the documents are not available to the public. Among others, they contain details of the tariff that the IPPs charge TNB.
Lower tariff than Singapore
Many have alleged that the PPAs require TNB to pay an exorbitant price to purchase power from IPPs which is then transferred to the consumers. Umno Youth chief Khairy Jamaluddin Abu Bakar had once described the deal as 'lopsided' and 'unfair'.
They also argue that the PPAs were drawn up in a clandestine manner and were thus not accountable.
To a question during the press conference, both Chin and TNB chief operating officer Azman Mohd claimed that Malaysia’s power production cost is lower than Singapore’s even if there were no subsidy for natural gas.
This means that the IPPs, which contribute 47 percent of the total power capacity, are not producing power inefficiently or overcharging TNB.
Azman said that Malaysia's average electricity tariff is 47.31 sen per kWh if gas prices were to be allowed to rise to the market level of RM40.70 per mmBtu. It is lower than Singapore’s domestic electricity tariff of 57.5 sen which does not enjoy any gas subsidy.
However, he added that the comparison may not be appropriate because different countries have different composition of raw material used to produce power.
Earlier, DAP-linked think tank Research for Social Advancement (Refsa) had alleged that IPPs are producing power inefficiently and overcharging TNB.
According to its estimation, the IPPs will charge about 74 sen per kWh if the gas price is raised to the market level of RM47.42 per mmBtu, whereas the generation cost for Singapore is just 41 sen per kWh and electricity is sold to consumers at 52 sen per kWh.
