At the opening of the 11th Conference of the Electricity Power Supply Industry in Kuala Lumpur on Monday, the Prime Minister, Datuk Seri Dr. Mahathir Mohamad said that Independent Power Producers (IPPs) should not burden Tenaga Nasional Bhd. by demanding high prices for their electricity.
He 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.
The Prime Minister also said that the goverenment might have to call a halt in the construction of more IPPs.
The biggest issue is not the problem 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 open secret that Tenaga Nasional is very unhappy with the power purchasing agreements it had been forced to conclude with the various IPPs as well as most recently the power purchase agreement for 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, and this great burden on Tenaga Nasional will finally be a great burden on the consumers, who will ultimately have to foot the bill in terms of increased tariffs.
If Tenaga Nasional Bhd. had been allowed a completely free hand to conclude the power purchase agreements with the IPPs, it would not have agreed with the high selling rates demanded by the IPPs as Tenaga Nasional could generate power at much lower costs.
For instance, Tenaga Nasional is now forced to buy power from the IPPs at the following rates:
IPPs Power sold to Tenaga at (sen per unit)
Genting Sanyen Power Sdn. Bhd 11.8
Port Dickson Power Sdn. Bhd 13.0
Powertek Bhd 13.1
Segari Energy Ventures 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, there is a need to review all the power purchase agreements signed between Tenaga Nasional and the IPPs to bring them in line with the electricity rates charged by Genting Sanyen Power Sdn. Bhd. at 11.8 sen per unit.
(23/10/96)