Government should require Tenaga Nasional to hold public hearings to give consumers a chance to be heard before approving another round of power tariff hikes as Ahmad Tajuddin’s justification is self-serving, weak and most unconvincing

Media Statement
by Lim Kit Siang

(Petaling Jaya, Sunday): Tenaga Nasional executive chairman Datuk Dr. Ahmad Tajuddin Ali said yesterday that consumers have to pay higher power rates now if they want to avoid paying more in the long run.

He said tariff increases would improve Tenaga’s standing in the financial market, resulting in better borrowing rates from financial institutions.

He explained: "If the company is unattractive, interest rates for our borrowing to develop our capacity will be higher. The pressure will then be on us to hike tariffs in future to service the loans."

Such a justification for another round of power tariff hikes is self-serving, weak and most unconvincing. Ahmad Tajuddin is not bothering to present any case to the consumers for another round of power tariff increases, but was just issuing an ultimatum to the consumers - either power tariff increase now or even higher rate of power tariff increases later. What type of a case is this?

Tajuddin said that another round of tariff increases was meant to send "the right signals" to the market following Tenaga’s downgrading from positive to stable in Standard and Poor’s revised rating outlook for the company.

The pertinent question is what were the reasons for the downgrading of Tenaga’s credit rating. From Ahmad Tajuddin’s account, it would appear that the consumers are the culprits for Tenaga Nasional’s downgrading in its credit rating, and not the Tenaga Nasional management, whether for its "world ranking" for the frequency and severity of power interruptions or for sacrificing the interests of the consumers in entering into exorbitant power-purchase agreements with Independent Power Producers (IPPs).

Yesterday, Tenaga Nasional signed another power purchase agreement with independent power producer Inter Hidro Corporation to buy electricity from its Kenerong hydroelectric dam in Kelantan.

After the signing ceremony, Ahmad Tajuddin said Tenaga Nasional will no longer accept unreasonable power rates from IPPs because of the increased financial burden on the company.

He said that a greater understanding now existed of the implications of the IPP rates on all parties, including the Government, Tenaga and the public and that Tenaga was now in a better position to negotiate with new IPPs because it had ample power capacity and could afford to wait.

This should give relief countrywide, except such relief was very short-lived when consumers realised that the latest Power Purchase Agreement (PPA) which Tenaga had just singed with Inter Hidro Corporation was on the highest scale of the IPP rates, i.e. between 16.5 sen to 17.5 sen per unit of electricity for 30 years from the year 2000.

The power purchase agreements which Tenaga Nasional had concluded with IPPs which Ahmad Tajuddin now agrees are very exorbitant rates which had to be paid by Tenaga Nasional are as follows:

IPPs					Power sold to Tenaga
                                           (Sen per unit)

Genting SanyenPower Sdn. Bhd. 11.8
Port Dickson Power Sdn Bhd 13.0
Powertek Bhd 13.1
Segari Energy Venture Sdn.Bhd 13.5
YTL Power Generation Sdn. Bhd. 15.5
Bakun Hydroelectric Corp Bhd 16.5

If Tenaga has learnt the lessons from these PPAs which impose exorbitant costs finally passed on to the consumers, then the latest PPA which it had concluded with IPP Inter Hidro Corporation should be on the median, if not on the lowest, scale of the IPPs rates from 11.8 sen to 16.5 sen per unit. Instead, the latest PPA is on the highest scale of 16.5 sen to 17.5 sen per unit.

The latest PPA with IPP Inter Hidro Corporation is unacceptable, especially as the cost of generating power by Tenaga itself is well below 10 sen per unit.

I had said in Parliament that it is an open secret that there are companies which are prepared to generate and sell electricity to Tenaga Nasional at less than 10 sen per unit, and this had never been denied or contradicted by either the Minister or Deputy Minister for Energy, Telecommunications and Posts.

Based on the RM2.26 billion which Tenaga had to pay IPPs last year, Tenaga - which eventually should mean the consumers - Tenaga would save RM135 million a year if the IPPs reduce by one sen per unit. In the circumstances, the consumers have a right to be outraged by the failure of Tenaga Nasional to look after consumer interests in concluding the latest PPA with another IPP in Kelantan.

Before the Ministry of Energy, Telecommunications and Posts considers the latest Tenaga Nasional proposal, it should direct Tenaga Nasional to hold public hearings in every state in the country to give the consumers a chance to be heard as its present case presented to the public for another round of power tariff hikes is so self-serving, weak and unconvincing.

The DAP National Committee to launch a nation-wide million-signature campaign to oppose any tariff increase if Tenaga does not first give consumers a chance to be heard would hold its first meeting to chart out the strategy of the campaign next Wednesday.


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong