Guan Eng: royal commission on IPPs, PPAs

DAP secretary-general Lim Guan Eng has challenged the BN-led foreign government to set up a royal commission of inquiry into the issue of independent power producers and the related matter of power purchase agreements (PPA).

In this way, all PPAs and other PPAs would be disclosed and it could be determined once and for all whether the government has been equitable in its energy subsidy cuts for end consumers while maintaining lopsided arrangements with the IPPs that supply power to utility firm TNB, said Lim.

Lim, who is also Penang chief minister, was echoing an earlier statement by Umno stalwart Tengku Razaleigh Hamzah that an RCI should be set up to review TNB's contracts with the 26 IPPs currently producing about 60 percent of the TNB's energy supply.

“The RCI would determine how severely the lopsided deals are burdening consumers with the rise in electricity tariffs and introduce measures to either reduce or remove this huge financial burden on the people,” said Lim in a statement today.

The government had claimed that the reduction of subsidies for gas - which will lead to increases by RM3 per mmBtu every six months up to December 2015 - will contribute to 0.27 percent inflation.

Scoffing at this, Lim said “every ordinary housewife who shops in the markets will tell you that the BN government is ridiculous” in making such an assertion.

Would BN leaders dare tell the fishing communities upfront, furthermore, that the super subsidy price of RM1.25 per litre of diesel they had hitherto enjoyed has been replaced with RM1.80 per litre despite the maintenance of subsidies for IPPs, he asked further.

Lim also cited the revenues enjoyed by some of the IPPs that supply energy to TNB, such as YTL Power that reaped in 2010 was more than RM1.6 billion in profits, Malakoff which in 2009 recorded a profit of RM380 million, and Powertek that brought in RM450 million in profits.

Would the IPPs still enjoy these huge profits without gas subsidies and compulsory PPAs with TNB, he asked further.

Up to end 2010, said Lim, Petronas had extended about RM131.3 billion in gas subsidy to both the power and non-power sectors, the greatest beneficiaries of which are IPPs.

“In 2009, TNB received RM 5.4 billion in gas subsidies, IPPs RM7.3 billion and the non-power sector RM6.8 billion.

“Normally, TNB would not be raising electricity tariffs with such huge subsidies. But the RM5.4 billion subsidies enjoyed by TNB were offset by being forced to purchase power they do not need, causing a reserve margin that is the highest in the world of 52.6% in 2010,” said Lim.

There is nothing to celebrate, as the government contends, with the annual saving of RM226.8 million from the reduction of diesel subsidies, said Lim, when the IPPs gain up to RM1 billion in subsidies from the government.