The Association of Independent Power Producers (Penjanabebas) has come out in defence of its members who are accused of benefitting from natural gas subsidies.
In a statement today, Penjanabebas said it was "factually incorrect" to state that gas subsidies contribute to the overall profitability of its members.
The association explained that the sole duty of IPPs was to generate electricity and their fuel consumption was billed directly to Tenaga Nasional Bhd (TNB).
Natural gas prices are billed at a predetermined rate set by the government while coal prices are dictated by TNB.
"(The bill is) based on the quantum of electricity generated and at an agreed upon efficiency rate," said the statement from Penjanabebas.
The association explained that the power purchase agreement between IPPs and TNB operated on a "fully despatchable basis".
This means that full capacity must be made available to the national grid at any time, except during planned scheduled maintenance periods.
Consumers pay 'lower' tariff
It said the IPPs only generate electricity, and the fuel costs or variable operating expenses incurred are based on the instructions from the off-taker (TNB).
"In the event IPPs are unable to meet despatches as per TNB's instructions, penalties will be imposed," the statement said.
Thus, Penjanabebas argued that its members do not derive any financial benefit from the subsidies, nor do they benefit from changes in electricity tariffs paid by consumers.
"Instead, the savings in gas costs (difference between international gas prices and the fixed price set by the government) are passed on directly to consumers through lower tariffs," said the association.
Since raising the multi-tiered electricity tariffs by an average of 7.2 percent on June 1, the government has come under fire for its refusal to reveal the contents of the many power purchase agreements (PPAs) signed between the IPPs and TNB.
The PPAs, which the government claims is bound by a non-disclosure clause, are believed to stipulate the tariffs charged by the IPPs. Penjanabebas' statement confirms that the PPAs stipulate the cost of fuel that will be billed to TNB.
Critics of the agreements have argued that the PPAs are lopsided, that they guarantee the IPPs hefty profits, which are borne by consumers. They also argue that the PPAs were clandestinely drawn up, devoid of any transparency.
The Penjanabebas statement did not address calls for the disclosure of the PPAs but called on Malaysians to be "rational and objective" and to engage industry players through dialogue.
The recent power rates increase was sparked by the government's decision to slash gas subsidies for the commercial sector, including power producers, by RM3 per mmBtu every six months.
TNB said this would increase its gas bill by RM1.5 billion a year and the tariff hikes were therefore justified.