Reveal EPU role in IPP deals, Guan Eng tells Najib

By Yow Hong Chieh

June 06, 2011

 

KUALA LUMPUR, June 6 — The prime minister must come clean on the Economic Planning Unit’s (EPU) role in the “gas subsidy scandal” as alleged by a former Tenaga Nasional Bhd (TNB) chairman, Lim Guan Eng has said.

The DAP secretary-general said it was unfair that the public was burdened by a seven per cent electricity rate hike just so independent power producers (IPPs) can continue to profit from “imbalanced deals” allegedly forced upon the national power company by the EPU.

“Clearly, there is no justification for Putrajaya to hike electricity tariffs by seven per cent when a review of the original terms of IPPs would be more than sufficient to cut the subsidy bill,” Lim (picture) said in a statement today.
In a 2006 interview with The Star, former TNB chairman Tan Sri Ani Arope said he was strong-armed by the EPU into buying power from IPPs at 23 sen per kWh, despite the fact that the utility company could produce power at about one-third the cost.

He said there was no negotiation involved and pointed out that TNB was “humiliated” at every turn by the EPU — which he later dubbed the “Economic Plundering Unit” — and directed to accept “grossly unfair” terms and conditions favouring the IPPs.

Ani revealed that one IPP, believed to be Genting Sanyen, had agreed to sell power at 12 sen per kWh but was shot down by the EPU and was eventually made to sell at 14 sen per kWh.

“There was no negotiation. Absolutely none,” he said.

“Instead of talking directly with the IPPs, TNB was sitting down with the EPU. And we were harassed, humiliated and talked down every time we went there. After that, my team was disappointed. The EPU just gave us terms and asked us to agree.”

Ani also claimed that he was eventually “put out to pasture” for objecting to the terms and conditions of the purchasing power agreements (PPAs) that eventually created the first-generation IPPs during the Mahathir administration.

Today, Lim said Petronas has extended RM131.3 billion in gas subsidies to both the power and non-power sectors and pointed out that if gas prices remain unchanged, the government will have to foot some RM27 billion in subsidy cost.

He also quoted the Federation of Malaysian Manufacturers, which said the power sector here has yet to translate its price advantage in fuel cost into more competitive electricity rates despite paying less for natural gas than Thailand, Singapore and Indonesia.

Putrajaya announced a 7.1 per cent hike in electricity tariffs in an effort to trim a subsidy bill that would otherwise double to RM21 billion this year, promising that the hike would not affect three-quarters of domestic users.

Power prices will rise by as much as 2.3 sen per kWh in areas taking TNB’s supply, a potential source of public anger just ahead of snap polls expected within a year.