PETALING JAYA, May 31 — Datuk Seri Najib Razak insisted that independent power producers (IPPs) would not benefit from the increase in electricity tariffs, amid Pakatan Rakyat (PR) criticisms that the move was lopsided in favour of the private energy companies.
The prime minister said the government’s “fuel cost past-through mechanism” meant Petronas would forgo part of its revenue to enable the power sector to produce low-tariff electricity.
“It is a pass-through tariff so nobody benefits,” he told a press conference here today.
Najib (picture) said the government would look into making public the agreements between Tenaga Nasional Berhad (TNB) and the IPPs.
Earlier today the DAP’s Tony Pua said the decision to raise electricity tariffs without reviewing “lopsided” deals with highly inefficient IPPs was like “righting a wrong with another wrong”.
The DAP publicity chief said raising rates without restructuring purchasing power agreements (PPAs) with IPPs would only worsen inefficiency and place a greater burden on industrial and commercial consumers, who will bear the brunt of the hike.
He pointed out these large-scale users will see an average increase of 8.4 per cent in their power bill, which would not only worsen rising inflation but “deal a bigger blow” to export industries already hurt by the strong ringgit.
The Petaling Jaya MP pointed out that despite having to contend with natural gas prices that were more than double that of Malaysia’s, commercial electricity tariffs in Thailand were only 0.4 per cent higher than Malaysia’s RM37.85 kWh rate.
He said the latest tariff hike meant that commercial power rates here would be “significantly higher” than Malaysia’s northern neighbour when they should be 16.9 per cent cheaper, based on existing subsidy rates.
“And the key reason for that is the unfair PPAs which result in ridiculously high levels of electricity reserve margins,” he said, adding that Malaysia’s 52.6 per cent reserve margin in 2010 was double that of Thailand (25.4 per cent) and Java, Indonesia (26 per cent).
“The net effect is TNB is forced to purchase electricity which it does not need from the IPPs, resulting in inflated costs for TNB and correspondingly inflated profits for the IPPs.”
The Najib administration announced yesterday it will raise electricity prices by an average of 7.1 per cent from tomorrow.
The price charged by Petronas to power companies for the natural gas will rise to RM13.70 per mmBtu from RM10.70, and go up by RM3 every month until December 2015, after which market rates apply.
PKR also claimed today that the inflation rate this year will likely exceed the 3.6 per cent increase seen in 2006, the second highest in the past five years, owing to the latest power rate hike.
PKR strategy director Rafizi Ramli said the diesel, sugar and gas subsidy cuts announced by the government this past month would have a similar “combined effect” on inflation that petrol and electricity price hikes had four years ago.
Rafizi pointed out that IPPs would continue to enjoy subsidies while TNB could now pass the additional cost of higher gas prices to consumers through a new fuel pass-through mechanism introduced yesterday.
