Malaysiakini
May 31, 11

The DAP has hit out at the federal government for raising the electricity tariff but without first restructuring the lucrative independent power producers (IPP) sector.

Currently, IPPs are charging Tenaga Nasional Bhd (TNB) high prices despite facing relatively low production costs, DAP publicity chief Tony Pua said in a statement today.

“And the key reason for this is the unfair power purchase agreements (PPA) which result in ridiculously high levels of electricity reserve margins.

“According to TNB, our reserve margin was 54.6 percent in 2008 and 52.6 percent in 2010, which is double that of Thailand and Java, Indonesia, at 25.4 percent and 26 percent respectively.

“The net effect is TNB is forced to purchase electricity it does not need from the IPPs, resulting in inflated costs for TNB and correspondingly inflated profits for the IPPs,” Pua (right) said.

Yesterday, the government approved of an average of 7.12 percent increase in the electricity tariff, which only affects households that use more than 300 kWh a month.

It said this was necessary to reduce the government’s subsidy bill and that only those who consume large amounts of electricity would pick up the burden.

Tariff should be 17 percent lower

But most consumers will eventually feel the pinch from the tariff hike because all major industries will now pay an average of 8.35 percent more for electricity, said Pua.

“This will inevitably fuel further inflation and reduce the competitiveness of our goods and services,” he said.

“Our export industries, which are already affected by the strong ringgit, will be dealt with a bigger blow due to higher electricity prices compared with the region as a result of an inefficient and distorted power sector that profits only the IPPs.”

In Thailand, Pua said, commercial electricity tariff is only 0.4 percent higher than in Malaysia, despite natural gas prices in the country being 68.6 percent more expensive.

“Using Thailand as a benchmark, Malaysian electricity prices should be 16.9 percent cheaper, based on the existing subsidy rates. Instead, the BN government does the exact opposite by raising the electricity tariffs,” he said.

Dismissing Minister in the Prime Minister’s Department Nor Mohamad Yaakop’s claim that the government was trying to correct ‘market distortions’, Pua argued that the distortion lies with lopsided IPP contracts.

“The fact that the government chooses to punish our consumers and industries, without laying a finger on the IPPs only serves to prove that the Najib administration has no political will to carry out the necessary reforms to our economy, contrary to the rhetoric we hear every day.”