DAP: IPP deals bleed consumers, fuel tariff hikes

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.”

  1. #1 by Joshua on Wednesday, 1 June 2011 - 9:28 am

    sorry folks, this fuel crisis in Malaysia is self created by greedy and illegals. very tough to survive.

    The price levels go beyond IPP and the whole fossil fuel under Petroleum Development Act 1974 Act 144 and Petronas as how the whole system works against the people and the consumers especially those 6 concessionaires who can benefit from the high price of crude oil.

    Obvious, massive corruption and abuses of power is involved and hence I had many times
    call for a Royal Commission of Inquiry on the PDA 1974, Petronas and the PM in handling our oil resources as I had already lodged two Police Reports on this fuel crisis which is causing us to pay more as consumers.

    more details in


  2. #2 by sheriff singh on Wednesday, 1 June 2011 - 9:44 am

    Perhaps it is not the individual hikes (‘subsidy rationalisation’) that matters but the CUMULATIVE effect over the years that should be noted.

    The BN government is killing consumers slowly and not making it too obvious.

    1Malaysians have short memories and are slow to realise the cumulative impacts.

    Food prices are going up, up, up, even in small towns and villages.

  3. #3 by ktteokt on Wednesday, 1 June 2011 - 9:04 pm

    TNB is always in the dark! When petrol prices rose, it raised its tariff, but when petrol prices dropped, it turned around and refused to cut its tariff, claiming that electricity WAS NOT GENERATED WITH PETROL BUT WITH COAL! Then, why raised tariff when petrol prices went up?????

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