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TI-M Wants Govt and TNB to renegotiate Power Purchase Agreements

TI-M Wants Govt and TNB to renegotiate Power Purchase Agreements
Press Releases


Tuesday, 15 October 2013

During Tun Dr Mahathir Mohamad’s tenure as premier, the Economic Planning Unit (EPU) had a say in everything with the power purchase agreements which Tenaga Nasional Berhad (TNB) had to sign. This was revealed by former TNB executive chairman, Tan Sri Ani Arope in his latest book, “Memoirs of Tan Sri Ani Arope” published by the Fulbright Alumni Association of Malaysia.

Although Ani Arope stopped short of suggesting that there were elements of corruption, the lack of transparency in the terms and conditions in the previous Power Purchase Agreements (PPA) before Ani Arope’s shocking revelation, suggest that there was some unreasonable pressure for the utilities company to toe the line.

Even Ani Arope had to pack his bag and leave TNB, despite doing a fine job and being well-respected as a corporate leader there.

Unreasonable prices

There is no reason why household consumers should be forced to pay for the hefty prices of electricity, when TNB was able to produce it at 8 sen a unit (kWh), but the IPP was paid 23 sen per unit (300 percent).

With the emergence of more IPPs, technically, the market should be more competitive, and power producers would have been forced to be more efficient. Instead, we have seen prices of electricity going up several times in the past 20 years, when market forces would have caused prices to drop to a comfortable level.

The first PPA that was signed with YTL in 1994 will be ending on September 30, 2015. The Government under Dato’ Sri Najib Tun Razak and TNB must come clean in renegotiating with the IPPs to reduce the cost of electricity, especially since they have been enjoying government subsidies in fuel prices for the past 21 years. By now, most of the IPPs would have recovered their capital investments in their plants; therefore, commercially, while they are still viable, should be able to reduce the prices of electricity.

All stakeholders should be invited to sit around the negotiation table. On this note, since Pakatan Rakyat has harped on the issue before the May 5 General Election, promising that they will be able to slash the prices of electricity, they should either be invited to sit in the discussion, and give them input, or the Government should prove that on its own, it is capable of reducing the burden of the people already saddled by rising cost of living. Transparency International – Malaysia (TI-M), and the taxpayers will be watching the development in this aspect.

RCI on Power Purchase

The strong indication that there was a lopsided agreement that benefited the IPPs should also warrant the Government to set up a Royal Commission of Inquiry to find out what transpired, and why TNB had to pay such a hefty price for the electricity, when it could produce at one-third the price.

Without knowing the truth, it is easy for the people to continue making assumptions that there was indeed an abuse of entrusted power for personal gains, in some forms, taking place during the signing of the PPA. No analyst would be able to explain such an unusual economic decision, especially when the decision was made by the Economic Planning Unit in the Prime Minister’s Department.