Tuesday, May 31, 2011

Lopsided power hike inefficient, says DAP

The BN government has made a bold move to raise electricity tariffs by 7.12% on average, and therefore risks losing the vote of manufacturers, medium and high income households as well as exporters who are already feeling the pinch of a strong ringgit. The increase in overall inflation would be palpable, when we as consumers are facing higher petrol prices, higher food prices and higher living costs without having to experience a hike in our electricity bill.

Yes, subsidies in the long run will weigh down the country. But when RM208 million can be spent buying votes in the Sarawak Elections, Billions poured into the failed Port Klang Free Zone, Billions poured into Iskandar Region which would eventually be bought over by Singapore to move the old folk to, and Billions lost through corruption, cronies, and wasteful mismanagement of public funds, how can the people be the ones to bear the brunt of the government's ineptitude?

Tony Pua makes the case about the government's inability to renegotiate the Purchasing Power Agreements between themselves and the Independent Power Producers are a clear case in point. Here is the article from themalaysianinsider.com which highlights the issue:

By Yow Hong Chieh

KUALA LUMPUR, May 31 — The decision to raise electricity tariffs without reviewing “lopsided” deals with highly inefficient independent power producers (IPPs) is like “righting a wrong with another wrong”, Tony Pua has said.

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 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,” Pua (picture) said in a statement today.

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 (Tenaga Nasional Bhd) 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.

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