By G. Sharmila
The old adage is that when one door closes, another opens. But does the same apply to independent power producers, who only now have a new mechanism by the Energy Commission called Neda to (maybe) look forward to when their power purchase agreements expire? Why can’t their PPAs be renewed instead with them being given lower rates, Tiger wonders.
Tiger has always been a bit sceptical about independent power producers (IPPs) if only because of the long-standing and highly lucrative power purchase agreements (PPAs) they’ve enjoyed with Tenaga Nasional Bhd (TNB) over the years, nay, decades.
Thus, she expected to be pleased when TNB announced early this month that its 21-year PPA with YTL International Power Bhd (YTL Power) had expired on Sept 30, 2015 and hence it would no longer supply power to the grid effective Oct 1. The PPA involved both the Paka, Terengganu and Pasir Gudang, Johor plants, which have a combined generation capacity of over 1,200 megawatt (MW).
Then, last Thursday, YTL Power announced to Bursa Malaysia that its wholly owned subsidiary YTL Power Generation Sdn Bhd had won the bid to supply power from its existing 808 MW power plant in Paka to the main grid. The contract is for two years and 10 months commencing March 1, 2016.
In addition to that, YTL Power said it has registered its interest to participate in the New Enhanced Dispatch Agreement (Neda), which was launched by the Energy Commission (EC) on Sept 29.
According to news reports, the EC has yet to renew YTL Power’s PPA for its 404 MW power plant in Pasir Gudang as it needs to fulfil certain conditions before the renewal is granted.
After mulling over the matter, Tiger is very, very upset over the whole thing. She is now wondering why the EC is dragging its feet on renewing the PPA for YTL Power’s Pasir Gudang plant.
In fact, Tiger thinks the EC should be promoting cost-efficient electricity generation by renewing the long-term PPAs of IPPs like YTL Power, but by giving them lower rates instead of the earlier extortionate ones. The rationale for this is first-generation plants such as YTL Power’s Paka and Pasir Gudang plants are fully depreciated, hence electricity generation will be cheaper. This way, the plants will not sit idle and will continue to supply electricity to the grid in the long term.
Tiger believes it is also high time that the EC disclosed the terms of PPAs with IPPs with the public to prove to the public that the electricity being purchased by TNB from IPPs is at a fair price and thus is fair to consumers.
In fact, Tiger thinks that the EC should have taken the opportunity to redo the entire PPA terms as they expire, instead of “replacing” the PPA mechanism with the Neda, the specifics of which have not yet been disclosed. All we know is that the Neda is supposed to save power production costs and benefit consumers in the long run.
Recall that YTL Power was the first IPP to ink a PPA with TNB back in March 1993, which was reportedly the most lucrative PPA for a local IPP back then (the exact amount has never been disclosed as the terms of the agreement are bound by the Official Secrets Act 1972).
Meanwhile, 1Malaysia Development Bhd’s Powertek plant in Telok Gong, Malacca and Malakoff Corp Bhd’s Port Dickson Power will expire in January next year.
Maximus Ongkili
Energy, Green Technology and Water Minister Maximus Ongkili said on Wednesday that the PPAs had been extended to three companies through a competitive bidding process, namely YTL Power, Malakoff and TNB, for about three years. At the time of writing, Malakoff and TNB have yet to make official announcements on the renewals.
It’s not that Tiger feels sorry for IPPs like YTL Power and Malakoff – she is just concerned that by not renewing their PPAs for the long term, existing and, more importantly, fully depreciated power plants by IPPs will remain underutilised, such as YTL Power’s Pasir Gudang plant.
She also thinks that the EC should have introduced the Neda earlier, so that there would have been a smooth transition to the new mechanism when the IPPs’ PPAs end.
According to news reports, EC chief executive officer Ahmad Fauzi Hasan said following the launch of Neda, IPPs need to apply for an operating licence to be able to continue selling electricity to TNB for the bidding process under Neda. He also said at the time that the EC was in the midst of sorting the process out. The system is slated for implementation by the first quarter of 2016, the EC said.
Tiger’s question is, what took the EC so long to introduce the Neda when it knew the PPAs were going to expire? And what will happen in the interim period between the expiry of the PPAs and the (possible) confirmation of their new contracts under the Neda system?
So many unanswered questions remain surrounding the PPAs and Neda. Tiger thinks the EC should provide more details and clarity on the matter and thus inspire more confidence in the public. The EC also needs to get the timing right for the renewal of the IPPs’ PPAs, as well as speed up the Neda to ensure that it really walks the talk when it comes to cost-efficient power generation.
GRRRRR!!!
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