THE BN GOVERNMENT’S DECISION TO INCREASE POWER TARIFFS IS AN ABDICATION OF ITS DUTIES TO THE PEOPLE

This is a press statement by YB William Leong, Member of Parliament Selayang.

31 May 2011

The BN Government’s decision to pass the burden of the increased gas prices from TNB and the Independent Power Producers (IPPs) to Malaysian consumers is an abdication of its responsibility owed to the people.  The cause of the increased in the tariff which is about 7% higher from 1st June 2011 and increased every 6 months until 2015, is due to the Government’s unwillingness to review the grossly unfair contracts entered into by the Government with the IPPs and the manifestly improper long term gas supply agreements between Petronas and the IPPs.

The grossly unfair power purchase agreements require TNB to purchase all electricity produced by the IPPs, regardless of TNB’s requirements and at a cost that is more expensive than the power produced by TNB itself.  As a result, TNB pays the IPPs a capacity charge which is payment for power produced by the IPPs not required by TNB.  There is a 40% excess capacity for which TNB pays capacity charges to the IPPs since 1993.

Under the gas supply agreements, the IPPs purchased gas from Petronas at the price of RM6.40 per Million Metric British Thermal unit (MMBtu) when the production cost is RM15.00 per MMBtu.  This was reviewed in 2009 to RM10.70 per MMBtu.  It is now increased by RM3.00 to RM13.70 per MMBtu.  The Government has agreed with TNB and the power companies for the increase cost of gas to be passed through to the consumers.

By reason of the grossly unfair power purchase agreements and the highly improper use of Petronas to sell its gas production below cost to the IPPs, the IPPs have made super profits since 1993.

The Barisan Nasional Government backed down from reviewing these unfair contracts and also surrendered to the IPPs’ demand by not proceeding with the imposition of windfall taxes in 2008.  The Prime Minister’s brother, CIMB Group Chief Executive, Datuk Seri Nazir Razak, described the imposition of the windfall tax as “shooting the golden goose”.  It is certain that Malaysian consumers are not reaping the golden eggs from the IPP goose.  They are paying the cost of maintaining the goose.

In backing down from the review of the unfair contracts and not proceeding with the windfall tax, the Barisan Nasional Government has therefore chosen to protect the profits of the IPPs over the people.

I call upon the Barisan Nasional Government to immediately declassify and make public the power purchase agreements and the gas supply agreements.  The public has a right to know the terms of these agreements and to take action to correct the wrongs if the Barisan Nasional Government does not have the courage of conviction to do the right thing.

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