After days of bombardment by politicians and public, the Independepent Power Producers finally came up with a clarification that they do not benefit from gas subsidy. The reply was printed in the Sun in the letter to the editor (June 8, 2011). Please read:
IPP DO NOT BENEFIT FROM GAS SUBSIDY
PENJANABEBAS, the association of Independent Power Producers, wishes to clarify recent reports relating to the prevailing misconception that the gas subidy contributes to the overall profitablity of independent power producers.
The associaton wishes to reiterate that it is factually incorrect to portray our members as beneficiaries of the gas subsidy or that any of our members in any way profit from any fuel used in the generation of electricity.
Under the Malaysian IPP model, most of the power purchase agreements (PPAs) between our members and Tenaga Nasional Berhad operate on a fully despatchable basis (all capacity must be made available to the national grid at any time except during planned scheduled maintenance).
Payments to IPPs consists of two core components - Capacity Payments (fixed payments as specified under the resepective PPAs to recover the costs of developing power generating facitlies and fixed overheads), and Energy Payments for fuels consumed in generation and variable operating rates (to cover maintenance costs incurred during generation).
All IPPs only commence generation of electricity, and thereby incur fuel costs or variable operating expenses upon instruction from the off-taker (TNB).
Once instructed to despatch electricity by the off-taker, fuel consumed in generation by IPPs are quantified and billed back to the off-taker at pre-determined rates set by the government - in respect of gas, or at a rate dictated by TNB for coal, based upon the quantum of electricity generated and at agreed upon efficiency rates. In the event IPPs are unable to meet despatch as per TNB's instruction, penalities will be imposed.
As such the cost of gas as a fuel to generate electricty is a component that the IPP industry does not derive any benefit from. Instead, savings in gas costs (difference between international gas prices and a fixed price set by the Government) are passed on directly to consumers through lower tariffs.
Since 1997, the government has elected to shield electricity consumers from the volatility in gas pricing by setting a fixed cost for gas to electricity generators. Prior to this, TNB had been able to adjust its prices to consumer in response to market pricing, which in essence what is meant by the term a "fuel cost-pass-through to consumers" - the use of which is an international norm.
Moreover, it is important to note that IPPs are in no way involved in decisions relating to electricity tariffs as were are mere conract generators to TNB, whereby our generation facilities are contractually made available to TNB. Imporantly, the terms and rates contained within PPAs remined unchanged regardless of changes to electricity tariffs.
The association and our members would like to highlight that there is a need for rational and objective discussion on the Malaysian energy generation sector, and this must be undertaken froma balanced perspective to allow the public to make informed judgements on issues baced by the sectorl. Such understanding is important for engagements aimedat the development of a long_term sustainable national energy policy.
Our members would like to reiterate our commitment to engagiing in dialogue or discussions with members of the media and other stakeholders, with the aim of achieving understanding, support and commitment to meeting the nation's future energy needs.
IPP DO NOT BENEFIT FROM GAS SUBSIDY
PENJANABEBAS, the association of Independent Power Producers, wishes to clarify recent reports relating to the prevailing misconception that the gas subidy contributes to the overall profitablity of independent power producers.
The associaton wishes to reiterate that it is factually incorrect to portray our members as beneficiaries of the gas subsidy or that any of our members in any way profit from any fuel used in the generation of electricity.
Under the Malaysian IPP model, most of the power purchase agreements (PPAs) between our members and Tenaga Nasional Berhad operate on a fully despatchable basis (all capacity must be made available to the national grid at any time except during planned scheduled maintenance).
Payments to IPPs consists of two core components - Capacity Payments (fixed payments as specified under the resepective PPAs to recover the costs of developing power generating facitlies and fixed overheads), and Energy Payments for fuels consumed in generation and variable operating rates (to cover maintenance costs incurred during generation).
All IPPs only commence generation of electricity, and thereby incur fuel costs or variable operating expenses upon instruction from the off-taker (TNB).
Once instructed to despatch electricity by the off-taker, fuel consumed in generation by IPPs are quantified and billed back to the off-taker at pre-determined rates set by the government - in respect of gas, or at a rate dictated by TNB for coal, based upon the quantum of electricity generated and at agreed upon efficiency rates. In the event IPPs are unable to meet despatch as per TNB's instruction, penalities will be imposed.
As such the cost of gas as a fuel to generate electricty is a component that the IPP industry does not derive any benefit from. Instead, savings in gas costs (difference between international gas prices and a fixed price set by the Government) are passed on directly to consumers through lower tariffs.
Since 1997, the government has elected to shield electricity consumers from the volatility in gas pricing by setting a fixed cost for gas to electricity generators. Prior to this, TNB had been able to adjust its prices to consumer in response to market pricing, which in essence what is meant by the term a "fuel cost-pass-through to consumers" - the use of which is an international norm.
Moreover, it is important to note that IPPs are in no way involved in decisions relating to electricity tariffs as were are mere conract generators to TNB, whereby our generation facilities are contractually made available to TNB. Imporantly, the terms and rates contained within PPAs remined unchanged regardless of changes to electricity tariffs.
The association and our members would like to highlight that there is a need for rational and objective discussion on the Malaysian energy generation sector, and this must be undertaken froma balanced perspective to allow the public to make informed judgements on issues baced by the sectorl. Such understanding is important for engagements aimedat the development of a long_term sustainable national energy policy.
Our members would like to reiterate our commitment to engagiing in dialogue or discussions with members of the media and other stakeholders, with the aim of achieving understanding, support and commitment to meeting the nation's future energy needs.
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