NOVEMBER 28 — While Pakatan Harapan does not dispute that the Najib Government had solved the legacy issue of Mahathir’s lopsided Independent Power Plant (IPP) agreements of the past, they are still denying 1MDB’s role in this.
At the same time, they are also asking why there was no reduction in the electricity tariff for consumers despite solving the lopsided agreement.
This shows how narrow-minded that politicians are.
After 1MDB took over many of the IPP businesses, the government was able to hold its first ever open tender for power purchase agreement (PPA).
With the market power that 1MDB and by extension, the government, now had, 1MDB was the lowest bidder for every new or renewal PPA bids that it entered. This had the effect of forcing other bidders to lower their price too.
What Pakatan failed to explain is why the lopsided IPP agreements were eliminated only after 1MDB had entered the power sector and why 1MDB needed to be the lowest bidder.
If the govt had wanted to ensure 1MDB made excessive profits, surely the lopsided agreements would have continued with 1MDB being the main beneficiary, correct?
Pakatan politicians also fail to understand the difference between the PPA tariff and the final electricity tariff to the consumer.
The PPA tariff is just one of the component of the final electricity tariff.
The other components would be the fuel price as well as the profit that Tenaga Nasional Berhad (TNB) makes.
Due to the much reduced PPA tariff, fuel prices can be increased without forcing the final electricity tariff to similarly increase.
The gas price that Petronas charged to the IPPs in 2009 of RM6.40 per MMBtu was heavily subsidised and way below market value.
This huge subsidy in the past was necessary to compensate for the high IPP tariff in order to keep the final electricity tariff low.
This caused Petronas to incur tens of billions in losses every year – money that should have benefited the rakyat every year instead of the IPP owners.
However since the lopsided agreements was solved in 2012, Petronas was able to reduce these subsidies and increase the price from RM13.70 in 2012, to RM18.20/MMBtu in January 2016 and now to RM22.70/MMBtu as at July 2017 – without significant increases in Malaysia’s electricity tariffs which are already among the cheapest in Asean.
Petronas now saves tens of billions every year – money which is then funnelled back for its own expansion or paid to the government for development projects.
At the same time and despite these gas prices which are now almost 4 folds higher and without having to raise electricity tariffs excessively, the elimination of the lopsided IPP deals have allowed TNB to make record profits every year instead of losses like it used to make prior to 2011.
In fact prior to 2011, the govt also had to heavily compensate or bail out TNB of their losses which was partly caused by the high IPP tariffs.
The Employees Provident Fund (EPF), Amanah Saham Bumiputra (ASB) and Tabung Haji are three of the top five shareholders of Tenaga Nasional.
Last month, Tenaga announced a record dividend of RM3.5 billion which also led to its share price increasing.
The dividend payments and higher share price will then directly benefit holders of all those funds mentioned – which would be the majority of the Malaysian public.
While it is true that the public did not directly benefit from reducing electricity tariff, we directly benefit from the higher returns from the funds as well as funds for development that would have otherwise gone to subsidising the gas price and benefiting the IPP owners.
Due to the short-sighted nature and their zombienomics, Pakatan politicians do not see this indirect but substantial benefit to the Rakyat.
These savings from the elimination of the lopsided IPP deals is estimated to benefit the rakyat to the tune of RM200 billion in the next 20 years.
*This is the personal opinion of the writer and does not necessarily represent the views of Malay Mail Online.