IPPs, Tenaga and Telekom

This was a post made on November 4 by the new DAP Economics Advisor, Chi Chang. In it he addressed the matter of electricity supply, Tenaga, IPPs and, he also dealt with Telekom and streamyx. Chi Chang knows what he's talking about and, I agree with his analysis:

Electricity tariffs were raised 24% in June. Oil prices have since fallen dramatically and people are now demanding Tenaga reduce power tariffs. But our electricity is generated using gas and coal, for which prices are still high.

In fact, the main beneficiary of the 24% electricity tariff hike is Petronas, which more than doubled its gas price to Tenaga – to RM14.31/mmBTU, from RM6.50/mmBTU! Besides higher gas prices, Tenaga is also incurring higher coal prices, which at about US$95 today are still 25% higher than the average US$76/MT Tenaga incurred in its last financial year ended Aug 08. The pain will be made even worse by the depreciating ringgit.

Some numbers will illustrate this. That 24% tariff hike will add about RM5.5bn p.a. to Tenaga’s revenue. Of that, RM5.3bn goes to third parties, leaving Tenaga with just a measly RM200m of the RM5.5bn additional revenue:

RM4.2bn (76%) goes to Petronas to cover the increased price of gas;

RM1.0bn to cover higher coal prices:

a. RM0.3bn because of the the US$ increase in price to US$95; and

b. An additional RM0.7bn due to the weaker ringgit, assuming an average RM3.70:US$1

instead of RM3.30

RM135m for capacity payments to new IPP Jimah.

In fact, by next year, Tenaga will be in a negative situation again because capacity payments to Jimah will rise to RM 700m! If you want lower power tariffs, the appropriate targets are the IPPs which have earned exorbitant returns and Petronas, not Tenaga.

Tenaga is under-appreciated. Its services have improved tremendously in recent years. So tremendously that we don’t appreciate how much effort goes into delivering that stable and reliable power supply.

If Telekom were running the power sector, we would still be suffering frequent brownouts (noisy fixed lines is the telecoms equivalent), blackouts (unstable Streamyx connections) and some areas without power at all (sorry, tak cukup kapasiti di sana untuk talian baru).

And yet Telekom gets a RM2.4bn handout of taxpayers’ money to do high-speed broadband while Tenaga is pilloried for high power tariffs which are not its fault in the first place.

If there’s one GLC to target for inefficiency, it’s Telekom. Why do we still have to pay Telekom RM25/month for fixed line ‘rental’? My housing estate was built in the 1970s. Surely after over 30 years Telekom has already more than covered its capital cost of laying down the telephone lines. And then there are the huge issues with Streamyx ….