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Open Bidding Process for New PPA Is A Good Move, But Must Remove the Bad Apples


DATE: 28th December 2011 (WEDNESDAY)


Association of Water and Energy Research Malaysia (AWER) would like to congratulate the Energy Commission for making a bold move to open up the bidding process for the replacement of First Generation PPA (Power Purchase Agreement).

Opening up the bidding up to 49% foreign equity will allow Malaysia to have more industry players that can invest in better and efficient technology. We hope to see a transparent and fair bidding process to allow capable business entities to manage these power plants.

AWER would also urge Energy Commission that the First Generation Independent Power Producers (IPP) that did not renegotiate their PPAs should not be allowed (blacklist) to bid in this and any new generation projects after this. Such ban (blacklist) should be extended to shareholders and board of directors of the IPPs, their subsidiaries as well as the parent company. None of these shareholders or board of directors should be allowed to involve in any new generation projects through any other new set ups or other forms of entities. The government should not worry about removing the bad apples as it is genuine and based on normal business term. It will also protect the nation’s interest.

In addition to that, a transparent tariff setting process is vital to be implemented. These are the following steps that the Energy Commission and Ministry of Energy, Green Technology and Water (KeTTHA) must implement:

  1. Audit of capital expenditure (CAPEX) and operational expenditure (OPEX) of all generation, transmission, distribution and support services.
  2. Benchmarking electricity services related costs internationally.
  3. Differentiating the electricity services related costs and non-electricity services related cost. The non-electricity services cost such as running a university should not be parked on tariff.
  4. Reinvestment cost is vital to ensure continuous efficiency in the electricity generation and supply system to minimise operational cost.
  5. Tariff setting to be punitive and representative of usage by sector. Special Industry Tariff should be abolished.
  6. Public involvement in tariff setting process to ensure transparency and clear understanding is a key component.
  7. Transparent fuel cost pass-through mechanism must ensure proper fuel cost and generation efficiency is maintained.

The Federal Government must be FIRM in protecting the people’s interest and the country’s growth. Malaysia needs an efficient and effective electricity industry to survive in the competitive global economic situation.

Association of Water and Energy Research Malaysia (AWER)

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