Penjanabebas, the Association of Independent Power Producers, wishes to clarify recent media reports relating to the prevalent misconception that the gas subsidy contributes to the overall profitability of Independent Power Producers (IPP).

While the association had previously clarified this matter, the industry wishes to reiterate that it is unfair to portray our members as beneficiaries of the gas subsidy. The cost of gas as a fuel to generate electricity, is a component that the IPP industry does not derive any financial benefit from but instead, the savings from gas subsidy is passed on to consumers through the tariffs.

The association would like to highlight that under the Malaysian IPP model – in line with international norm in power purchase agreements - gas costs operate under a ‘pass through’ mechanism, whereby all gas supplies are provided directly to gas-fired generators at costs determined by the government. Hence IPPs do not benefit from gas subsidy.

The application of such a gas pass through to consumers is also an international norm (not only for any independent power producing business where a power purchase agreement exists with a single off-taker). This inclusion of a gas pass through mechanism to consumers (which was discontinued in September 1997) was intended to allow Tenaga Nasional Berhad (TNB) to adjust their prices to consumers in response to market pricing.

On tariffs, we are in no way involved in decisions relating to consumers tariffs as we are mere contract generators to TNB, whereby our generation facilities are contractually made available to TNB.

The association and our members would like to highlight that there is an undeniable need for rational, substantiated reporting on the Malaysian energy generation sector, and this must be undertaken from a balanced perspective to allow the public to make informed judgments on the issues faced by the sector. Such understanding is important for engagements aimed at the development of a long-term sustainable national energy policy.

Our members would like to reiterate our commitment to engage in dialogue or discussion 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.

The writer is president, Penjanabebas.