1. Peninsular Malaysia electricity demand

Electricity demand growth in peninsular Malaysia has been declining after financial year 2012. Declining electricity demand growth will also mean that there will be no need to fast-track any projects at the moment.

2. 1,000MW utility scale solar (USS)

Based on news reports, the Energy, Green Technology and Water Ministry has awarded 200MW of the USS project via direct negotiation to fast-track the implementation of the USS project. Do we need it desperately? Electricity demand has taken a dip for the past few years and ‘fast-tracking’ 200MW USS does not make any engineering and economic sense.

The last few fossil fuel power plant projects were awarded via direct negotiations by using misrepresented engineering facts to justify such falsely needed ‘fast-track’ move. All these direct negotiations must be stopped and all the 1,000MW USS must be awarded via fair and transparent competitive bidding process by the Energy Commission.

‘Fast-track’ reasoning is making Malaysia look like having zero engineering and planning capabilities. Any delay in reaching higher Renewable Energy (RE) mix in electricity generation mix is the fault of the ministry. The Association of Water and Energy Research Malaysia (Awer) has warned the ministry on the possible failure in Feed-in-Tariff (FiT) mechanism as well as the redundant formation of Sustainable Energy Development Authority (Seda) since 2011.

Awarding direct negotiation to meet the failure of Seda and FiT is not the right way. In fact, the ministry and its officers (both current and former) who pushed for the formation of Seda and FiT as a solution to rapidly increase the renewable energy (RE) mix should be held accountable and severely punished.

3. Extension of old power plants

Based on media statement released by the Energy Commission on Oct 9, 2012, the levelised tariffs of extended old power plants (Genting Sanyen Power, Segari Energy Ventures and TNB Pasir Gudang) were published. Old power plants have lower generation efficiency and will pass on a higher fuel cost to electricity tariff.

Last year, it was widely reported that Energy Commission will be calling competitive bidding for extension of some of the old power plants. When extensions were given, there was no announcement of the levelised tariff that was approved for these extensions. Why has the Energy Commission failed to publish the levelised tariffs as they had done back in 2012? How many bidders were involved and what were the bidding prices? Why is there is no transparency in this?

Awer would like to reiterate that the current extension of old power plants are due to the failure of the Energy Commission to prevent a delay in new power plant projects to meet the financial close. This risk has already been highlighted to the Energy Commission and the ministry for the past few years. Their failure to take the right action is now causing higher fuel costs to be passed to the electricity tariff.

4. The fate of Track 4A

Track 4A is a 1,000-1,400MW combined cycle gas turbine (CCGT) power plant which takes about 32 to 36 months to complete. The project was awarded to a consortium of SIPP-YTL-TNB. However, both YTL and TNB have pulled out of the project. The project has also missed its financial close requirement a few times.

The Energy Commission must cancel the award of Track 4A to SIPP and call a transparent competitive bidding immediately. Delay in calling for competitive bidding will exhaust the time available for the competitive bidding process. Why is the Energy Commission preventing competitive bidding? Failure to carry out competitive bidding will prevent fair and equitable costs from being passed on to the electricity tariff.

5. Foreign equity cap and sale of development rights of power plant projects

There was no removal of foreign equity cap when IMBD’s energy assets sale bidding was closed on Oct 16, 2015. Malaysia has a cap of 49 percent foreign equity ownership for our electricity generation sector as energy assets are part of national strategic assets. These are part of our national security.

Therefore, any entity that participates in power plant bidding in Malaysia must abide by this policy and the government must not entertain any request to change the policy to prevent setting bad precedent in the industry.

On Feb 29, 2016, the Energy Commission uploaded a notice for the pre-qualification of prospective bidders and the foreign equity ownership cap of 49 percent is valid and utilised in this notice. Is there a policy flip-flop?

There were also some reasoning that Power Purchase Agreements (PPA) will protect the consumers' and nation's rights. PPA is just another commercial agreement and step in right can be prevented if the owner of the power plant justifies that they are doing ‘something’ to address the problem with the power plant. The Energy Commission and the ministry should be fully aware of this.

Award of power plants comes with strict conditions including preventing sale of development rights. Track 4B which is a 2,000MW combine cycle gas turbine (CCGT) in Malacca and 10 x 50MW utility scale solar power plants which were awarded via direct negotiation to 1MDB were included in the 1MBD’s energy assets sale. These power plants are yet to be constructed. Why did the Energy Commission allow the sale of project development rights?

6. JPPPET, do we need it?

The Planning and Implementation Committee for Electricity Supply and Tariff (JPPPET) is a very important set up for future planning of electricity supply. All decisions made by JPPPET will give a direct impact to the electricity tariff and these decisions must be made public. Mysteries that JPPPET documents must reveal are:

(i) Reasons for Track 4A to be given via direct negotiation;

(ii) Was 10 x 50 MW USS awarded to 1MDB part of its decision;

(iii) Reasons for 200MW USS to be given via direct negotiation; and

(iv) Does this committee know how to do planning for the nation's electricity supply?

7. Auditor-general must investigate

The Energy Commission is duty-bound to follow the functions and powers outlined in the Electricity Supply Act and Energy Commission Act. As such, failure to carry out these duties and responsibilities spelled out in both the acts is treachery to the nation and must be severely dealt with.

Power plant construction and its costing poses huge cost impact to electricity tariff, competitiveness, good and services affordability, investors' confidence and nation building. We urge Athe auditor-general to audit the following issues:

(i) Audit all approval processes and award letters for power plant in the minsitry, Energy Commission and Sustainable Energy Development Authority (Seda) from 2012 onwards;

(ii) Audit all JPPPET decisions, meeting minutes, documentations and presentations from 2012 onwards;

(iii) Handling of competitive bidding process for new power plants and documentation including how nodal points and land requirements (green field and brown field) are set;

(iv) Extension process of old power plants and its bidding process; and

(v) Failure of Seda and FiT to meet renewable energy mix target as well as Seda’s mysterious set-up process and FiT mechanism.

These findings must be tabled to Parliament and published for public knowledge.

Competitive bidding is to ensure public and business community benefits from fair and equitable tariff. Many engineering facts were misrepresented to the the public and members of Parliament to justify so called ‘fast-track’ and ‘direct negotiation’ as well as extension of old power plants.

All these have very serious and negative repercussions for Malaysia in the long run. Moreover, why should the government continue to employ incompetent people to run the Energy Commission?

Many industry stakeholders and investors have expressed their concern over the latest developments in the electricity sector. We urge the government to take immediate action as there is no point of crying over spilt milk.

PIARAPAKARAN S is president, Association of Water and Energy Research Malaysia (Awer).