I note with interest the statements made by Energy, Communications and Multimedia Deputy Minister Tan Chai Ho in replying to a question in the Dewan Negara on Dec 4 ('RM1 million a day for power supply in Sabah').

Tan Chai Ho said that although Sabah Electricity Sdn Bhd (SESB) pays an average of RM30 million every month to independent power producers (IPPs) in Sabah, this is not the reason why SESB is suffering heavy losses every year. On the contrary it appears that SESB's heavy losses are due to the high cost of generation of 72 of SESB's own small power plants.

If we accept the truth of these statements (and they must be true because they were made in the Dewan Negara) then what SESB needs to do is to tackle their perennial problems of heavy losses by looking for ways to reduce costs rather than trying to deflect attention elsewhere by complaining about how much money they have to pay the IPPs.

After all the IPPs have firm power purchase agreements (PPAs) that were signed with mutual agreement on all the terms and conditions, most importantly pricing mechanisms for capacity and energy, after protracted (and sometimes very tough) negotiations.

Another interesting piece of information revealed by the deputy minister is that 63 percent of the electricity in Sabah is fueled by petroleum (diesel and/or fuel oil) and that high petroleum costs drives up its operating costs to generate electricity in Sabah.

This is indeed an irony as what the deputy minister failed to mention is that only 29 percent of the electricity in Sabah is fuelled by gas .

Gas is heavily subsidised by the government, yet the Ministry of Energy, Communications and Multimedia stood idly by when the subsidies for diesel were removed at the recent budget announcement by the prime minister.

One wonders whether PM was properly briefed about the electricity industry in Sabah, since by removing the diesel subsidies it has contributed to even higher cost of generation for SESB. Although the subsidies were reinstated for the transport sector, nevertheless the electricity generation sector is still struggling with high prices of diesel.

Surely it would make sense now to reinstate the subsidies for diesel and in addition provide subsidies for fuel oil as well, specifically for the electricity generation sector in Sabah.

It is no wonder therefore that SESB's heavy losses are going to become even heavier in time to come, unless concerted efforts are made by both SESB and the government to tackle the problem of high generation costs incurred by SESB's power plants.