PARLIAMENT | Putrajaya has terminated four power plant deals in a bid to keep electricity tariffs down.

Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin told the Dewan Rakyat that if the government proceeded with the deals, Peninsula Malaysia's reserve margin would have needlessly increased.

"Approximately 30 percent of what we pay for our electricity bills is for capacity payment, which is linked to the reserve margin and terms stated in the power purchase agreement (PPA) contract.

"Our reserve margin is currently optimum - at 32 percent. If these projects were to continue, our reserve margin will be far above what (the country) needs and increase capacity payments (by end users).

"When the capacity payments increase, electricity bill increases," she said in response to a question by Wong Kah Woh (Harapan- Ipoh Timor).

Yeo said cancelling this project will result in RM1.26 billion cost savings for end users.

The four projects involve Malakoff Corporation, Aman Majestic Sdn Bhd, Sabah Development Energy (Sandakan) Sdn Bhd, SM Hydro Energy Sdn Bhd, Edra Power Holdings Sdn Bhd and Tenaga Nasional Bhd.

The ministry's Planning and Implementation Committee for Electricity Supply and Tariff (JPPPET) cancelled the projects on Oct 11 due to non-compliance with the offer letter to the contractors.

Meanwhile, Yeo said Putrajaya found that the deals were not competitive and the result of direct negotiations between the government and the companies.

She added that similar contracts would only be awarded through open tender in the future.

To a follow-up question from Wong on the financial implications of the cancellations, Yeo said Putrajaya does not expect a negative financial or legal impact.

"Contractors who do not comply with the terms in the offer letter will result in the termination of the contract. It will not have any (negative) implications (on the government)," she said.