THE government will undertake a review of the bidding process by independent power producers (IPPs) to ensure greater transparency and integrity in the awarding of contracts.

Energy, Green Technology, Science, Climate Change and Environment Minister Yeo Bee Yin said the move will hopefully open up the power-producing sector to more competition, and in turn, lower costs.

“We will review the IPP contracts that have been awarded through direct negotiations and take action, according to the rule of law, to keep generation costs under control,” she told The Malaysian Insight in her first interview since assuming her ministerial post.

“We are going through a power sector reform to make the sector more competitive, to control electricity prices. One of the first things we are doing is going through the IPP agreements.”

In the days to come, the ministry will also make public the reform plan.

“There’s an internal discussion. There are still a lot of things for us to iron out before we go public to tell what we are going to do in terms of the power sector.

“We are thinking that it will be a two- to three-year plan for us to complete the entire exercise,” said Yeo, adding that there will be “public engagement” along the way.

“I want to make sure it is transparent. No hanky-panky (to ensure that) the power sector is not enriching certain individuals, but is equitable among Malaysians.”

IPP agreements, some amounting to billions, have long been criticised for being awarded through direct negotiations, leading to tariffs that are sometimes higher than market prices.

Yeo said the ministry will review all existing projects, as well as those that have yet to be implemented, adding that ending the “monopolistic” nature of the power sector’s retail side will help generate healthy competition and drive down prices.

“There are some projects that have not started. There are some projects that only have letters of intent.

“We are trying to rebuild it, and everything will be done according to the rule of law.”

Via power purchase agreements with power producers, Tenaga Nasional Bhd (TNB) pays for energy generated at a specific tariff for a predetermined period.

TNB currently has a monopoly on the power grid and the retail front. The ministry’s review is expected to allow for more competition in power production and retail.

TNB recently announced an additional surcharge for non-domestic customers of 1.35 sen/kWh from July 1, due to higher fuel and generation costs.

The surcharge is provided for under the Imbalance Cost Pass-Through mechanism, which allows the utility company to reflect changes in fuel and generation costs in consumer’s electricity tariff every six months.

According to the Energy Commission, Malaysians consume 133 billion kWh of electric energy annually, while producing 141.9 billion kWh, resulting in a reserve of 30%.

Yeo said another ministry focus is to draft a long-term plan to chart the country’s energy output, needs and costs.

“I was very surprised that there is no long-term energy plan in Malaysia in 20 years’ time,” she said during the interview at her office in Putrajaya.

“What is going to be our fuel? How much would it cost? We actually don’t have a long-term energy plan.”

The ministry is expected to carry out a policy review to allow for more competition in power production and retail. – July 7, 2018.