Friday August 3, 2012
M'sia should learn from India's massive electricity blackout
Friday Reflections - By B.K. Sidhu
INDIA'S massive power outage on Monday had paralysed the northern and eastern parts of the country, including its capital city, New Delhi. Over 600 million people were left powerless for two solid days before glimpses of power returned.
The engineers there were furiously working to get power back but there are fundamental issues that need to be addressed as well.
The outage in India reminds me of the big blackout Malaysia had experienced on Sept 29, in 1992 and again on Aug 3, 1996. These two episodes have changed the landscape of the power sector in this country and once and for all broke Tenaga Nasional Bhd's (TNB) monopoly of the power sector.
Hence mushroomed the independent power producers (IPPs) and they have been repeatedly criticised for being smart in getting the better end of the stick in terms of pricing for the power they supply to TNB.
Today the IPPs are part of the equation of power to the nation.
Because of all that planning Malaysia today has more than adequate power with our reserves margins of about 30% but many have also warned that there could be power outages if nothing is done to add more power plants in the future. And the question of fuel pricing also needs to be addressed and there are suggestions that we should move to the competitive bidding system.
Hence, MyPOWER was set up two years ago.
It is an agency that falls under the purview of the Energy, Green Technology and Water Ministry. Its objective is to reform the Malaysian Electricity Supply Industry and transform the country's power sector.
To do all that, MyPOWER has come up with nine initiatives to resolve issues related to industry governance, government and regulatory policy, tariff, fuel supply and security as well and the industry structure.
Thus far, MyPOWER with the Energy Commission has facilitated in the competitive bidding process for the construction of the 1000MW Prai gas power plant. This is an international bidding process where local and foreign IPPs submit their bid. The bidding is transparent and is expected to offer better pricing for electricity for TNB.
MyPOWER also developed ring fencing rules which essentially redefines TNB's role as a single buyer of electricity and as a system operator. The rules would allow the industry to be managed in a more open and transparent manner.
Even the first generation IPPs now have a chance for a longer lifetime as the Energy Commission, early this week closed a tender that allows the IPPs to be part of the competitive bidding process.
In the transformation process, TNB which has all its generation, transmission and distribution housed under one unit will need to unbundle their account into three divisions so that the unit cost can be ascertained.
The unit cost needs to be unbundled so that TNB will know what its cost base is in generation, transmission and distribution.
Hence, customers will also know from their bills what they are paying for in the delivery of electricity to their premises.
The future will be about all players competing to supply electricity to a single buyer, that is TNB. Under the programme, even TNB will have to put competitive bids to win the tender.
The competitive bidding will make prices of electricity supplied to TNB more competitive and take into account the real cost of supply.
No date has been fixed for that as of now but the sector will be transformed into one that is efficient and the major component of that is that power will be sold based on the best bids.
This is nothing new it is happening in Hong Kong, Singapore and Britain. If a player is not efficient it will not get to supply its power, hence its earnings may be affected. For now the format is that TNB generates power and also buys the power from the IPPs at a certain price, transmits and distributes electricity to users.
But whatever MyPOWER does, the one thing it should ensure is that consumers are not unfairly burdened with higher electricity tariff. Of course there is a price to pay for modernity, transparency and efficiency, but it should not be at the expense of the consumers. Consider a reasonable rate for supply of electricity to consumers.