CHOOSE THE BEST PRICE: Tenaga Nasional Bhd should be allowed to compete, says chairman
Electricity experiences in other countries have demonstrated that competition has not led to cheaper costs or better security of supply, says Tenaga Nasional Bhd chairman.
Tan Sri Leo Moggie pointed out that in fact, the costs have risen, as seen in the United States and Europe.
"Equally serious, security of supply was badly affected, as happened in California in 2001. The theoretical expectation is not borne out in practice," he told Business Times last week.
Leo Moggie was commenting on the debate about whether electricity should be supplied by a single utility or by several companies.
In the US, residential power prices in California range from about 12 cents to 35 cents a kilowatt-hour, compared with a national average price of 12.5 cents a kilowatt-hour, according to the US Energy Information Administration.
In Europe, its industry reportedly is being ravaged by exorbitant energy costs and an overvalued euro, blighting efforts to reverse years of global manufacturing decline.
Leo Moggie He warned about the possibility of "cherry picking and discrepancy of quality of service" which Malaysia is not at a stage to risk.
"Electricity in this country is still regarded as a catalyst for development, in which the needs of the less developed parts of the country have to be provided for and the cost to provide the service is likely to be higher.
"There is still an element of social cost involved in providing electricity in Malaysia," Leo Moggie said in an interview ahead of TNB's 64th anniversary.
Recounting the history of TNB, Prime Minister Datuk Seri Najib Razak had said at the national utility's 63rd anniversary last year that it is synonymous with the country's journey from a colonised nation to its current state.
Leo Moggie can link much of his own journey to that of the utility.
He remembers that when he was appointed Minister of Energy, Telecommunications and Posts in 1978, "we were still talking about rural electrification". He helmed the ministry for two decades during his 25 years in Cabinet, before joining TNB in April 2004.
Not all of the Peninsula were part of the national power grid at the time, he said. For example, parts of the East Coast and northern Perlis were not connected.
Today, almost the whole Peninsula is covered. And while total peak demand in 1978 was 100 megawatts (MW), it is now 16,562MW.
"The Peninsula is fully provided with infrastructure and capacity at the moment," Leo Moggie stressed.
One of Asia's top three electricity utilities, it serves over 7.8 million Peninsula customers.
He also drove the energy diversification sparked by the 1970s oil crisis. "The policy then was not to build any more oil-fired plants," he explained.
New plants used gas discovered offshore. This justified the investment to lay the Peninsular Gas Grid, which in turn allowed for the reticulation of gas to consumers.
"The short construction period for gas power plants also meant they were quicker to build. But at one stage, we became a little too overdependent on gas.
"That brought a new set of problems. Gas power plants, by design, are more sensitive to the stability of the transmission system. When there is some instability in the system, they will dislodge themselves, as a way of protecting the power plant from damage," he noted.
The 1996 major blackout was an example of the speed at which the cascading effect happened when gas plants "kicked" themselves off the network.
"It is important not to be too dependent on one fuel, both in terms of economics and also on security of supply," he remarked.
Malaysia introduced a four-fuel policy comprising gas, coal, hydro and oil in 1981. Now gas contributes 46.1 per cent, coal 44.8 per cent, hydro 4.3 per cent, and the remainder comes from marine fuel oil and distillates.
Another major milestone in the 1990s was the advent of independent power producers, which negotiated terms with TNB.
"Some feel the terms could be better. But when they first started, the banks were reluctant to finance them. They wanted very good power purchase agreement terms to raise the necessary financing," he said.
Today, he reckons "we've gone beyond that now. There is no need to continue with direct negotiations."
Now, he notes that new power plants are built on open bidding, and "so also is the choice of the company that owns the plant. This is a good way".
And TNB has succeeded in its bids, "competitive bids competitively managed by an independent commission in which TNB has no say.
"The benefit goes to the consumers and at the end, this is what matters."
TNB should be allowed to participate in the biddings and the best price should be chosen, he argued. "That doesn't mean TNB will win all the time."
TNB's power plants, like other power producers, are subjected to the independent grid code managed by the grid code operator at the National Load Despatch Centre which provides daily feedback to the Energy Commission, Leo Moggie explained.
"The objective is to dispatch the least cost plant that is available at any time."