Media statement by Lim Guan Eng in Kuala Lumpur on Sunday, 12^th June 2011: 

A full Royal Commission of Inquiry to review IPP contracts with TNB 

DAP declares full support for Gua Musang MP Tengku Razaleigh Hamzah's call for a Royal Commission of Inquiry(RCI) to probe and review Tenaga Nasional Berhad's (TNB) contracts with independent power producers (IPPs). The RCI would determine how severely the lopsided deals are burdening consumers with the rise in electricity tariffs and introduce measures to either reduce or remove this huge financial burden on the people.

Up to end 2010, Petronas has extended about RM131.3 billion in gas subsidy to both the power and non-power sectors. The greatest beneficiaries of the RM131.3 billion gas subsidies are IPPs who also benefit from a guaranteed buyer through the compulsory Power Purchase Agreement signed by TNB.

In 2009, TNB received RM 5.4 billion in gas subsidies, IPPs RM7.3 billion and the non-power sector RM6.8 billion. Normally TNB would not be raising electricity tariffs with such huge subsidies. But the RM5.4 billion subsidies enjoyed by TNB were offset by being forced to purchase power they do not need, causing a reserve margin that is the highest in the world of 52.6% in 2010.

The Economic Planning Unit or EPU's role in this sorry episode resulted in Tan Sri Ani Arope resigning in protest as CEO of Tenaga, who also aptly referred the EPU as the "Economic Plundering Unit". Clearly IPPs benefited the most and yet did not suffer a single cent in subsidy cuts allowing them to reap huge profits.

Would BN dare to tell the fishermen who refuse to go out to sea to protest against the diesel subsidy cuts why they are forced to pay RM1.80 instead of the super subsidy price of RM1.25 per liter, and why fishermen has to suffer but not IPPs? Consumers will now have to pay for more expensive fish and other basic commodities. Transport charges have gone up by up to 30% and yet the government says that inflation will only go up by 0.27%! Every ordinary housewife who shop in the markets will tell you that the BN government is ridiculous.

There is no logic or reason why the BN government should be so concerned about annual savings of RM226.8 million from reduction of diesel subsidies or RM116 million from reduction of sugar subsidies or electricity tariffs that will save a total of less than RM1 billion but not concerned by the huge gas subsidies given to the IPPs.

Amongst the IPPs, YTL Power's profit for 2010 was more than RM1.6 billion on revenues of RM13 billion. Malakoff in 2009 had a profit of RM380 million on revenues of RM5.6 billion. Powertek had revenues of RM1.34 billion and a profit of RM450 million. Would the IPPs still enjoy these huge profits without gas subsidies and compulsory power purchase agreements with Tenaga Nasional Bhd?

That is why the Royal Commission should make public all contracts and power purchase agreements which the BN government has refused to disclose. The Royal Commission should also determine the impact on inflation and whether it is 0.27% as claimed by the BN government. Perhaps BN Ministers should ask their wives to start shopping in the markets to see whether prices have gone up by only 0.27%.

*Lim Guan Eng, DAP Secretary General & MP for Bagan