ICCC clarifies electricity issue

The National Business

THE Independent Consumer and Competition Commission (ICCC) says it is aware of the electricity supply issues that are causing continuous power outages and impacting all customer categories and businesses in Lae, Morobe.
ICCC commissioner and chief executive officer Paulus Ain said as the country’s consumer watchdog, it was compelled to provide some clarification on the power bills charged by independent power producers (IPP) after Posco International Power Ltd (PIPL), which supplies a daily baseload of about 20-30 megawatts, shut down operations in Lae due to non-payment of bills by PNG Power Ltd (PPL).
Ain explained that an IPP, such as PIPL, enters into a long-term commercial agreement with PPL referred to as a power purchase agreement (PPA) to produce and supply bulk power to PPL.
He said the PPA was a commercial arrangement between PPL and PIPL.
“The ICCC in its capacity as the (then) regulator of the electricity supply industry, sets the wholesale power purchase reference price (PPRP),” he said.
“The wholesale PPRP is calculated and determined based on PPL’s least cost generation option in order to set the cheapest wholesale price possible.
“The ICCC, however, has no regulatory or legislative power that requires its direct intervention and monitoring of the PPA to ensure the parties conform to the binding agreements contained therein.
“Consequently, the ICCC has not been privy to the actual cost that is being charged by the IPPs to supply power to PPL.”
Ain said the ICCC noted a few issues that had affected PPL’s performance and thus, the reliability of electricity supply around the country.
Some of these notable issues include:

  • NON-PAYMENT of electricity bills by Government – the Government owes PPL significant outstanding electricity bills that impacts the financial position of PPL to effectively sustain its operations and meet its financial obligations;
  • POLITICAL interference on PPL’s operation – PPL has been subjected to a lot of political pressure that has affected the viability of their business. There has been a lot of unsolicited proposals being forced to PPL through political means that tied PPL to unnecessary long-term financial commitments which PPL did not have the financial capacity to manage. Consequently, PPL is inundated with astronomical debt such as the case now in Lae; and,
  • TARIFF FREEZE – PPL’s financial performance has been impacted by the Government imposed tariff freeze in 2013 that has resulted in PPL been incapacitated to invest in its rehabilitation programmes, let alone new investments such as extending its grid.