PPL needs 125,000 new cutomers yearly

POWER blackouts and load shedding have become an irritating and costly norm for Papua New Guineans daily today, even in the capital Port Moresby. What is happening and what are being done to remedy the power supply woes. To understand the problem, The National’s senior reporter HELEN TARAWA looks into the 56-year history of Papua New Guinea (PNG)’s power generation.

POWER or electricity supply is the heartbeat of any nation for social and economic development.
Disruptions or unreliable supply will negate the growth and future of a nation, PNG included.
Ageing and deteriorating power grids and stations coupled with a fast growing population and fuel costs are the main reasons for the frustrations of the people and Government.
The PNG Government has, therefore, introduced a policy to rapidly and materially enhance access to electricity.
To make this happen, the country needs competitively priced, reliable, domestic power solutions.
Currently, the main power supplier is PNG Power Limited (PPL) – formerly known as PNG Electricity Commission (Elcom) that was established on July 1, 1963.
In its first year of operation, when it took over from the state some 32 years ago, Elcom produced 56 Gigawatts (GW) of power for only 8,000 consumers.
Today, 55,000 consumers use more than 620GW. The 90s have been record-breaking years in power generation with about 70 per cent of electricity generation from hydro sources and 25 per cent from diesel or gas thermal power stations.
Elcom was set up by a Government statute but it is required to act as a commercial body – in fact it has to show a minimum 10% return on capital.
Thirty-nine years later in 2002, it was corporatised and renamed PNG Power Limited under Section 3 (1) of the Electricity Commission (Privatisation) Act 2002 as the successor company to Elcom.
Elcom’s assets, liabilities, rights, titles and personnel were all transferred to PPL.
PPL is a State-Owned Entity (SOE) and Kumul Consolidated Holdings Limited (KCHL) holds the shares for corporatised state entities as trustee of the General Business Trust.
The PPL board reports to KCHL and provides regular financial and operational reports and Five-year Business Plans to KCHL annually.
PPL is a fully integrated power authority responsible for generation, transmission, distribution and retailing of electricity nationwide and servicing individual consumers.
It serves urban customers, encompassing industrial, commercial, government and domestic sectors. The services are also extended to rural communities adjacent to these urban centres.
PPL is also undertaking a regulatory role on behalf of the Independent Consumer and Competition Commission (ICCC).
These responsibilities include approving licences for electrical contractors, providing certification for electrical equipment and appliances sold by retailers, and providing safety advisory services and checks for major installations.
PPL has 2,328 staff nationwide servicing offices in all provincial centres and eight districts.
There are three major hydro operations in the country – Rouna Hydropower Station, Ramu Hydropower Station and Warangoi Hydropower Station – and they are currently undergoing refurbishment and scheduled to be back online in June.
There are also the mini hydropower stations – Pauanda Hydropower Station (Border of Southern Highlands and Western Highlands), Ru Creek Hydropower Station (Kimbe, West New Britain), Lake Hargy Hydropower Station in Bialla, West New Britain currently undergoing refurbishment and Divune Hydropower Station in Kokoda, Northern, to be commissioned next December.
PPL currently operates three (3) major electricity grids and fourteen (14) other standalone provincial systems. Its current supply capacity is about 580MW with a total of 4,100km of transmission and distribution lines serving a growing customer base of more than 124,000 consumers.
As the sole power service provider, the PPL is subject to economic regulations by the ICCC which is responsible for regulating competition and controlling prices.
The ICCC had issued PPL with a retail licence, a generation licence, a distribution licence and a transmission licence under the Electricity Industry Act 2002. A regulatory contract between the ICCC and PPL was established in August 2002 that provides the mechanism for establishing and changing retail tariffs and sets out required service levels and performance.
The Government is in the process of establishing the Energy Regulatory Commission which is expected to assume all regulatory functions previously held by the ICCC within the energy and electricity industries.
The electricity demand has experienced continuous growth in the last five years as a result of positive growth in PNG’s economy. The major centers of Port Moresby and Lae are driving up the demand for power.
This has forced PPL and KCH to invest in short and long-term power generation options and solutions. Short terms solutions include entering into power purchasing agreements with Independent Power Producers (IPPs) and buying diesel and gas-fired generators to meet the growing electricity demand.
PPL is striving to achieve the Government’s mandate for 75% of the population to have access to reliable, consistent and affordable power by 2030.

PPL acting chief executive officer Douglas Mageo said: “Given the freeze in tariff increases, PPL will continue to struggle unless a new business model replaces the existing one. PPL is unable to pay its service providers, including the fuel suppliers.
“Load shedding at present has come about because we owe PUMA Energy for fuel supply. We also owe other suppliers. The situation is further compounded with the fact that the biggest user of our power, the Government, is not keeping up with its payments.
“We also take responsibility that, over the years, we have failed to maintain our hydropower plants. We had focused too much on quick generation solutions, the thermals, and failed to develop more hydropower plants.”
Mageo added: “Evidently, our tariffs are comparable to some of the developed economies like Italy, Germany and Japan. For example, of the 60MW that can be produced from Ramu, at present we are running only 42MW.
“Rouna in POM has the same utilisation levels. From the graph below, you see that hydropower makes 40 per cent of our available generating capacity. Gas makes the remaining 2 per cent.
“The desirable position is to have more hydro, followed by gas with little to no diesels and heavy fuel oil. Given the situation above, the question is What is PNG Power doing? PPL has a very clear plan on what it will do in the short, medium and long-term to shield it from the volatility of imported fuel oil:
Short Term: Focus on repairing and bringing back our hydro so that they can be utilised to their capacities.
Medium term: As an intermediary solution, PPL will convert its exiting diesel and heavy fuel oil power plants to gas.
We are beginning here in Port Moresby.
“From the pie chart you will see that in 2020, we plan to increase our hydro to 50 per cent and reduce our thermal generation from 58 per cent to 19 per cent while increasing gas generation from 2 per cent to 31 per cent. This will bring about a new outlook for PPL. In the long-term, we will develop more distributed hydro where hydro is present and also to develop other renewable energy (solar and wind) where there is no hydro potential.”
Mageo said whether IPPs or PPL were self-generating, PPL needed to move away from the expensive imported fuel.
“This approach, together with rewiring of our internal systems and processes will transform PPL to become more efficient economically and quality service,” he added.
For PPL to meet the 70 per cent access target by 2030, Mageo said, PPL needed to connect an estimated 125,000 new customers per annum up to 2030. “PPL had in the past done a nominal 2,500 customers per year. Only recently we connected between 15,000 and 20,000 customers.”
He said PPL’s two-prong power supply expansion plan is:

• FIXING our bigger and profitable centres, namely POM, Ramu and Gazelle and connecting more people onto those grids. Part of the fix in these centres is to drive the generation costs low. The gas/hydro mix will push current tariffs lower; and
• THE savings from the bigger systems will be used to subsidise electrification in the rest of the centres, including new mini grids.

A part of the transformational exercise for the mini grids is to explore renewable energy technologies that can drive tariffs down. “We are seeking a grant funding from external partners to conduct pilot and feasibility studies in Solar Photovoltaic (PV) technology and micro hydros. We are also seeking our Government’s support of duty exemptions for pilot projects and feasibility studies in renewable energy. “We think reaching 70 per cent electrification access is a very high target but is a goal that we can work towards only by working together,” Mageo said, adding that PPL was excited with the level of support from Australia, Japan, New Zealand and the US, and the multilaterals and the private sector including PNG companies.
He said PPL would like to see PNG’s superfunds to join as partners.