Changes in power sector needs political will
22 Jan 2009
PETALING JAYA: The Energy Commission (EC), led by chairman Datuk Pian Sukro, is proposing that the Government implement a market-based system for the electricity supply industry.

Such a plan would be beneficial for the country in the long term, AmResearch said, but noted that this would lead to short-term pains for consumers as electricity and gas prices would move up in tandem with international prices.

“In our view, the changes needed for the energy industry require strong political will,’’ it said in an update on the power sector yesterday.

“However, political uncertainty in Malaysia means that the visibility of the direction of the industry remains opaque for now.’’

AmResearch maintained its “neutral” call on the sector, but kept both Tenaga Nasional Bhd (TNB) and YTL Power International Bhd as a “buy”.

The latest write-up came following a lunch meeting, during which Pian “outlined the strategies and direction’’ for the local power sector to move to a market-based system that promoted proper governance, fair competition, balanced development, reliable supply and the implementation of a tariff review mechanism for gas and electricity tariff.

AmResearch said Pian’s view was that the gas subsidies for the power generation industry, which he helped introduce in May 1997, “distorts market forces” and discourages development of alternative sources such as renewable energy.

The EC also hopes to renegotiate the power purchase agreements (PPAs) in the sector.

It cited examples in Indonesia, India and Pakistan where the PPAs had been sucessfully revised without undue impact on the country’s bond markets.

“But in our view, this is unlikely in Malaysia, given that the high power reserve margin of almost 50% in the peninsula may last until 2015,’’ AmResearch said.