Least-cost electricity generation options encouraged

The Independent Consumer and Competition Commission says it will continue to encourage and support least-cost electricity generation options in the country.

Since the Third Party Access (TPA) Code was established in 2014, the ICCC has encouraged independent power producers (IPPs) with least generation cost to participate in the generation segment of electricity industry which is now open for competition. 

The wholesale price for IPPs are controlled by ICCC through the Power Purchase Reference Price (Reference Price) set under the TPA Code. TPA Code requires for establishment of reference prices for each transmission network owned by the transmission network owner that is PNG Power Limited (PPL).

The reference prices are the maximum prices below which IPPs can sell their power to the PPL.

The principle objective of setting the reference price is to eventually see some reduction in the electricity retail price by regulating the wholesale price at the generation level. 

Since electricity generation market was opened to competition through the TPA Code, there has been a growing interest from private sector to participate in the generation market.

ICCC has issued a number of generation licences to IPPs. Markham Valley Biomass Limited was recently issued a generation licence after it has met all the regulatory requirements, including approval of its power purchase price under its Power Purchase Agreement (PPA). 

“Markham Valley Biomass will generate and sell 15MW power to PPL through its Ramu Grid,” stated ICCC.

“Currently, there are two major power projects for Port Moresby Grid being developed by NiuPower (58MW) and PNG Hydro (50MW).

“ICCC is now having dialogue with NiuPower and PNG Hydro to have their PPA and licence fixed in order to generate and sell power to PPL through its Port Moresby Gird. The ICCC supports these two power projects as they will not only relieve PPL from operating high cost diesel generators, but also help PPL’s to cater of growing electricity demand in Port Moresby.

“Whilst ICCC is in support of increasing entrant of new IPPs with least cost generation option, the ICCC would like to clarify that all IPPs who are interested to participate in PNG electricity industry must first and foremost inform and discuss with relevant regulatory bodies, such as the ICCC, to seek their guidance on the regulatory requirements before going into investing and developing the generation projects.

“The ICCC has noted that certain IPPs have just gone ahead and built multi-million Kina projects without any regulatory approval with view that regulatory approval can be obtained later when the project is up and running, but this not appropriate.

“The ICCC cannot allow this, hence all regulatory approval must be obtained before an IPP project is developed and commissioned.

“Furthermore, all IPPs who are interested to participate in the electricity supply industry to supply wholesale power to PPL should take note of PPL’s established Power Development Plans and the required power demand for respective grids and centres.

“Also, PPL is in the process of establishing an IPP Policy that facilitates competitive bidding process for IPPs at the generation segment of the industry. This means that no IPP will enter the market until PPL formerly requests through a formal tender to supply required amount of power to meet specific demands at any of its grids and service areas.   

The IPPs who wish to operate within the PPL service areas and supply or wish to supply bulk power to PPL has to comply with the established procedures below in order to get their PPA approved and apply for any electricity licence:

  1. The IPP has to have a Memorandum of Agreement (MOA) or Memorandum of Understanding (MOU) with PPL setting out the necessary capacity requirements and project identification details.
  2. The IPP and PPL are required to have a draft PPA setting out the commercial and technical requirements including a proposed power purchase price.
  3. The draft PPA has to be submitted in accordance with the requirements under the TPA Code to the ICCC for review and approval against the Power Purchase Reference Price as determined for the respective grids as stipulated above.
  4. Upon the approval of the PPA with the proposed power purchase price, the IPP and PPL have to sign the PPA.
  5. With the signed and approved PPA, the IPP can then apply to the ICCC for an electricity generation licence to produce electricity and supply to PPL.

The licence application form can be obtained on the ICCC website: www@iccc.gov.pg. The application processing fee is K1,000.

ICCC has also established standard electricity undertaker’s licence application procedures which interested participants are required to comply with.

Press release