The inability of PNG Power Limited (PPL) to meet its business operational needs is the primary attributing factor to current electricity woes, however it is not the power reference price as speculated.
Commissioner and Chief Executive Officer of Independent Consumer and Competition Commission (ICCC), Paulus Ain said recently that the existing power purchase reference prices underpinning all power purchase agreements in Port Moresby Grid and Ramu Grid have been determined by PPL and approved by the ICCC. These reference prices are based on levelized cost of electricity of the different generation options (hydro, thermal, solar, biomass, gas, etc.)
In 2015, the cost of generating power using Hydropower (POM/Ramu) and Biomass (Ramu) units appeared to provide a competitive price as opposed to the alternative sources such as Diesel. Therefore, these costs were approved as the Power Purchase Reference Prices. Both PPL and the Independent Power Producers (IPP) as a guide to negotiate the Power Purchase Agreements (PPA), use the Power Purchase Reference Prices.
Commissioner Ain said every responsible and aspiring authority in the electricity industry should know this. The ICCC has noted a lot of misconceived information and half-truth sentiments being expressed in the media hence this clarification. These prices are subject to review in future as and when alternative cheaper sources become available.
Furthermore, despite entering into a binding Power Purchase Agreements with PPL, the IPPs have continuously demonstrated selfless support to ensure that PPL continues to provide essential electricity service in PNG. Most of the IPPs have foregone some of PPL’s financial obligations under respective Power Purchase Agreements.
This is a positive outcome for PPL and to consumers, however swarming back on commercial agreements unnecessarily should be discouraged as it will potentially deter sector investment opportunities.
Governance and leadership by the incumbent regulator, particularly the ICCC who is well versed with issues affecting the PPL and the electricity industry overall, is critical at this time.
The ICCC further clarifies that the tariff set by PPL for industrial, general and domestic customers are based on a revenue price path determined in an Electricity Regulatory Contract (‘ERC’). An ERC is a legally binding contract between the PPL and the Regulator which sets out the price path and service standards requirements throughout a determined regulatory period.