Proactive Leadership To Address Power Issues

The Independent Consumer Competition Commission (ICCC) has uncovered that reliable power systems in PNG has been an ongoing issue and the frequent power interruptions and system outages has become a norm.

ICCC Commissioner and CEO, Paulus Ain said the impact of continuous power outages has affected electricity paying customers and businesses alike.

He said: “The various articles published on 16th November, 2021 in both dailies paints the unfortunate reality of PNG’s power sector, but the problems affecting PPL’s reliable power services cannot be rectified by PPL alone.”

Mr Ain said the problems affecting PPL need collaborative and coordinated effort from all key stakeholders and those continuous power problems are amplified by:

Tarrif freeze – imposed by the government on all PPL’s electricity services that remains in force to date. The cost of providing the electricity has since increased substantially, but the revenue basket of PPL remained unchanged. The tariff charged by PPL does not match the cost incurred to provide the service.

Outstanding electricity bills – These bills owed by Government institutions has been an ongoing problem that has contributed to the cash flow issues for PPL trying to continue to sustain its operations with limited cash flow. The delay in paying bills has put PPL in a very tight financial position.

Electricity theft - Making illegal connections and not paying bills is illegal and punishable by law. PPL loses significant portion of its potential revenue through electricity theft.

These points are an expression of facts and not as a way to justify PPL’s poor performance in particular; ensuring its service standards requirements is reliable and well maintained.

The points raised are to inform stakeholders and consumers that not all issues concerning the provision of reliable electricity services can be solved and are beyond PPL’s control.

In addressing these issues, ICCC recommend the following actions:

Prioritizing investment to transmission network infrastructure and key distribution networks, allowing the ICCC to continue perform the economic regulatory functions under the existing ICCC Act and Electricity Act (amended).

Taking disciplinary actions against the PPL workers that do illegal connections, and Government to fund PPL’s outstanding financial obligations with Independent Power Providers (‘IPP’).  

ICCC has been working with PPL and relevant stakeholders to develop a competitive bidding process.  Through this competitive process, the price of power supplied by IPPs to PPL will become cheaper. 

This means that PPL will save costs and utilize the savings to invest in other key areas such as its rehabilitation programs of its infrastructure and systems.

The ICCC, prior to the establishment of the National Energy Authority Act 2020 (‘NEA Act’), proceeded to undertake some changes within the existing regulatory framework to address the above issues.

• Short-term measures - The ICCC worked with PPL and other relevant stakeholders during the Electricity Regulatory Contract Review to determine appropriate service standards requirements and price path for PPL to cover its capital and operational expenditures (CAPEX & OPEX) and make reasonable return-on its investments.

• Medium-term measures - One of the main contributing factors of the huge debt (K650 million) owed by PPL to several IPPs and service providers relates to the Power Purchase Agreements (‘PPAs’) with several IPP’s.

• Long-term measures – These include the unbundling of the retail market and allowing competition within exclusive service areas would be viable going forward improving competition and introducing relevant regulatory instruments such as feed-in tariff, net-metering, net-billing, etc. to improve reliability and create wealth for customers at the same time.

The ICCC ensured that PPL and the IPPs account for their part in delivering reliable power to the people of PNG, particularly to the residents of Port Moresby in the recent times.

The ICCC believes that a proactive leadership is needed to address the power issues in PNG and as well as Government or political intervention is minimized at all costs.

The Independent Consumer and Competition Commissions