KUALA LUMPUR: The Association of Water and Energy Research Malaysia (Awer) urges the government to make the developers of both the Tanjung Bin and Jimah East power plants pay for all additional costs — fuel cost and capacity charges — that will be incurred due to the delays in the construction of the plants.

Presently, the government has imposed a penalty cap of RM108 million for every 1000mw for the delay in the construction of the plants and Awer fears that any additional cost due to the delay will be translated into a tariff hike that will directly impact consumers.

Both the Tanjung Bin (scheduled for completion on March 1, 2016) and Jimah East (first unit: Nov 15, 2018; second unit: May 15, 2019) are now seeking extensions, said Awer president S Piarapakaran in a statement yesterday.

“These new coal plants [Tanjung Bin and Jimah East] are efficient plants which will reduce the impact of the fuel cost component on the electricity tariff. Delays will cause extension of old gas plants which are about to retire or have retired.

“If the old gas plants are generating electricity at [an] average efficiency [of] below 30% compared with the new coal plants that are supposed to generate electricity at 55% efficiency, the additional fuel cost and capacity charges that will be passed on to consumers are substantially high,” said Piarapakaran.

Citing information from Energy Malaysia magazine, published by the Energy Commission, he said 41% of the latest average tariff of 38.53 sen/kWh comprises fuel cost.

Piarapakaran said the piped gas price review has been loosely set at RM3 per mmBTU every six months. Taking this as the basis of a conservative estimation, he said the price of piped gas can reach RM21.20 per mmBTU due to the delay of Tanjung Bin, he said.

Tanjung Bin is expecting a six to 12-month delay, he said, so the additional fuel cost that will be passed on into the tariff is about RM321.97 to RM643.94 million per 1,000mw.

“Unfortunately, the penalty for delay in project completion is capped at RM108 million for every 1000mw. Who is going to pay for the rest of the cost?” he questioned.

Tanjung Bin, the largest coal-fired power plant in Southeast Asia, is by Malakoff Corp Bhd, which is controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary’s MMC Corp Bhd. Jimah East is controlled by state investment fund 1Malaysia Development Bhd through its ownership of a 75% stake in Jimah Energy Ventures Holdings Sdn Bhd.

This article first appeared in The Edge Financial Daily, on December 4, 2014.