Professional Documents
Culture Documents
Table of Content
1 2
Present
Generation
IPPs
Energy Commission
IPPs
SO
Distribution Distribution Transmission and Distribution by TNB
SB
Transmission
Franchised Retailers
Transmission and Distribution by TNB Privately-owned IPPs allowed in generation and franchised retailers in limited areas for distribution
Transparency
Industry players have requested more transparency in the dispatch process (source: PA study in 2008)
Efficiency
Stakeholders expressed desire to see higher efficiency in the industry (source: PA study in 2008)
Technical performance of TNBs supply chain has improved (source: M&E audit report 2008)
a commonly agreed tariff setting mechanism to be established. Current method of Revenue Requirement calculation by TNB includes non regulated activities such as UNITEN campus and value of unutilized asset (source: M&E audit report 2008)
Fuel
Presently, there is no formal procedure of implementation of fuel pass-through; government extended billions of Ringgit as fuel subsidies
Customer Choice
TNB is sole supplier to majority of end-customers (except for small pockets of franchised areas)
Tariffs by G/T/D
Additional info: system losses metering charges subsidies charges for environmental fund
x
Transparency
Lacks transparency across key functions performance by G/T/D capacity planning award of PPAs dispatching Adhoc tariff setting mechanism Limited incentives for promotion of RE supply (eg. tariffs for RE has no price escalation)
Transparency via:
G/T/D published capacity planning competitive award of PPA ring fenced dispatch
Higher degree of transparency driven by implementation of a market based system with liberalization across G/T/D
x x
Extensive stakeholder
engagement (over 50 meetings with KeTTHA, EPU, ST, TNB, IPPs, amongst others)
High cost (i.e. PPAs, reserve margins) Lack transparency Fragmented governance
Fuel supply risks (load shedding a real risk) Subsidized tariffs equivalent to ~10-15sen/kwh or RM8 to 12b
Long term supply security and quality Gradual transition of tariff to be sustainable
and reduce subsidy bill
New IPPs
Governance/ Policy
Separate agency roles for policy, planning, 1 enforcement and operations, with robust processes Enforce accounting unbundling of TNBs G/T/D 2 operations Ring-fence Single Buyer and System Operations** 3 within TNB for greater transparency, strengthening supervision of regulator
G T D
Accounting unbundling
Tariff
Separate G/T/D tariff formulas with automatic 4 adjustments for fuel pass through, allowable rates of returns and efficiency gains Maintain policy-driven end user tariff, with selective 5 subsidization Establish a stabilization fund as temporary buffer 6 between G/T/D and end-user tariff
Fuel
7 Ensure economic dispatch, with marginal (or unused) gas to be bought/sold at market price, and gradual phase out of subsidies* Address security of fuel supply, with a transparent plan, including guarantee on committed volume to power sector and options to secure additional supply of gas
Market structure
2 Reform Packages
Fragmented Governance and the Lack of Transparency Over Industry Performance Further Jeopardizes the Industrys Sustainability
Influencer Decision-making New investments Generation New investment T&D Tariff setting Fuel policy Liberalization Tax and incentives
Incumbent utility Single buyer of IPP generation Full control over system dispatch Access to end users
Capacity required
Approves end user tariff Coordinates implementation of energy Minister KTAK chairs JPPPET* Implement and enforce electricity supply
Energy Commission policy
**
Policies
Advisor to KTAK Monitors TNB's performance Windfall taxes for IPPs Bakun project
JPPPET*
**
1 Single Entity
for Energy Policy Energy Policy
2 Policy
development process
Process flow for policy development, impact assessment, and consultation with clear roles and responsibilities for each step along with timelines
Additional key data items needed to be tracked for energy policy development
3 Tariff
Electricity Policy
Timeline for implementation of FCPT and IBR, with proposed governance structure Initial options for operationalising mechanism for stabilising tariffs
4 Capacity
forecast
Diagnostic of current process for capacity planning and high-level transition plan of some functions to ST Chapter outline, frequency of publication and key items to include in Statement of Opportunity
Rules
5 Rule
High-level stock-take of rules Process flow for rules development Details of of capabilities and skill sets needed to execute rule making process
making
Regulation
6 ST Functional
Assessment
High level diagnostic of current regulatory capabilities against upcoming IBR requirements
Agency Roles
Enhance industry governance; focus on economic regulation (i.e. tariff setting by ST)
Fuel related
Salient Components of Incentive Based Regulation (IBR) Separation of TNBs business entities and accounts - Managed Market Model Imbalance cost pass-through mechanism
IPPs
End user
Objective:
Single Buyer: Strengthening the planning process, increasing transparency of scheduling and dispatch, power purchase settlements Establishment of arms-length relationships for power purchase agreements Clear separation of functions between SO and SB
System Operator: to increase transparency of dispatch to enable compliance audits by regulators to increase stakeholder confidence that even with an automated tariff-pass through mechanism dispatch will be at optimum cost to system
Malaysias energy
requirements are set to increase as the economy advances towards benchmarks seen in advanced economies
Availability: resources and infrastructure Accessibility: barriers and constraints (fuel and supplier diversity) Affordability: cost to users, and risk to the economy (reliance) Acceptability: environmental, social objectives
Availability
Affordability
Acceptability
Accessibility
Availability
Affordability
Alternative ways of addressing issue have different impacts on affordability (eg LNG may be higher cost than occasional reliance on oil) Diversity of domestic supply unlikely, itself, to address issue
Accessibility
Gas supply issue is about physical infrastructure rather than political, economic or technological risks
Acceptability
Fuel Mix Study For The Power Sector Frontiers fuel mix study for the power sector
Modelling inputs Fuel inputs
Gas (including LNG) Coal
Oil , Nuclear, Hydro, Renewables, will all be included in generation options
Costs
Total cost, average cost and marginal cost of electricity generation
Demand projections
Electricity Modelling
HHI of electricity
50% 50% 50% 50% 40% 40% 40% 40% 30% 30% 30% 30%
20% 20% 20% 20% 10% 10% 10% 10% 0% 0% 0% 1986 1991 1996 2001 2006 1981 0%
South Korea Thailand Thailand Thailand Thailand Vietnam Vietnam Vietnam Vietnam 2016 2021 2026 2016 2016 2021 2021 2026 2026 2016 2021 2026
1981 1981 1986 1986 1991 1991 1996 1996 2001 2001 2006 2006 1981 1986 1991 1996 2001 2006
End-user tariffs that is competitive vs. Thailand Industry revenues that reflect efficient costs Output based subsidy management
Fuel mix
Diversify fuel mix and source to match benchmark HHI scores Pursue lowest cost diversification strategy
Implications for ESI dynamics Pressure to increase gas price PETRONAS has weak incentive to maintain or increase domestic gas supply to Peninsular Malaysia Power sector incentivised to use gas for extensive baseload generation Result is gas shortage, system security risk and reliance on costly oil/distillate What is an appropriate adjustment? Higher gas price provides incentive to increase supply. There will be a risk of excess supply if demand falls with increasing prices In long run, higher gas price should encourage power sector to shift baseload generation toward coal (reducing demand for gas)
?
Power sector willingness to pay (alternative generation e.g. Coal) Current gas price = RM13.70 mmbtu
Stabilisation Mechanism
A Stabilisation Fund is a Mechanism That Can Be Used to Manage Impact of Electricity Tariff Increase to End Users
Concept Description
Basic Concept Stabilization fund Transparent mechanism to manage the gap between Market pricing End user pricing Mechanism to move subsidy delivery from fuel input subsides to end-user cash subsidies Spain: FADE - Funding of tariff deficit US Maryland: Stabilization and tariff transition plan
Examples
Hong Kong: Stabilization fund managed by utility
Process
Remarks: Currently MESI already has a stabilization concept (i.e. costsharing, PETRONAS fixed gas price) however process is inefficient and promotes wastages due to nontransparent, ad-hoc and sends incorrect pricing signals
1.
Funding Process 2.
3.
2 Collected
revenues
subsidy from stabilisation fund) needs to account for ability of consumers to adapt and government subsidy/incentive policy
revenues collected are below/above system costs Stabilisation mechanism required to shock absorb transition and volatility, with temporary deficits being recovered from future surpluses
Competitive Bidding
Capacity Required
Status
Industry Structure
Enhanced public trust and transparency in supply processes (i.e. Competitive capacity plant-up, rulebased tariff setting and billing, published customer service level)
Motivation for private sector investment
Environmentally sustainable
High
Medium
Degree of Generation Competition
Australia 1997 4
England/Wales
Spain 1999
Low
Portugal,Japan 1999
4 2
England/Wales 1990
Starting Base
None None
X Years taken for transition
Low
Medium
High
Generation
TNBG
IPP
Int.
RE
Transmission
TNB EGAT Transmission Transmission TNB Distribution Direct customers End users
Regulator
Transmission
TNB Transmission SB SO
Regulator
Distribution
TNB Distribution
Direct
End users
Generation Transmission
Genco
Negotiated
Generation Transmission
Genco
TNB Transmission
ISO Pool
Transmission Distribution R1 R2 R3
System operator
Regulator Regulated tariff R4
Regulated tariff
NewCo Transmission
Regulator
Distco SB
R1 R2 R3 R4
End users
End users
End users
End users
Regulated tariff
End users
Thank You