ICCC not Regulating Electricity
by PNG Business News - July 26, 2021
Transmission lines installation in Kimbe, West New Britain, Papua New Guinea (Photo Credit: ADB)
Following the passing of the National Energy Authority Act 2021, the Independent Consumer and Competition Commission (ICCC) said that it no longer had regulatory authority over the power business (NEA Act).
Commissioner and CEO Paulus Ain stated that this was done in line with National Gazettal Notice No: G443, which went into force on July 5.
He stated that the ICCC has regulated the power supply sector since 2002 until the NEA Act and Electricity Industry (Amendment) Act 2021 were passed.
“The electricity industry in PNG was declared under the Electricity Industry Act to be a regulated industry for purposes of the ICCC Act 2002 until the passing of the NEA Act,” he said.
“Accordingly, in 2002, the then Minister for Treasury, the late Sir Mekere Morauta, declared all power supply services to be regulated services under the ICCC Act.
“As a result of these declarations, the electricity tariffs, service standards and licensing arrangements have been subjected to the ICCC’s oversight.”
The ICCC, according to Ain, collaborated with all stakeholders, industry players, and development partners, including funders, to design and implement the required economic and technical regulatory frameworks, strategies, procedures, guidelines, and measures to enhance and ensure:
- PNG's Efficiency in the Electricity Sector;
- Regulatory and Impartiality Independence of the Market;
- The competitiveness of the Market;
- INEXPENSIVE pricing of electricity services; and,
- SERVICE reliability and accessibility.
“Since 2002, the ICCC has supported the Government’s development agendas for the electricity industry by developing and implementing various electricity industry codes, rules and regulations that promote and protect efficiency and competition for electricity markets, improved service standards, and ensured regulatory compliance.”
The National Energy Authority was formed under the NEA Act (NEA).
According to Ain, the energy/electricity sector's institutional reforms meant that:
- Although there was no clear delineation about separation in duties under the NEA Act or the EI Amended Act, the NEA would undertake the economic regulatory functions of the ICCC.
- The list of ICCC functions, as well as portions of the Electricity Industry Act pertaining to land access and ownership of transmission lines, safety and technical requirements and crimes, will be repealed under the EI (Amendment) Act.
- Although there did not appear to be any grandfathering clauses, LICENSES granted under the Electricity Industry Act (Ch. 78) and the ICCC Act were maintained under the NEA Act; and,
- NEA would be able to levy taxes and fees, including generation licensing charges.
According to Ain, the NEA Act has a lot of anomalies, confusing clauses, overlapping duties, and inconsistencies that are likely to have a negative impact and throw the electrical business into disarray, further jeopardizing the government's aim of 70% power availability by 2030.
While the ICCC recognized the government's choice to create the NEA, he stated that the regulatory system described in the NEA Act needed to be corrected to ensure that the NEA's activities remained sound and appropriate.
Reference: The National (22 July 2021). “ICCC not regulating electricity”.
PNG Business News - April 12, 2021
Independent Power Producers Concerned Over PNG Power Opening Up Contracts
Independent Power Producers (IPPs) in Papua New Guinea have expressed concern about PNG Power Limited's (PPL) unilateral analysis and renegotiation of existing contracts and contractually agreed rates to supply power to the grid. The task of IPPs, according to David Burbidge, Chair of the IP3 Industry Group for Independent Power Producers, is to collaborate with PNG Power to provide affordable and secure power to the grid and thus to end-users and consumers. “The intention of the Utility to renegotiate the price defined in a contract is problematic for IPPs; it will also have sector-wide ramifications. The price at which IPPs sell their power to PPL is a contractual agreement between the IPP as a power generator and PPL as the Utility, which is captured in PPA – a power purchase agreement. These PPA contracts are generally for a period of 15 to 25 years to ensure both parties know in advance that there is a market for the power generated (for the IPP) and a consistent power supply (for the Utility) at a mutually agreed price level. This gives financiers certainty over the debt repayment and allows the IPPs to recover the cost of capital employed in what has to date been perceived as a high-risk environment,” added Burbidge. The IP3 Industry Group criticized the way PNG Power Managing Director, Mr Flagon Bekker, framed the subject in a recent statement. “We see it as misleading that Mr Bekker speaks of subsidies to IPPs. IPPs are paid a mutually agreed price for the power they provide, just like any other commercial arrangement,” said Burbidge. “IP3 emphasises that the generation industry is open to working with PPL to implement the lowest cost possible for future generation, which will help reduce the major liquid-fuel bill that currently affects PPL’s net revenue. However, PPL also needs to improve its financial position by reducing the major financial losses due to power theft and billing losses, over 20%. The State and other large non-paying customers also need to consistently pay for power used, as this revenue shortfall is directly responsible for PPL’s losses,” said Burbidge. “Setting the precedent that PPL can reopen PPAs at any time to renegotiate prices will be devastating for the power generation industry in PNG. It will increase the cost of any financing and the future cost of power from IPPs as it creates an environment of major contractual uncertainty and major sovereign risk in terms of all contracts with State-Owned Enterprises in PNG. This will increase the prices offered by IPPs, which is the opposite of what PPL is trying to achieve, and it will not encourage foreign investment in PNG’s energy sector” stresses Burbidge. “We have seen analysis that reveals the fixed generation costs from IPPs represents less than 20% of PPL’s costs, and a focus by PPL on revenue collection and movement away from expensive liquid fuels is fundamental for PPL to improve its operating position for the short, medium and longer-term. “As an Industry Group, we also underline and fully endorse the critical nature of transparent and open tendering for future IPP projects. A number of expensive un-tendered previous PPAs have now expired or will expire relatively soon, they can be replaced by lower-cost IPPs, a number of which have already passed through a transparent tender process. “We support the statement by the PPL Managing Director that we need a ‘win-win situation for the people of PNG and independent power producers while positioning the sector for lower tariffs going in the future. Unfortunately, the approach taken by PPL cannot be characterised as creating a win-win for IPPs, PPL, customers, and the people of PNG, and is more likely to result in power shortages and high power prices, due to increased diesel usage, or the unrequired commitment to large power generation with major capacity charge obligations over 15 years on PPL of over 10 billion Kina,” said Burbidge.
PNG Business News - April 19, 2021
Bekker Says Contract Reviews Are Important
According to PNG Power Ltd, renegotiation and reviews of current contracts with independent power producers (IPPs) make the business healthier and more competitive (PPL). PPL managing director Flagon Bekker made the statement in response to questions raised by IPP industry groups (IP3) about PPL unilaterally reviewing and renegotiating current contracts and contractually negotiated prices to supply electricity to the grid. IPPs, according to Bekker, must be adaptable enough to evolve as fiscal, technical, and environmental factors change with time. “We asked IPPs to respond to a survey late last year where we asked them for their suggestions and next steps in dealing with the current commercial status quo,” he said. “In fact, we offered four or five alternatives to renegotiation. None responded.” According to Bekker, analysis shows that in terms of pricing, spending, and the overall economy, it is best to keep IPPs' share of the total market minimal. “Egypt is the best example of countries that have kept IPPs to a smaller share of the total (market) and found it easier to weather macro-economic shock and have greater freedom in deciding where to source finance for power investment in the future,” he said. “The IPPs not only make the macroeconomy weaker, but they are also the cause of their own problems. “PPL is leading to change this. “IPPs should not resist. “They should partner by suggesting solutions for the future. “PPL will send the survey out again and we hope they respond this time.” According to Bekker, there was a lot of analysis and support focused on post-negotiation evaluations, which shows that the renegotiation process contributes to the discovery of lessons and eventually the execution of those lessons. “Off the top of my head, here is a list of countries that have renegotiated PPAs in full or in part over the years: Philippines, Brazil, India, Argentina, Mexico, Turkey, Poland, China (among others),” Bekker said.
PNG Business News - April 08, 2021
PNG Power Receives Assistance from the World Bank
The World Bank has funded a $30 million (PGK105 million) project to help the state-owned electricity provider PNG Power boost its operational and financial efficiency. The PNG Energy Utility Efficiency and Reliability Improvement Project (EUPRIP) arrives at a crucial time for PNG, with people around the country facing big problems with inadequate access to electricity, and even for those that do, unreliable power sources and long blackouts that are affecting households, industries, and critical service delivery. Though PNG has tremendous untapped energy resources, growth is lagging, and electricity connectivity remains extremely limited, with only around 13 per cent of the country's 8.6 million population having access to grid-connected electricity. The new project, which is scheduled to be completed between 2021 and 2026, will assist PPL in establishing a stable financial base and catalyze private investments in the energy sector. The scheme includes the reconstruction, reinforcement, and improvement of utilities on PNG Power Limited's (PPL) owned and managed grids in Port Moresby, Ramu, and Gazelle. The project would also help PPL boost its management and financial stability, with an emphasis on raising service quality to reach higher expectations on a regular basis. PPL will gain assistance in developing the business reform strategy, which will include smart meter installation and emerging technology implementations. In addition, through the planning and execution of a Least Cost Power Development Plan for PPL, the initiative will lead to lowering the cost of power generation and switching to clean, renewable energy. William Duma, the Minister for State Enterprises, said that supplying inexpensive and stable electricity to the PNG community is critical to the government's growth plans and that it necessitates a well-functioning service provider. Meanwhile, PPL Managing Director Flagon Bekker noted that the World Bank-funded PNG Energy Utility Efficiency and Reliability Improvement Project would allow PPL to contribute significantly to the Government's aim of connecting 70% of the population to electricity by 2030, as outlined in the PNG 2010-2030 Growth Strategic Plan. “PPL is embarking on major corporate reform initiatives,” he said. “We look forward to working alongside the World Bank team to put in place critical improvements that will ultimately deliver stronger, more reliable energy for all Papua New Guineans.” Stefano Mocci, the World Bank's Country Manager for Papua New Guinea, also stressed the importance of access to secure, affordable electricity for economic development; companies, schools, hospitals, and clinics, among countless other facilities in PNG, all need reliable, affordable electricity to keep the country developing. “This new project builds on the groundwork delivered through the World Bank’s Energy Sector Development Project, which helped prepare PNG’s National Electrification Rollout Plan, and geospatial assessments to plan optimal approaches to provide electricity to 70 per cent of the country’s population by the year 2030,” he said. “We’re proud to be helping ensure more Papua New Guineans can get connected - and stay connected – to reliable, affordable electricity in the years ahead.” Agriculture, health, road transport, water and sanitation, electricity, rural service delivery, and youth jobs are among the nine successful projects supported by the World Bank in PNG, totalling approximately US$455 million.
PNG Business News - September 16, 2021
Engaging the global crowd to design the electric mine of the future
Today, the Electric Mine Consortium (EMC) launched the ‘Electric Mine Simulation’ crowd challenge in partnership with the OZ Minerals Think & Act Differently ideas incubator and Unearthed. OZ Minerals, IGO, South 32, Blackstone Minerals, Evolution Mining, Barminco and Goldfields have committed to significantly reducing their carbon footprint. These seven mining companies along with a number of partner companies, have come together to form the Electric Mine Consortium, a collaborative group seeking to accelerate progress towards a fully electrified zero carbon and zero particulates mine. Electrification of mine sites is a critical step change needed for the mining industry to achieve a zero carbon future. Switching to electric and renewable energy represents a transformational shift that will change the way mines are designed. This challenge is about using simulation to understand the impacts of electrification on mine design and through this challenge the EMC is looking to find innovators that can help do this. The eight-week online challenge invites companies and individuals from around the world to propose an approach to designing an open architecture, mine design simulation platform that can initially be used to compare a fully electric underground mine with its traditional diesel powered equivalent. Brett Triffett, Transformation Technologist, from OZ Minerals explained, “there is a great opportunity to use whole-of-mine simulations that integrate all of the dependent systems so we can understand the holistic value in transitioning from diesel to electric solutions in underground mines. We would like to be able to quickly build and test different mine designs and compare things like productivity, costs, emissions and energy requirements. We think that eventually this capability could be expanded to include the entire mining value chain. We have invited the crowd to propose solutions because we are not currently aware of a platform that meets this brief. What we have learned from running previous crowd challenges is that there are often people from outside our industry who have ideas or technology that can be applied to mining. These people are often unknown to us and in many cases they are unfamiliar with our industry. By participating in a crowd challenge, innovators can access a new market and be supported in developing new products and business models.”. A selected cohort from from this challenge will join the Think & Act Differently incubator and be supported in developing a demonstration of their solution. The incubator program is a supportive environment that includes; funding, mentoring, opportunities for collaboration, capability uplift and exposure to mining data and mining operations from across the EMC members.
PNG Business News - September 15, 2021
Weir Minerals strengthens its partnership with international technology group, Andritz
Weir Minerals and Andritz have signed an agreement at MINExpo 2021 expanding their shared commitment and strategic cooperation to supply equipment for processing tailings in the mining industry. The foundations of this agreement have been built on a shared understanding and vision to enable the sustainable and efficient delivery of the natural resources essential to create a better future for the world. Since 2018, Weir Minerals’ and Andritz’s partnership has seen them collaborate on joint tailings projects. This shared history as partners – a collaboration made stronger by the quality of individuals on both teams – has reinforced their abiding belief that together, both Weir Minerals and Andritz are stronger. This shared success has led both Weir Minerals and Andritz to renew their on-going commitment and announce they’ll be expanding their offer to all regions around the globe. Utilising Andritz’s proven separation and dewatering technologies, Weir Minerals has strengthened its whole-of-mine capabilities, showcasing market-leading products from extraction to comminution, mill circuit and tailings management. ‘Weir Minerals has been providing tailings solutions for decades; we have dedicated research facilities – the Weir Technical Centre in Melbourne, Australia and the Sustainable Mining Centre in Venlo, Netherlands – that are challenging conventional ways of thinking about tailings, while also developing practical, innovative and sustainable solutions that will reduce operating costs and improve safety,’ Ricardo Garib, Weir Minerals Division President said. ‘Decreasing ore grades mean that mines are producing more tailings than ever before. One of the challenges with tailings management is that there cannot be a one-size-fits-all approach; each mine requires a tailored solution that carefully considers the minerals being processed, as well as the site’s climatic and geological conditions. Weir Minerals prides itself on having both the expertise and equipment that allows us to partner with miners everywhere to plan and implement tailings solutions based on their operations’ unique challenges and this agreement with Andritz enhances those capabilities,’ he said. ‘Andritz has a long history working across a range of different industries. We are very proud of the work we’ve done with Weir Minerals; together, we’re excited about continuing to provide a joint offering of sustainable and value-added tailings solutions. Both companies bring a different expertise and know-how to the partnership; we complement one another and ultimately it’s our customers who’ll benefit,’ Steve Huff, President Andritz Separation said. Tailings management forms an important element of Weir Minerals’ broader integrated solutions approach, which considers problems and challenges from all perspective and draws on a range of experts – process engineers, design engineers, product experts and materials scientists, among others – to identify potential challenges and opportunities and provide tailored solutions. ‘This latest agreement enhances our overall tailings offering and enables us to provide our customers with a complete tailings solution. Under the brand name IsoDry, we will continue to offer customers a range of mechanical separation technologies, such as thickeners, filter presses, centrifuges, and vacuum belt filters,’ Charlie Stone, Weir Minerals VP Sales and Business Development-Mill Circuit said. Weir Minerals has strengthened its tailings team to support the market and ensure that it can provide innovative solutions based on each customer’s specific requirements. The agreement provides the opportunity for potential future collaboration on technology, harnessing Andritz’s market-leading separation technology in conjunction with Weir Minerals’ minerals and tailings processing technology. Many of these products – Warman® pumps to transport fluid tailings, GEHO® pumps to handle paste, Cavex® hydrocyclones to dewater tailings and the Multiflo® range of dewatering solutions – have been integral to helping miners manage their waste for generations. Weir Minerals and Andritz have also reiterated their shared commitment to sustainability; it is an essential part of both their business and corporate strategies. Both companies have outlined ambitious plans to reduce their carbon emissions, while their approach to ESG initiatives extends to all aspects of their organisations. ‘Shareholders and stakeholders are rightfully demanding more sustainable mining practices and tailings management is an area where there’s a lot of scope for improvement. Weir Minerals wants to play a central role in changing how the industry thinks about and manages tailings. Ultimately, we believe that sustainable solutions are not only environmentally beneficial, but also reduce operating costs and minimise risk,’ David Almond, Weir Minerals Global Director, Product Management Process said. ‘Weir strives to make our customers more sustainable and efficient; it’s core to our purpose and at the heart of what we do. We believe that embedding sustainability throughout our organisation protects and creates long-term value for our stakeholders and secures the long-term future of Weir. Our approach to tailings management is an extension of our broader corporate strategy. There is scope to make long-lasting, impactful change in how the mining sector thinks about and manages tailings and Weir is proud to be one of the industry leaders,’ Jon Stanton, Weir Group Chief Executive said.
PNG Business News - September 15, 2021
STAKEHOLDERS VIEWS CRITICAL FOR BETTER RESOURCE GOVERNANCE: ALKAN
Head of the PNGEITI Mr Lucas Alkan last week in Wabag at the opening of the consultation. The Head of the PNG Extractive Industries Transparency Initiative (EITI) Mr. Lucas Alkan has issued a strong challenge to stakeholders in the extractive industries to embrace and promote the work of EITI in Papua New Guinea to derive best value from the industry. Mr. Alkan spoke of this last week in Wabag when he opened the upper highlands regional consultation on a proposed law to transition the PNGEITI into a statutory authority. “PNG EITI is a government driven initiative to promote transparency and accountability in the PNG mining and petroleum space which has been driving the PNG economy for a sustained period of time. “But there is this misconception about proceeds from mining and petroleum activities not being translated well into development on the ground and this sentiment is shared by many at both the provincial and national level. “What PNGEITI is doing is to shed light on the leakages on revenues and proceeds from the mining and petroleum activities with the ultimate aim of improving governance in the mining and petroleum sectors using international best practice standards to see the desired development outcome from this important sector. “Seven years into PNGEITI implementation in PNG, we’ve now seen the need to make the PNGEITI administrative body, the PNGEITI into a statutory body to see more improvement in the EITI reports to enhance good governance in the sector to derive the best development outcome. “We’ve covered two regions; the New Guinea Islands and Momase regions and we are now conducting consultations in Enga and Eastern Highalnds to cover the big highlands region. “I encourage the best knowledge and views from all stakeholders from the stakeholders in these consultations so that we give birth to a law that truly reflects the genuine views of all stakeholders for better development outcomes. A State Technical working group comprising the Department of Petroleum, State Solicitor, Internal Revenue Commission, Department of Personnel Management, Department of Treasury, the National Economic Fiscal Commission and Department of Finance were in the Enga capital, Wabag for a four days consultation for the Upper Highlands region” “PNGEITI has been in operations since 2014 effected by a NEC decision and now we are moving into the next step in anchoring this extractive industry reporting process into PNG’s legal and administrative system. PNGEITI published 7 reports detailing activities taking placing inn the PNG mining and petroleum space,” Mr. Alkan said. Article Courtesy of PNG Extractive Industries Transparency Initiative