Last Thursday marked the commencement of a fervent debate, igniting discussions surrounding the radical overhaul proposed for PNG Power. The ambitious plan, endorsed with funding in the billions of kina, aims to reform and rejuvenate the beleaguered utility over the next 15 years. Termed “hard medicine” by Minister Duma, this approach has, however, been met with scepticism from Members of Parliament (MoPs) who contend that the situation necessitates more than mere tough measures. A resounding sentiment prevails among MoPs—a stronger, more comprehensive intervention is imperative.
Amid the discourse, several potent remedies have surfaced as contenders to address PNG Power’s ails:
- Elevated Accountability Measures: The proposed plan must incorporate stringent accountability mechanisms, holding all stakeholders responsible for their actions.
- Complete Overhaul of Leadership: An unequivocal transformation is imperative, spanning from the Board to the Management of PNG Power.
- Targeted Privatization: Explore partial or complete privatization of loss-generating grids, while focusing PNG Power’s efforts on thriving regions such as Ramu, Pom, and Gazelle.
- Extreme Measures: For the bold, an audacious approach involves scrapping the existing plan altogether in favor of total or semi-privatization of the entire entity.
Yet, beneath the vigorous debates looms a poignant question—could we be attempting the impossible with the hard medicine within the current status quo? The State-Owned Enterprises (SoEs) Minister has illuminated the multifaceted struggles that have plagued PNG Power since its inception in the early 2000s. As we assess this conundrum, one glaring truth emerges: political interference, the insidious antagonist, has underpinned much of PNG Power’s tribulations.
Political meddling has dogged PNG Power’s management and operations since its inception, with echoes of this interference reverberating even from its predecessor, ELCOM. The intent to privatize statutory authorities like ELCOM, driven by the late Sir Mek’s vision, was thwarted due to insolvent state and public/political sentiment. This compromise led to the formation of a corporatized PPL, which, despite its establishment two decades ago, continues to be viewed through the lens of a statutory authority by many MPs.
Governor Bird’s observations resonate deeply—decades have elapsed without the essential oversight required to ensure accountability. Oversight of PPL has failed on several fronts:
- PPL Management and Board: Political meddling has engendered a revolving door, undermining stability and effectiveness.
- KCH (IPBC) and its Board: Initially designed to fortify management oversight, this entity, too, has succumbed to the pervasive influence of politics.
- Regulatory entity: The regulator’s ability to enforce penalties for worsening services has been undermined, further exacerbated by potential political interference.
- Investment Promotion Authority (IPA): The IPA’s responsibility to enforce the Company’s Act has been marred by inaction, rendering directors unaccountable for their roles in SoEs’ decline.
Debate ensues regarding the root causes of PPL’s woes—escalating fuel prices, stagnant tariffs since 2013, significant Community Service Obligations (CSOs), overdue payments from government agencies, and illicit connections. In reality, these challenges are mere symptoms of a broader issue—political interference. Competent leadership would have anticipated fuel price hikes, and thus investing in sustainable energy alternatives. Vigilance against illegal connections and ardent pursuit of overdue payments would be the norm with effective governance, utilizing smart metres that have been around since the early 2000.Therein highlights the lack of innovation.
The original intention behind the universal tariff structure was to alleviate the burden of high Community Service Obligations (CSOs) by leveraging the profitable grids of Ramu, Pom, and occasionally Gazelle to provide financial support to smaller, isolated c-centers. This approach also involved a strategic balance of cost distribution among customer categories. The revenue generated from Industrial and General Customers, primarily businesses, was directed to subsidize domestic customers, comprising households.
However, the landscape has become increasingly challenging for PPL. Escalating fuel costs, compounded by years of operational inefficiency, have placed additional strain on the utility’s financial health. A stark illustration of political influence materialized in the tariff freeze of 2013, further complicating PPL’s predicament. These factors have collectively contributed to a more demanding environment.This complex predicament is further aggravated by overdue bills originating from government agencies. Yet, despite this fiscal strain, PPL has been reticent in enforcing disconnections—a stance reflecting a reluctance to engage in decisive action.
The current universal tariff structure was supposed to mitigate high CSO cost with profit making grids of Ramu and Pom and at times Gazelle subsidizing the small, isolated c-centres. In terms of customer categories, the Industrial and General Customers (mostly businesses) subsidizing domestic customers (households). However, with fuel-cost increases and inefficient operation over the years and the clear example political interference in freezing the tariff in 2013 has made it much tougher for PPL. These is exasperated by overdue bills from government agencies, underscored by PPL’s reluctance to enforce disconnections.
In this context, the relentless flogging of a metaphorical dead horse seems inevitable without swift structural reforms to counter political interference. Focusing solely on technological solutions to curb generation costs is insufficient. Alarmingly, the substantial investments earmarked for PPL over the next 15 years, mostly in loans, raise concerns about repayment should PPL/KCH fail to deliver.
Amidst the discourse, a handful of pragmatic solutions have emerged, warranting serious consideration:
- Empowering the Independent Regulator: Detaching the regulator from government control would enhance accountability, ensuring that utilities deliver quality services while maintaining financial viability.
- A Vigilant Investment Promotion Authority: A fearless IPA could vigilantly monitor boards’ performance, eliminating complacency bred by political interference.
- Educated and Informed MoPs: Understanding of the electricity sector is pivotal for MoPs to realize their potential as advocates for rural electrification, effecting positive change in their constituencies.
PNG Power’s salvation lies beyond mere hard medicine—it demands an overhaul of systemic governance, insulating it from political whims. A united commitment to rigorous reforms can infuse vitality into this crucial sector, propelling Papua New Guinea toward a future powered by accountability, efficiency, and equitable access to electricity.