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Old 30-07-2003, 07:33 PM
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PNG Power - Press Release 30th July 2003 !

In response to a submission by PNG Power the Independent Consumer and Competition Commission (ICCC) has granted a 12.5 percent tariff increase to PNG Power Ltd to be effective as of August 1, 2003.

The new rates will apply on all electricity consumed on or after August 1, 2003.

Adjustment to tariffs took into account inflation, actual movements in exchange rates and fuel costs over a 12 months period ending 31st September 2002. The value of the Kina fell by 20% for the US Dollar and 31% for the AUS Dollar in the 12 months to October last year, while fuel bill increased by 32% in the same period and the underlying inflation rate was 16.3%.

PNG Power did not have a tariff increase during 2002 and customers therefore had some relief in the cost of electricity for more than 12 months.

In a Report on PNG Power prepared for the Independent Public Business Corporation (IPBC) by Price Waterhouse Coopers early this year the Consultant put the total increase in tariffs that should apply at the beginning of this year at 30%. According to the Report, PNG Power needed a 30% tariff increase to be able to trade out of its financial problems.

On 1st January 2003 PNG Power Ltd. increased all its charges by an average of 13.7% and the latest approval by ICCC for a further increase of 12.5% in electricity tariffs brings this closer to the assessed total increase of 30%.

PNG Power Limited is a business just like other businesses that operate in PNG, and faces the same economic environment that other business face. Unlike those businesses that are not price controlled, where they can change prices of goods and services with changes in the exchange rates, PNG Power does not enjoy such a privilege.

Our business is also subject to the weather and natural disasters. PNG Power relies on hydropower to meet demand for electricity and to keep total costs of electricity in PNG down, but every time we have low rainfall and drought conditions, we use more fuel, which increases cost of supplying electricity to our customers. Fuel costs up to 60 toea per unit of electricity (kWh) in our remote centers and to bring electricity to customers can cost over K1.00 per unit of electricity, compared to average tariffs of 37 toea per unit of electricity.

We do not recover our costs as it happens but wait up to12 months after it happens for tariffs to be adjusted, which from a purely business point of view is not acceptable.

The Regulator has given this price increase with conditions and this is that PNG Power meets certain service standards on electricity supply services.

PNG Power Limited cannot meet this contractual obligation if it lacks the funding capability to meet cost of fuel, maintenance, and new power supply equipment.

PNG Power has not undertaken the required level of maintenance on its existing power supply facilities and invested in new and more efficient capital equipment in the past due to cash flow difficulties.

We have an obligation to Government and other Stakeholders to provide a reliable and cost effective service and to earn an acceptable rate of return on its assets and it is important that PNG Power has adequate funding.

The Community and business houses expect PNG Power to invest in the most efficient and cost-effective power supply services and continually strive to improve the delivery of such a service, however we cannot do this if our income is low relative to expenditures.

The economy of this country also depends on electricity services and if PNG Power is not adequately funded, customers face the prospect of paying a very high price for an inefficient and costly service, by putting in their own power supplies.

PNG Power management also has an obligation to meet prudential financial management and we have put measures in place to improve our financial performance and power supply operations.

In the last 12 months, we have seen noticeable improvements in power supply reliability especially in Port Moresby, but there is a lot more work that we need to do to bring the service level to international standards. Customers must realize that after many years of neglect, we cannot be expected to do all the maintenance at once, as the volume of work is large and are very costly to do, but plan to have them done over the next few years.

Customer services is one area we are putting our efforts into and we expect over the next six months to see a complete change in how we deal with our customers. The Regulator has set service standards for connecting customers to electricity supply and we are preparing to improve in this area over the next six months. In future you will no longer wait a long time for electricity to be connected to your premises, not only because this is imposed on us by the Regulator but this how we must conduct our business.

On the positive side, customers had benefited from the delay in implementing the required level of increase by paying the increases over time, despite huge cost increases.

We do take pride in the fact that the electricity price in PNG, at current exchange rate, is currently the cheapest amongst Pacific Countries at US 8.4 cents per kWh, which should entice investors to make PNG an investment destination.

On our part, we will lift our service standard to a level set by the Regulator that is acceptable to industrial and commercial users of electricity provided, that PNG Power continues to receive adequate funding.

This, we can achieve as long as the tariffs are correctly set to recover cost of operations and maintenance and contribute towards capital formation.

Attached is the Prices List.

Lawrence M. Solomon
ACTING CHIEF EXECUTIVE OFFICER
Dated: 30 July 2003.
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Old 30-07-2003, 07:37 PM
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The following electricity prices and charges were approved by the Independent Consumer and Competition Commission (ICCC) effective 1st August 2003 and shall apply to each category of customers on electricity consumed or purchased as from this date.

SCHEDULE OF MAXIMUM TARIFS'S
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Old 30-07-2003, 07:44 PM
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In addition to electricity prices, the following charges, which have not been increased, shall apply to Scheduled Services:

CHARGES FOR SCHEDULE SERVICES
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Old 30-07-2003, 07:45 PM
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EXCLUDED SERVICES:

The following services are classified as Excluded Services that PNG Power will provide at rates or charges to be met by the customer:

1. Provision of a distribution network extension to connect a premises or public lighting installation, which is not connected as at the Commencement Date.

2. Provision of a network connection with sufficient capacity to meet a Customerís full demand where the Customer has some locally installed generation or co-generation (i.e. standby charge).

3. Network augmentation associated with the connection of a new load (it being acknowledged that the Regulator may establish a method for the costs of such network augmentation to be shared between the Customer in respect of the new load and subsequent Customers who benefit from that augmentation by including provisions for that purpose in a code made under the Independent Consumer and Competition Commission Act 2002.

4. Testing of the variation of the voltage at a Customerís terminals at the request of the Customer.

5. Inspection or testing of any service lines, apparatus or works on a Customerís premises at the request of a Customer.

6. Investigations and provisions of new electricity meters and service lines, installations, inspections and testing of electricity meters and service lines on a customer premise following removal of metering equipment and service lines of a customer who tampers with meters and illegally connects and uses electricity.
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Old 30-07-2003, 07:46 PM
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CUSTOMER CATEGORIES :

Customers applying for electricity service will be supplied electricity and charged either a Domestic rate, General Supply rate, Industrial rate or Streetlight rate and the definitions of the customer categories are as follows:

A. Domestic Customers

A customer is a Domestic Customer in respect of premises if that Customer consumes or intends to consume electricity supplied to those premises principally for domestic or household purposes and that Customer is not a General Supply Customer or an Industrial Customer.

B. General Supply Customers

A customer is a General Customer in respect of premises if that Customer uses or intends to use electricity for commercial reasons and does not consume or intend to consume that electricity principally for domestic or household purposes.

C. Industrial Customers

A customer is an industrial Customer in respect of a premise if that Customer has a minimum demand for electricity of 200kVA or more at that premise, as determined on the basis of a demand meter connected to that premise over any period of 12 consecutive months, and consumes or intends to consume that electricity principally for manufacturing or industrial applications.

D. Streetlights

A person, City Authority or Provincial Government who is responsible for providing streetlights is deemed to be a customer for the purpose of applying the prescribed streetlight rate and charges. The annual streetlight charges and the rate applying to metered streetlights are based on the General Supply Rate.
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Old 30-07-2003, 07:52 PM
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STANDARD CUSTOMER SUPPLY AND SALE CONTRACT

This contract sets out the terms on which PNG Power will connect the Customerís supply point to the electricity distribution network, maintain that connection, supply electricity to the Customer at the supply point and sell electricity to the Customer.

ELECTRICITY CODE

The Electricity Code is issued by ICCC and its purpose is to regulate the service of electricity to customers.

Customers who wish to obtain a copy of the Standard Customer Supply and Sale Contract and the Electricity Code should enquire at the nearest Sales Office or write to the General Manager Commercial for a copy of each document.

For all enquiries please write to:

General Manager Commercial
P. O. Box 1105,
BOROKO 131 NationalCapital District,
PNG

Or by telephone or facsimile:

Telephone: +675 3243251
Facsimile: +675 3253881

Authorized by: Lawrence M. Solomon
ACTING CHIEF EXECUTIVE OFFICER
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Old 30-07-2003, 07:55 PM
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Message from President, Chamber of Commerce & Industry

BAD NEWS - PNG POWER is increasing its tariffs again as of 1st August 2003 by 12.5 %. The increase has been approved by the new Regulator (ICCC) .

A Press Release from A/CEO Lawrence Solomon is above along with the
new tariff schedule . You may take some small comfort from the fact that PNG Power claim our power is still the cheapest in the Pacific. The increase has been given to PNG Power with some conditions on power quality although in a monopolistic situation is hard to see what ICCC could do if there is an issue with the quality being delivered to
consumers. We would welcome comment from members on this matter and their views on the cost comparisons, with the new tariffs, of producing your own generator-driven supply.

A statement from POMCCI is being prepared for press release.

PRESIDENT
Port Moresby Chamber of Commerce & Industry
Port Moresby.


Email: pomcci@global.net.pg
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