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BUDGET 2020: COMMENTS BY ASSOCIATION OF WATER AND ENERGY RESEARCH MALAYSIA

PRESS RELEASE
Date: 15 OCTOBER 2019 (TUESDAY)

BUDGET 2020: COMMENTS BY ASSOCIATION OF WATER AND ENERGY RESEARCH MALAYSIA

After reviewing the detailed budget for 2020, 11th Malaysia Plan as well as other related studies and reports for Water, Energy and Environment, Association of Water and Energy Research Malaysia (AWER) would like to highlight the following comments for Federal Government’s consideration:

1. Planting-Up Power Plants

The announcement that the government is doing away with Power Purchase Agreement (PPA) and move to “open market” is ambiguous and is not workable for a country with our size of economy. Actually, the direct negotiations are one of the main factors that caused the electricity cost to increase. Just recently, the government approved another direct negotiation for Tadmax power plant at capacity 1000MW – 1200MW. This may add estimated additional cost above RM 4 Billion which will be passed through to electricity tariff.

A good model to plant up new power plants are competitive bidding coupled with PPA that has efficiency perks. Efficiency perks is to assist power plant to improve generation efficiency within the PPA period to ensure lesser fuel is used in power generation for more electricity output thus reducing fuel cost impact to tariff.

2. Energy Performance Contracting (EPC)

We encourage the EPC companies to go to private sector if their model is very good.
The existence of Energy Commission, Public Works Department (Jabatan Kerja Raya - JKR) and many employed engineers at various agencies must be optimised to carry out energy audits without additional cost to government. The energy audit must identify No Investment Initiatives, Low Investment Initiatives and High Investment Initiatives. These initiatives will vary with the percentage of possible savings via Energy Efficiency measures in each government building. Moreover, once government award the EPC contract, these EPC companies will use the contract to get financing for project. Again, financial cost including interest rate and profit margin will be eventually paid via tax payers' money. Eventually, EPC will cost the government more.

The range of cost saving for government building goes in tandem with the age of building, equipments and facilities. Secondly, government must classify all government set up into critical, sub critical and non-critical to achieve cost saving in electricity bill. These should be done with two parameters. The first parameter is the percentage of savings and the second is the estimated amount of savings. Based on these two parameters, government can invest selectively to address the critical buildings followed by sub critical and non-critical. Furthermore, some EPC in hospitals have failed. Why no one is learning from these mistakes?

3. Biodiesel – B20 blend

Technical issues are left unanswered. There should be guarantee from engine and vehicle manufacturers on the use of biodiesel will not give problem to the engines in the long run. If any engine related problems crop up after long term use, who is going to take responsibility for repairs or even road accidents? Increasing palm oil biofuel into diesel should be done carefully as not to upset the balance of using palm oil for edible purposes. Malaysia cannot end up having food or fuel crisis as businessman is very much focused on profit.

4. Rural Water and Electricity Supply and FELDA Water Supply Projects

It is important for us to ensure that water and electricity supply reaches our entire citizen. It is also equally important to ensure that these projects are properly regulated. The Federal Government should study mechanism to utilise the existing water operators and Pengurusan Aset Air Berhad (PAAB) to implement water related projects as well as electricity companies for rural electricity projects. This will enable regulators like Suruhanjaya Perkhidmatan Air Negara as well as Energy Commission to regulate these projects to ensure it follows industry standard. There are cases where operators are forced to takeover below standard projects and this is due to these projects are being implemented via ministries or agencies without such expertise. Water related projects should be under the ministry in charge of water and similarly the case for electricity related projects.

5. River of Life Project

AWER never believed that this project will be able to turn Klang River to enable families of the ministers to take a dip at the end of the project timeline. The liquid pollution input has not been entirely solved. AWER urges an independent technical committee to evaluate the success rate of this project and relatively how PEMANDU evaluated this project. The focus of the evaluation should be on the river quality output. Only after the evaluation is completed, Ministry of Finance can evaluate the probability of continuing this project and releasing another RM 605 million.

6. Shutdown Redundant Agencies

Sewerage Services Department (JPP) has overlapping function with PAAB, SPAN and Indah Water Konsortium. Water Supply Department (JBA) has overlapping functions with PAAB, SPAN and water operators. Both JBA and JPP must be closed down and its staff force can be absorbed to SPAN, PAAB, Indah Water Konsortium, water operators or other government vacancies..

For energy and green technology sector, Sustainable Energy Development Authority (SEDA) and Yayasan Hijau can be closed down. SEDA's functions can be carried out by Energy Commission. Meanwhile, Yayasan Hijau's function can be carried out by GreenTech Corporation Malaysia.

The Federal Government should not waste tax payers money on redundant agencies.

7. Indah Water Konsortium (IWK) Must Be Restructured Under WSIA

IWK should have been broken to state based entities and merged with state water operators by the end of 2015. This is to complete the national water services industry restructuring in Peninsular Malaysia and Labuan. Till date, IWK is resisting this move and delay the overall restructuring.

At the moment, there is a member of IWK board who is also sitting as commissioner of Suruhanjaya Perkhidmatan Air Negara (SPAN). SPAN is a regulator for IWK and the move to place such a vested interest party in SPAN will jeopardise the independence of SPAN. In addition to that, a senior official for water services from Ministry of Water, Land and Natural Resources (KATS) is also sitting in the board of IWK. KATS is in charge of policies related to water services (water treatment, water supply and sewerage). Therefore, placing this official in IWK board is not correct as well.

There is also information that KATS is now attempting to extend concession agreement for IWK via a cabinet paper. Such a move will contradict with Water Services Industry Act 2006 (WSIA). Can we assume that there is blatant abuse of power to ensure IWK gets its concession extended? We urge the relevant ministry to rectify the conflict of interest issues as well as, restructure IWK immediately.

PIARAPAKARAN S.
President
Association of Water and Energy Research Malaysia (AWER)

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
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