VISION FOR THE MINISTRY OF ENERGY, GREEN TECHNOLOGY AND WATER

Transcription

1 VISION FOR THE MINISTRY OF ENERGY, GREEN TECHNOLOGY AND WATER SPEECH BY YBHG DATUK LOO TOOK GEE SECRETARY-GENERAL, MINISTRY OF ENERGY, GREEN TECHNOLOGY AND WATER 9.00 AM NOON, 23 APRIL 2012 RAZAK SCHOOL OF GOVERNMENT, PUTRAJAYA Y.Brs. Dr. Hamidin Abd Hamid CEO, Razak School of Government Datuk/Datin/Tuan/Puan Selamat Pagi dan Salam Sejahtera, 1. Firstly, I would like to thank the Razak School of Government for inviting me to this session to talk on my vision for the Ministry of Energy, Green Technology and Water or KETTHA. 2. As you are aware, KETTHA manages two main utilities of this country, i.e. electricity and water. In addition, we manage Green Technology, which will promote sustainable development and green living in Malaysia, whilst powering the economy through new value creation. 1

2 3. KETTHA manages issues which are close to the hearts of the rakyat, i.e. electricity and water, primary elements of our everyday lives. At the same time, these utilities, especially electricity, is an important element for economic growth. Green Technology, on the other hand, will pave the way for a greener Malaysia for our descendants and drive future economic growth. Thus, all three sectors are important and the same time, complex industries. 4. Let me start with Energy, as Energy Security is one of the primary concerns of the world today and that is also true for Malaysia. Our oil and gas resources are dwindling and Malaysia is looking to importing energy resources shortly. Gas, which currently comprises about 60% of our energy mix for electricity generation will have to be imported shortly because we are running short on gas and much of what we have is exported on longterm contracts. The next biggest fuel is coal, which comprises about 30% of our energy mix and nearly all of it is imported. So, more than 90% of our fuel for the electricity industry will be subjected to the vagaries of global supply and prices in the future. 5. The electricity sector also has much monopolistic legacy, which impacts efficiency of the industry. Whilst, we have domestically liberalized generation through IPPs, transmission and distribution is still operated as monopolies. 6. We have ample renewable energy sources, i.e. solar and biomass, but it is expensive and unsustainable in the current market conditions. We 2

3 have also a high electricity intensity rate, mostly due to cheap prices, lacking incentives for energy efficiency and also due to energy-inefficient industries. 7. But the biggest challenge is if course pricing. We keep our prices down with heavy subsidies and it has become a serious political problem to remove them now. 8. The vision of KETTHA for the electricity industry is to transform it to a rules-based industry by strengthening the legal and regulatory environment of the industry. It will be an efficient and competitive industry, with a high level of governance and we plan to achieve it by This year, we are calling for offers for 4,500 MW through an open tender process. This will rid our legacy of negotiated IPP agreements with purported lop-sided conditions and PPAs, which has been a great sore point among the rakyat for sometime now. 10. We are also removing the barnacles of monopolistic legacy. We will, for starters, separate the accounting of TNB into the 3 value chains, i.e. generation, transmission and distribution. This will give us a better picture of cost elements for pricing energy and tariff making. This will also facilitate the entry of new players, somewhat reflective of the telecommunications industry. 3

4 11. We will also be building the platform for establishing an electricity market circa Non-domestic tariffs will be determined by market forces. Transmission will be managed by an independent IGSO. Distribution will be liberalized, not only to promote competition, but also to promote innovations and value creation. 12. Until then, KETTHA will continue to institute measures to manage the monopolistic environment. Towards that, we plan to implement IBR (Incentive-based Regulation) whereby the monopoly will receive benefits (incentives) upon meeting certain prerequisites for the betterment of the industry. For example, a higher tariff will only be approved if they meet a determined quality of service. Thus, they earn their benefits. 13. But for all these to happen, subsidies need to be removed and the Government is working on this now, for the economy at large. We hope to progressively remove the subsidies, especially gas price subsidies, over time. Thus, the industry will move to a cost-based industry. But, as the Government has stated countless times, the under-privileged rakyat will be supported through direct subsidies. For the industry itself, price volatility of fuels will be managed through an industry balancing fund. 14. Energy Security is also about efficient utilization of resources, i.e. Energy Efficiency (EE), which fortunately happens to be the lowest hanging fruit. Thus, KETTHA will also be driving EE more aggressively. We have just finalized our EE Master Plan and the EE law is underway. Whilst, we will undertake extensive EE initiatives on a voluntary basis, mandatory 4

5 initiatives will also be pushed through the EE law. We intend to partner with MEPS selected industries, i.e. heavy energy users, to power big EE initiatives. Currently we are focusing on EE for the electrical and thermal sectors and soon we will tackle the transportation industry, which is a big primary energy user. 15. In ensuring Energy Security, renewable energy (RE) is another prime area. RE will not only diversify energy mix, but it will indeed reduce our carbon footprint. Towards that, we have just launched the RE Act and the associated feed-in tariff mechanism (FiT). We plan to have a cumulative generation of 2,000 MW in But, that is primarily through the FiT mechanism and we have to promulgate other initiatives to further contribute to RE promotion in Malaysia. 16. Water Security is another major global concern in current times. In Malaysia, operational sustainability is the primary concern. Inefficiency and poor management has resulted in many water operators becoming unsustainable. Revenue is unable to meet costs and financial assistance from the Federal Government has become necessary. 17. KETTHA s vision here is to transform the water industry to be a sustainable industry. Here too, we plan to transform the water industry into a rules-based industry, with the Suruhanjaya Perkhidmatan Air Negara or SPAN, as the enforcer, or more precisely, the Regulator. 5

6 18. For the operators to remain operational, we will remove their debt burden by transferring it to the specially created Pengurusan Aset Air Berhad, which will now own and maintain the water industry assets, whilst the water operators will concentrate on operations. This will also create synergies because a centrally owned PAAB will ensure that water assets are built and maintained well for sustained provision of services. Financial efficiencies will also result from this move. To date, 6 States have migrated to the new licensing regime under the WSIA and have transferred their assets and liabilities to PAAB. 19. The current initiative to corporatize the water companies will ensure responsibility and accountability in operations and finance. Whilst this is a move towards a monopolistic environment, it is a short term measure to resolve current issues. Liberalisation for greater efficiency will be considered when the situation stabilizes and is ready for the next wave. 20. PAAB will also take constructive action to reduce wastage of water, especially non-revenue water. In the long run, we will also institute relevant measures to ensure that the industry is cost-based and subsidies in the industry will be removed. Again higher tariffs will be instituted and a safety net created for under-privileged sections of our society. 21. The Green Technology sector will concentrate on green initiatives which can create value to enable green tech to be the next engine of growth for Malaysia, reminiscent of the ICT industry in the late 90 s. 6

7 22. We must take into cognizance that much of green technology is about RE, EE and conservation. Green buildings would be a major initiative for EE and we have fared well in this area. There is a big push for green buildings now and we see more developers focusing on green elements in their developments and buildings. 23. Vehicle emission is a major polluter and we have launched our electric vehicle initiative with Proton. A fleet test is currently underway and we are looking at developing EV infrastructure in major urban areas. We plan to have 10% of all new cars to be EVs in Even now, we have about 2000 hybrids and EVs entering our roads every year. 24. Eco-procurement and eco-labeling are the other initiatives we have launched to promote green products for our people. 25. Moving forward, we are also mulling several proposals. The Sewerage Services Sector is also facing huge difficulties because the tariffs are too low to sustain effective delivery of services, In addition, the difficulty in collecting the tariffs compounds the issue further. We are now thinking of a similar model as the PAAB, whereby a new company is created to take over Indah Water and also the Sewerage Services Department under the Ministry. Indah Water has operations expertise, whilst the Department has project implementation expertise. That would be good mix to kick start the entity to provide better sewerage services. 26. We are also thinking of enhancing an integrating billing system and operations, whereby the three bills, i.e. electricity, water and sewerage, are integrated and managed by one entity. This would be more effective and 7

8 bring about synergies to this activity. Before that, we probably would look into integrating the water and sewerage bills first. Integration of the bills would probably spur people to be more efficient in consumption and promote conservation. 27. I have encapsulated the vision of the Ministry as much as possible, given the time limit. Maybe we can talk more during the question time. 28. But the other area I would like to talk about is the person to drive these visions. Apart from the Minister, who is the main driver, we as KSUs, have to be able to be good navigators to assist the Ministers in this journey. Public managers have the one main thing different from private managers, the need to take into consideration the political motivations of our bosses. But, most times political and management motivations can be made to converge. 29. In this new era, the primary consideration of public managers has been clearly articulated by our Hon. Prime Minister. The era of the government knows all is over. This should be the mantra of public managers now. Before creating our visions as above, we have done countless consultations with our stakeholders and clients. All ideas and opinions by the stakeholders and clients have been thoroughly considered, in coming out with our policies because we need their acceptance to ensure the smooth implementation of those initiatives. Thus, consultations, including public consultations, are a necessity for public managers now. 8

9 30. Failing to be aware of the empowered rakyat is a sure path to failure itself. The scope of all freedoms is much expanded now. The demands by the rakyat is louder and accountability of the Government and its employees to the rakyat is higher. Thus, efficiency, transparency and a higher level of governance is required now. The repercussions for failure in this aspect is clearly evident in the Arab Spring. Whilst Malaysia will not be looking at similar incidents like the Arab Spring, we clearly can see heightened public outcries by our rakyat in recent times. 31. Innovation is not only a prerequisite in the private sector, but it is indeed more required in the public sector. Since the Government is working on a limited budget, improvements in service delivery very much depends on innovations. This has been shown to work in many instances where higher productivity and service delivery has been the result of innovations, rather than financial investments. Thus, we KSUs have to be innovative in discharging our duties and responsibilities. In fact, much of KETTHA s vision has been the result of innovative maneuvers. 32. Transparency is another requirement for public managers now. The days where everything is SULIT and RAHSIA is also over. Public managers need to be more transparent in what they are doing. The rakyat demands for higher transparency and even demands for full freedom of information. Whilst not all information can be revealed, much can be revealed without jeopardizing the operations and security of the Government. 33. Governance is another aspect for the consideration of public managers. Public managers will have to work in accordance with rules and regulations. Ad-hoc decision making will not be looked upon kindly. 9

10 Decision making would have to be thorough to ensure that all angles have been analyzed. In addition, we have to evaluate the policies to ensure that there is value for money. Spending of public money will be scrutinized by stakeholders and more so by clients and the rakyat. 34. Public managers would also have to continuously equip themselves with new and current knowledge. Changes happen faster now and public managers have to adopt and adapt to new methods and technologies. Thus, public managers have to acquire new skills continuously to remain relevant and to receive respect from their peers and subordinates. 35. I have tried my best to deliver issues pertaining to the vision we have for KETTHA and also the challenges faced by public managers. Due to the time limit, I have to be concise. Maybe we can talk more extensively later sometime. Thank you. Ministry of Energy, Green Technology and Water Putrajaya 23 April