Statutory, Regulatory & Licence Obligations
PNG Power has a number of statutory, regulatory and licence obligations imposed by various statutes including:
- Companies Act 1997;
- Income Tax Act;
- Electricity Industry Act 2002; and
- Independent Consumer and Competition Commission Act 2002.
The PNG Power Board initiated the development and maintenance of a Regulatory Compliance Register to summarise all the statutory and regulatory obligations of PNG Power and to provide a base reference document for compliance to be monitored. The PNG Power Company Secretary is responsible for maintaining this register.
Economic Regulations
As a monopoly service provider within its service area, PNG Power is subject to economic regulation by the Independent Consumer and Competition Commission (ICCC) which has responsibility for regulating competition, controlling prices and protecting consumers in a number of industries including electricity supply.
The ICCC has issued PNG Power with a retail licence, generation licence, a distribution licence and a transmission licence under the Electricity Industry Act. The ICCC has also issued the Electricity Code to regulate the terms and conditions of supply to consumers. An associated Standard Customer Supply and Sale Contract has also been established.
A Regulatory Contract between the ICCC and PNG Power was established in August 2002 and is valid until 31 December 2011. This Contract provides the mechanism for establishing and changing retail tariffs and sets out required service levels and performance.
The tariff setting mechanism takes into account changes to variables such as local, Australian and US CPI, fuel prices and the cost of purchased power from the independent power producer (Hanjung). The Contract also sets out service standards, including minimum reliability standards and connection standards.
As PNG Power purchases more than 35 million litres of diesel fuel per annum to generate electricity, movements in the fuel price in line with the international oil price has a big impact on the costs of the business. For example, each 20 toea per litre increase in fuel cost results in a K7m extra cost per annum for the business which requires a price increase of approximately 2% for PNG Power to recover this cost increase.
Monitoring & Regulation of Safety & Technical Standards
Under the Electricity Commission Act, responsibility for the monitoring and regulation of safety and technical standards was given to the ICCC which is accountable for:
- monitoring and regulation of safety and technical standards relating to the electricity supply industry;
- licensing of electricity generators, networks and retailers, electricians and electrical contractors;
- the monitoring and regulation of safety and technical standards with respect to works, electrical installations, electrical appliances and apparatus and associated equipment; and
- any other function conferred by the Act or regulation.
As it does not have the qualified staff or skills to undertake these activities, the ICCC has delegated these responsibilities and duties to PNG Power as permitted under the Act.
Although some fees are charged to industry for these services, the fees do not cover the full cost of providing these services and PNG Power has received no payment for the cost difference from the ICCC since the commencement of the delegation in 2002.
