PNG Power is committed to extending and expanding its rural distribution network throughout the country to provide electricity to the people of Papua New Guinea. This commitment is in line with the National Government Medium Term Development Strategies (MTDS) and the Vision 2050 for providing infrastructure and services to the rural communities.
This commitment by PPL is evidenced by engagement of skilled manpower and plant fleet resources towards the implementation of National Rural Electrification Program initiated by the National Government.
The future initiative by PPL is to increase the momentum of rural electrification and that is by the involvement of locally based private contractors in distribution line construction and community involvement in line clearance and digging of pole holes etc. This would enable more projects to proceed at any one time and it is anticipated that the contractors would gain experience in this type of work with community claiming ownership of the project.
The support of the National Members together with the allocation of funding for Rural Electrification in the National Budget and grants made available by Planning Department would all help ensure that the substantial program of construction outlined in this plan would be able to be achieved.
National Leaders have already become actively involved in supporting various projects both by allocating the necessary funds and assisting in obtaining the cooperation of the rural communities to ensure projects proceed without disruptions.
The support and assistance of the rural people themselves is essential for the success of any Rural Electrification Project and it is gratifying to note that in recent times there have been fewer cases of projects delayed because of compensation demands. When this cooperation exists, PPL will make every effort to work with the local communities to efficiently provide electricity and educate the people on its safe use.
At present, a very small percentage of rural people have access to an electricity supply, in this rural electrification program we would like to see many rural areas of the country have access to electricity.
INDENTIFICATION OF RURAL ELECTRIFICATION PROJECTS
In many cases during the field investigations the loads are identified for potential rural electrification project and this normally fits into one of the following categories;
- Rural infrastructure (Gov’t Centre, Offices, Hospitals, Missions, Schools etc.)
- Rural Village Communities
- Commercial Enterprises (Trade Stores, Workshops)
- Agriculture Based Processing Plants (Trees, Coffee, Coconut, Timber, Rubber)
With the ongoing Rural Electrification Program most projects have been identified and investigated in response to the following initiatives;
- Requests from the National, Provincial and Local politicians
- Request from Provincial and institutions to have power supply extended to a particular area.
- Request from private developers of business enterprises to have power supply extended to their business developments.
PPL IMPLEMENTATION CRITERIA
Briefly PPL Is a private entity established by the Act of Parliament in March 2002 under the Electricity Commission Privatization Bill and is obliged to conduct its investigation program in accordance with the Public Finance (Management) Act 1995 and should only undertake new investments which are expected to earn at least the rate of return.
The National Planning and Development criterion for Public Sector Investment is a rate of return (IRR) of ten percent (10%) and this is also the benchmark set for any Rural Electrification Project to be funded from PPL’s own Budget provisions.
To calculate this rate of return PPL considers all the costs which PPL would pay over the life of the distribution line and estimates the revenue that PPL would receive.
A number of projects identified in the past have not met the criteria set by PPL which is not in line with the required rate of return. For these projects the IRR trends towards a large negative number because of the very low revenue compared with the cost. The use of actual figures is not relevant.
PPL would normally undertake any rural electrification project, which is expected to earn PPL a ten percent real financial rate of return after including any subsidy available for the project. A final decision is however subject to budget conditions and the availability of finance and other resources at that time.
SOURCES OF FINANCE
It is generally accepted that Rural Electrification worldwide is uneconomical in strict financial terms and that it requires subsidization to be able to be carried out economically.
This is reflected throughout the Rural Electrification Plan by many projects not achieving PPL’s criteria of 10% rate of return.
Many projects are still able to proceed however because funding is provided by the National Government and Members DSIP funding to PPL and the project is considered as a social / economic infrastructure development rather than as an economic investment. Such funding can originate from the following sources.
Under the Provincial Government reforms the emphasis has transferred to Provincial Government involvement. Several Provincial Governments have accepted the challenge and may have made appropriate budget allocations for specific Rural Electrification projects. In some cases, the Provincial Governments have kept direct control of these funds by constructing lines under contract, with PPL adopting a supervisory and quality control role.
PPL is committed to the ongoing program for Rural Electrification and this has seen hundreds of kilometres of distribution lines built to extend power supply to rural areas in many parts of Papua New Guinea. It is however acknowledged that a large percentage of the rural population still do not have access to an electricity supply grid.
This annual plan outlines the projects that PPL considers possible to construct over this period subject to finance being made available.
For the current ongoing projects and other identified projects required to proceed smoothly, the co-operation of various Provincial Governments, elected leaders and especially the local communities themselves, is essential to ensure successful start to completion and achievement of the goals outlines in this Rural Electrification Plan.
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