Every year, PNG Power submits tariff calculations to the Independent Consumer and Competition Commission (ICCC) for approval before implementation.
PNG Power is regulated under a form of price control mechanism known as the maximum average price ('MAP"), thus for each of the tariffs that PNG Power charges to their different classes of consumers (Industrial, General Supply, Domestic Customers and Public Lighting) the average price of those tariffs must not exceed the MAP that the ICCC determines.
These are the undertakings by PNG Power under the watchful eyes of ICCC in ensuring that the services provided and tariffs set are in line with the regulatory requirements.
Our current tariffs and charges for electricity, connection and supply and other services supplied to you under the contract are set out below. Some of the tariffs and charges are regulated by law.
The increase in tariffs reflects the movement in cost of doing business and is determined according to the rules and procedures stipulated in the Electricity Regulatory Contract that PPL has with ICCC.
Under the Electricity Regulatory Contract, PPL must consider the movements in the cost of doing business associated with PNG CPI, fuel used in generating electricity and impact of US and Australian exchange rates and CPI on goods and services sourced from overseas. The main inputs to determining the tariff increase are discussed here:
Fuel Price – PPL remains heavily dependent on fuel oil to maintain supply around the country especially in the smaller isolated centers. This is the major operational cost for the company with variations in price having a major effect on PPL’s ability to invest in the necessary infrastructure to improve the reliability of its networks.
PNG CPI – PPL has a significant budget for goods and services sourced in country from other businesses and these businesses pass on CPI costs. Managing price increases are done through PPL’s operational budget but ultimately this affects PPL’s ability to invest in power supply infrastructure.
Australian CPI & Exchange Rate – PPL imports most of its new equipment, spare parts and specialist assistance from Australia so these variables are also contributory factors to PPL’s investment strategy.
US CPI & Exchange Rate – The Kanudi Power Station supplying base power to Port Moresby is a significant operational cost with the supply contract established in US dollar.
Any tariff increases approved by the ICCC uses the movements in the above variables in a formula given in the Electricity Regulatory Contract that determines the Price path. Usually, the increase is mainly attributed to the depreciation of the Kina against the Australian dollar by whatever amount over a 12 month period ending the previous year and the increase in fuel prices during the same period.
Increases in fuel prices going forward will have adverse effects on the company’s operations and unlike other businesses, the company has to initially absorb increases in costs and unexpected surges and will recover part of its costs through tariff adjustments in the following year. Costs are not passed to the consumers straight away like other businesses but are lagged by a year.