Mahathir shows caution on electricity deregulation

Mahathir shows caution on electricity deregulation

KUALA LUMPUR (AP): Citing the fiasco in California, Prime Minister Mahathir Mohamad said Monday that his government will be cautious about deregulating the government-controlled electricity sector.

"Because of the disastrous experience of California many, including Malaysia, are more cautious in restructuring the electricity industry. It is too important an industry to be left entirely to market forces," Mahathir said in a speech at a conference on electricity.

The Malaysian government, currently studying ways to restructure the sector, was expected to introduce a power-pooling system in 2005 in which generation companies would compete to supply electricity and electricity would be traded like a commodity.

But poorly thought-out deregulation of the California power sector has led to electricity shortages in America's richest state, forcing blackouts and politically unpopular price hikes.

Asian countries have been spooked by the California experience. Many countries are already grappling with strategies to ensure adequate power supply over the next decade to cope with expansion in manufacturing.

Mahathir said the current electricity sector structure has served the country "well' and that changes will have to be done gradually.

"It would be better to progress one step at a time and with enough time to measure the effect of those changes before proceeding with the next," Mahathir said.

Mahathir said electricity peak demand in peninsular Malaysia is projected to grow by more than 117 percent to 21,668 megawatts in the year 2010. He said the peak demand in peninsular Malaysia so far this year was 9,948 megawatts.

The national power utility, Tenaga Nasional, has proposed that the government restructure the sector to a "managed market model", with Tenaga continuing to be a dominant power generating company.

Tenaga, which is 78 percent-owned by the government, said this would avert Malaysia from having a California-type power crisis.

Tenaga was to sell off part of its power-generation assets to open the market to competitors. Late last year, Tenaga put on hold a plan to sell some assets until the government's plans for restructuring became clear.