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KUALA LUMPUR: The auditor-general, in his report for 2007, has called on the government to review its business arrangement with independent power producers (IPPs).

Auditor-General Tan Sri Ambrin Buang singled out differences in the way Tenaga Nasional Berhad made payments to IPPs.

The auditor-general also noted that some of the IPPs did not fulfil some of the terms of agreement.

In the report, the auditor-general gave an example of two IPPs which had different payment terms with TNB.

"For example, with YTL Power Generation Sdn Bhd, payment is on a 'take-or-pay' basis where TNB pays the company regardless of whether it uses the power supplied.

"For Tanjung Bin Power Sdn Bhd and Jimah Energy Sdn Bhd, the payment is made on the risk taken by both IPPs and TNB.

"The IPPs gets 85 per cent of the generation cost but the balance is dependent on whether there is demand for the power generated."

The auditor-general said "take or pay" favoured the IPPs.

On failure to fulfil terms of agreement, the auditor-general noted that some of the IPPs were required to set in maintenance reserve for repairs and replacement of parts to ensure smooth operations.

However, several IPPs had failed to comply with this requirement.

The auditor-general called on the Energy, Water and Communication Ministry and the Energy Commission to address these irregularities and renegotiate the IPPs contracts to benefit consumers.

He also called on the commission to tighten supervision and ensure the IPPs followed regulations set down for them.

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