PNG Power Crisis: The Way Forward

Over the past decade, PNG Power (PPL) has faced numerous critical challenges, significantly impacting its ability to deliver reliable and affordable electricity to the population. The key issues can be categorized as follows:

1. Financial Mismanagement and Debts: PPL has accumulated substantial debts, particularly to Independent Power Producers (IPPs), with unpaid amounts exceeding K700 million. This lack of liquidity has severely hindered the company’s ability to maintain and upgrade its infrastructure, which is now outdated and unreliable. Additionally, PNG’s government, responsible for 70% of PPL’s revenue, has frequently delayed payments, exacerbating the financial crisis
2. Aging Infrastructure and Maintenance Failures: The electricity grid and generation facilities have suffered from years of underinvestment. Preventative maintenance has been neglected, and the infrastructure is often "patched up" rather than comprehensively upgraded, resulting in frequent blackouts and reduced reliability
3. Governance and Political Interference: Political interference has played a significant role in PPL’s governance crisis. Frequent changes in leadership, with 10 CEOs in the past decade, have created instability. Political decisions have often prioritized short-term gains over long-term planning, leading to unsustainable financial commitments and resistance to necessary reforms
4. Tariff Freezes: The government's freeze on electricity tariffs since 2013 has prevented PPL from adjusting prices to cover rising operational costs. This has further strained PPL’s financial viability, reducing its capacity to fund improvements and expand services
5. Energy Theft and Loss of Major Customers: PPL has also struggled with electricity theft, which accounts for approximately 20% of its losses. Furthermore, several major companies, such as SP Brewery and Coca-Cola Amatil, have gone off-grid due to the unreliability of the PPL supply, causing further revenue loss

Potential Solutions and Policy Recommendations:

1. Tariff Reforms: Updating the electricity tariff policy is critical. PPL needs to be allowed to adjust tariffs in line with inflation and operational costs. This could be implemented with regulatory oversight to ensure transparency and fairness
2. Strengthening Governance and Autonomy: Policies should be introduced to reduce political interference in PPL’s operations. This includes implementing stronger governance structures, increasing transparency, and allowing PPL more autonomy to function as a commercial entity
3. Public-Private Partnerships (PPP): To address both the financial and operational challenges, PPL could explore more public-private partnerships. Private sector involvement, with appropriate regulatory frameworks, could provide the capital and expertise needed to modernize the grid and introduce more sustainable power generation sources
4. Investing in Renewable Energy: With its vast potential in hydropower, solar, and geothermal energy, PNG needs to remove legal barriers and promote investments in renewable energy projects. A national energy transition plan, focusing on phasing out diesel and shifting to cleaner energy, would reduce costs and environmental impact
5. Addressing Theft and Non-Payment: Implementing prepaid metering systems across the customer base, particularly for government departments and agencies, would help PPL collect revenue more efficiently and curb electricity theft

By addressing these systemic issues through legislative reforms, tariff adjustments, enhanced governance, and investment in renewables, PNG Power could stabilize its operations and secure a more sustainable future.

References:

• The Crisis of Governance in Papua New Guinea’s Power Sector, Business Advantage PNG. Available at: Business Advantage PNG
• Jacobs, S. (2024). A Practical Way to Resolve Papua New Guinea’s Electricity Crisis, Griffith Asia Insights. Available at: Griffith Asia Insights
• Unreliable Power Supply Stifles Economic Growth in Papua New Guinea, PNG Economics Bulletin. Available at: PNG Economics Bulletin
• Light at the End of the ‘Line’ for PNG Power, PNG Bulletin. Available at: PNG Bulletin
• PNG Power Struggling to Meet Obligations, The National. Available at: The National