Papua New Guinea - Power tariff study

Joint UNDP/World Bank Energy Sector Management Assistance Program Activity Completion Report No. 024/84 Country: PAPUA NEW GuINEA Activity: PowER TARIFF sTuTDY J OCTOBER 1984 Report of the joint UNDP/Worid Bank Inergy Sector Management Assistance Program This document has a restricted distribution. Its contents may not be cdisclosed without authorization from the Government, the UNDP or the World Bank.  ENERGY SECTOR MANAGEMENT ASSISTAtCE PROGRAM The Joint UNDP/World Bank Energy Sector Management Assistance Program (ESMAP), st&rted in April 1983, assists countries in implementing the main investment and policy recommendations of the Energy Sector Assessment Reports produced under another Joint UNDP/World Bank pro- gram. ESMAP provides staff and consultant assistance in formulating and justifying priority pre-investment and investment projects and in pro- viding management, institutional and policy support. The reports produced under this Program provide governments, donors and potential investors, with the information needed to speed up project preparation and implementation. ESMAP activities can be classified broadly into three grouDs: - Energy Assessment Status Reports: these evaluate achievements in the year fcllowing issuance of the oiiginal assessre.nt report and point out where urgent action is still needed; - Project Formulation and Justification: work designed to accelerate the p:eparation and implementation of investment projects; and - Institutional and Polity Support: this work also frequently leads to the identification of technical assistance packages. The Program aims to supplement, advance and strengthen the impact of bilateral and multilateral resources already available for technical assistance in the energy sector. Funding of the Program The Program is a major international effort and, while the core finance has been provided by the UNDP and the World Bank, important financial contributions to the Program have also been made by a number of bilateral agencies. Countries which have now made or pledged initial contributions to the programs through the UNDP Energy Account, or through other cost-sharing arrangements with UNDP, are the Netherlands, Sweden, Australia, Switzerland, Finland, United Kingdom, Denmark, Norway, and New Zealand. Further Information For further information on the Prog;am or to obtain copies of completed ESMAP reports, which are listed at the end of this document, please contact: Division for Global and OR Energy Assessments Division Interregional Projects Energy Department United Nations Development World Bank Program 1818 H Street, N.W. One United Nations Plaza Washington, D.C. 20433 New York, N.Y. 10017 0f2114 NO  PAPUA NEW GuINEA POE TARnPP STUDY CTORBER 1984  CURRENCY RQIJIVhLD"TS US$1.00 = Kina 0.80 Kina 1.00 = US$1.25 ABBREVIATIONS AND ACRONMYS BCL Bougainvilla Copper Limited chp combined heat and power ELCOM Electricity Commission GWh gigawatt-hour h hour hv high voltage K Kina km kilometer kV kilovolt k'-,. kilovolt-ampere k%,h kilovolt-ampere-houir kWh kilowatt-hour I liter lbs pounds lV low voltage m meter MD or md maximum demand NW megawatt MWh megawatt-hour o&M operation and maintenance rpm revolutions per minute t toea V volt  TABLE OF CONTINTS Page I* SUMMARY AND RECOMMENDATIONS... ................. ......... 1 Proposed Tariffs . ............. 1 Implementation ......... 2 Major Consumers ............. O . 3 Private Electricity Generation............. . ............ 3 Combined Heat and Power Generation ...................... 4 Standby Charges.......................... ............... 4 II. INTRODUCTION AND TERMS OF REFERENCE ....................... 7 Terms of R..................... ................... ....... 8 Visit to Papua New Guinea............................... 9 Draft and Final Reports9.......... ............. ....... 9 Cturrent Electricity Tariffs......9 .................... 10 Domestic and General Supply Consumers. ................ 10 Industrial Consumers ....9.. . * ........***.*...999999 10 Economic and Financial Factors ....................o... 10 III. EXISTING SYSTEMS .......................... 12 Port rasbiio.......................................... 12 ieneration.......................................... 12 Transmission........................................... 13 Distribution.... ..3................99999999999*99* 14 GietnerawSytem. 9.9.9.9.,........ .9........... .9......... 14 Tedrationa Ce.ne.rs.................... o.............. 13 Distribution ......ng.ad.Poental..jorConsmer........... 14 Gazelle Peninsula Sse ...................... 14 K^ieta-Arawa Sytm.......................14 Isolated Load Centersooo.o-**--.---*.**-*oo*ooo*.*-*--.o 14 Existing and Potential 4aior Consumers**.*** ..*e,e**.................. 1S IV. RELEVANT SYSTEM CHARACTERIS'ICS .....................oo 16 Fuel for Thermal Generatioai.*.*. ....................... 16 Load Variations. .... 16 Port Moresby... . 999999999999999999999999... 17 Ramu and Gazelle Peninsula Systems .................... 17 Kieta-Arawa System. .......................* 17 Isolated Load Centers ............... ................... 17 System Load Factors..*.*,,,......... .... 18 System Power Factors 999999999999999999999999999999999999 18 System Losses ................. 18 C'onsumer Characteristics . ..* eo* ..$*o.............. 19 V. FORECAST SYSTEM REQUIREMENTS........................... ""0* 22 L-oad Forecasts ........ 22 Changes in System Characteristics ....................... 22 Fuel for Thermal Generation............................ . 22 Load Variations. ................................ 23 System Power Factors and Losses.....*.....* *.*#**.*. 23 Consumer Characteristics. .............. ............... 23  Page VI. PLANNED DEVELOPMENT AND INVESTMENT PROGRAMS ............... 24 Generation Developments. ..............*...o.....o.o.o..oooooo 24 Port Moresby and Ramu Systems............... o......... 24 Gazelle Peninsula Systemt...* o...o.e................ooo 24 Kieta-Awara .....o..o....o.....o...o....o..........e 24 Isolated Load Centerso............... .................. 24 Transmission Developments9o......0..00..oo.o0o0o..******e 25 Port Moresby and Ramu System........................., 25 Gazelle Peninsula System .o...... oo *o......o.*........o00 26 Kieta-Arawa. oooooooo0o*ooooooo.oooo 0ooooooooo...oo.*. 26 Distribution Developmentso......oo...o..oo.........o.. 26 Investment Programo....o.o............ 000000000oo 05ooo 26 VII. COST OF SUJPPLY .................0.....0.0000.00.00.0 28 Components of Cost................,...0*....00. 28 Marginal Cost Pricing. .000 .00o.oo.o.oooo.o... .o.......... 29 Comparison of Marginal Cost and Average Cost Pricing............................... ...*. 30 Analysis of Marginal Costs... .. .....0*........ 30 Operation and Maintenance Co6ts.. .0*,.........0. 31 Administration Costs. ...................... . 0..........0. 31 Costs of Service Connections, Metering and Billing ...... 32 Port Moresby and Ramu Systems...,..................... 32 Gazelle Peninsula System. ....., 00000000000000* 38 Kieta-Arawa ................ 39 Isolated Load Centers...................... ........... 39 Summarized Marginal Costs of Supply..................o 40 VIII. FORMULATION OF TARIFFS ....... .........o*. 42 Structure of Tariffs ........................... 42 Fixed Charge .............. 43 Energy Charges .............. 44 Major Consumers...0 .................o oooooo. oos 45 Peak and Off-Peak Metering..................0*....... 45 Load Management...0*.................................. 46 Consumers Supplied Through Distribution Transformers on Their Premises*......................* 46 Proposed Tariffs............................... 47 IX. FINANCIAL IMPACT OF PROPOSED TARIFFS ...................... 49 Consumer Charges ... . ...................,... 49 Domestic Consumers ......... .. .000004000000 49 Non-Domestic Consumers (Excluding Major Consumers).... 49 Major Consumers ................................ 50 Tariff Revenue ..........................0*............. 51 Financial Projections. .o.....o.o...oooo........o.o.o... 52 Electricity Sales........................... 52 Other Operating Incomeo............................,0 52 Operations and Maintenance...... **00.....oo.....*..< 52 Administration... ....... ...o.. 52 Training ........................53  Page Depreciation.. ............ .. . .... ..... 53 Non-Operating Income and Expenditure ........53 Loan Interest and