Kota Kinabalu: Terminating the contracts of Independent Power Producer (IPP) is not a solution to Sabah’s electricity supply cost issues because IPP costs are competitive and project awards are transparent, said Deputy Chief Minister I cum Works and Utility Minister Datuk Seri Dr Joachim Gunsalam.
“I need to correct facts regarding average IPP costs in Sabah, which stand at about 21.03 sen per kilowatt hour as of August 2025, not 43.83 sen as claimed,” he said, responding to concerns raised by Usukan.
“The rate of 43.83 sen per kilowatt hour is the total approved cost to Sabah Electricity (SE) to cover the total cost of electricity supply in Sabah, comprising generation costs of 27.94 sen and 15.89 sen for transmission, distribution, retail and return on assets,” he said, Wednesday.
He pointed out that the IPP projects are developed through the Private Finance Initiative, where development and operating costs are fully funded by developers, allowing generation needs to be met without burdening SE or the Government with large capital commitments.
“Typically, the development cost of a 100-megawatt power plant is around RM800 million to RM1 billion. To meet the requirement to develop 2,000 megawatts within 10 years would involve a capital investment of around RM20 billion,” he said.
He said the same approach is practised in Peninsular Malaysia and most other countries, where electricity generation is developed by the private sector while utility companies serve as power purchasers and system operators.
“The real solution is not the number of IPPs or asset holdings by utilities, but competitive energy prices affordable to Sabah consumers.
“The State Government, through the Energy Commission of Sabah (ECoS) will ensure IPP tariffs are competitive. Each project is evaluated technically and financially through consultant appointments, cost structures are examined more transparently and returns to developers are controlled at reasonable levels commensurate with project risks.”
He said to ensure Sabah’s interests are protected, the State Government has decided that every energy project involve equity ownership and project participation by capable Sabah government-linked companies with technical and financial capacity.
Regarding power imports from Sarawak, Dr Joachim said the Power Exchange Agreement between SE and Sesco Berhad has been increased from 30 megawatts to 50 megawatts and began operating on Dec 13, 2025.
“The tariff rate is 28.5 sen per kilowatt hour with an annual increase of 1.5 per cent, which is competitive compared to existing generation sources.
“However, based on the Power Development Plan approved at the Sabah Energy Council meeting, the State Government through ECoS together with SE has begun efforts to increase capacity up to 100 megawatts by 2029,” he said.
He said the agreed megawatt amount between SE and SESCO Berhad considers excess capacity that SESCO can currently sell, with technical studies showing 100 megawatts is the maximum limit needed to stabilise Sabah’s grid system and balanced generation mix and energy security, prioritising local indigenous sources without excessive dependence on cross-border imports.
Additionally, Dr Joachim also justified the cost difference involving the Battery Energy Storage System (BESS) project in Lahad Datu, valued at RM644 million, compared to a similar BESS project in Terengganu at around RM306 million.
“Firstly, in terms of procurement time, the Lahad Datu BESS project was finalised in 2023, while the Terengganu BESS project was procured around 2025.
“Based on industry reports by BloombergNEF, lithium-ion battery prices decreased almost 30 per cent between 2023 and 2025, which occurred after the Lahad Datu project was finalised,” he said.
“Secondly, the Lahad Datu BESS installed capacity is larger at about 517 megawatt hours compared to Terengganu’s 400 megawatt hours.
“This installed capacity is required to ensure an effective capacity of 100 megawatts/400 megawatt hours can be maintained throughout five years of operation, in line with the requirements of Sabah’s east coast electrical system, which is more vulnerable to supply disruptions.
“The total engineering, procurement, construction and commissioning cost for the Lahad Datu BESS is RM644 million, including RM2.4 million for two years of operation and maintenance costs and RM5.9 million for five years of Long-Term Service Agreement.
“The operating cost of the Lahad Datu BESS is below RM1.00 per kilowatt hour,” he said.
He pointed out that the State Government is confident the Lahad Datu BESS project cost is reasonable and appropriate, in line with installed capacity and the actual project scope, including 275-kilovolt connection work, Sabah electrical system requirements and most importantly, does not burden electricity consumers in the State.
