BEWARE, IT'S COMING! Electricity tariffs could be hiked by 25% in early 2014 - industry exec

KUALA LUMPUR: Electricity tariffs could be raised by up to 25 per cent for heavily-subsidised sectors, a top industry executive said.

The maximum quantum will only affect heavy industrial users such as steelmakers and glove manufacturers.

Commercial users such as retailers and enterprises should pay for smaller increases, while those consuming less than 200 kilowatt hour (kW/h) will not see any rises.

The hike, which may be announced by early 2014, is to ensure that the power sector is sustainable, more efficient and free of market-distorting subsidies.

MyPOWER Corp chief executive officer Datuk Abdul Razak Abdul Majid said the potential hike is needed to close the gap between the true cost of generating power and current subsidised tariffs.

"We have presented our proposal to the Cabinet and it is up to the government on when it wants to hike the tariffs. It could be in January, February, or March next year.

"The government would have to look at other proposals such as from Petronas (Petroliam Nasional Bhd), the Energy Commission, Tenaga Nasional Bhd (TNB) and others before it can make a decision," Abdul Razak said at a media briefing, here, yesterday.

Inefficient

Malaysia's power sector has long been inefficient with consumers and industries paying subsidised prices.

Petronas sells gas to TNB to generate electricity at subsidised prices of RM13.70 per MMBtu (million metric British thermal units) whereby the actual international market price is RM43 per MMBtu' This means the oil national oil corporation is subsidising about RM20 billion.

The current average cost of power generation is 30.9 sen per kW/h and it is sold to domestic consumers, commercial users and industrial powerhouses at an average subsidised price of 33.5 sen per kW/h.

However, the actual true cost of power generation, including transmission and distribution, is 42 sen per kW/h compared with the current tariff of 33.5 sen per kW/h.

The cost of transmission and distribution of 8.5 sen is not inclusive, representing a 26 per cent shortfall. This makes the government subsidise the gap to the tune of RM12 billion a year.

The Philippines and Thailand sell electricity at 58 sen per kW/h and 48 sen per kW/h, respectively.

MyPOWER is a special purpose agency created to detail out the key reforms of the electricity supply industry in the next four or five years so that projects aligned with the Government and Economic Transformation Programmes can be implemented smoothly.

BT