Electricity tariff hike on the cards?

Energy Commission chairman Abdul Razak Abdul Majid says the government is expected to make an announcement on the matter in the next few days.

PETALING JAYA: The Energy Commission (EC) has proposed a system of surcharge to replace the current rebate structure which, if approved, will push up the electricity tariff.

However, the government may stick with the rebate structure to avoid a politically sensitive rate hike ahead of the 14th general election, Sin Chew Daily reported.

Electricity tariff in Peninsular Malaysia is fixed through the Incentive-Based Regulation (IBR) framework via a mechanism called the Imbalance Cost Pass Through (ICPT) implemented since January 2014.

The ICPT mechanism allows power corporation Tenaga Nasional Bhd (TNB) to reflect changes, either increase or reduction, in fuel and other generation-related costs in the electricity tariff every six months.

The timeline of the last revision expires on June 30.

EC chairman Abdul Razak Abdul Majid told Sin Chew Daily that the government was expected to make an announcement on the tariff revision in the next few days after being informed by the energy regulator of TNB’s situation.

He said the EC submitted its proposal to the government for a decision after considering various factors, including the costs of coal and natural gas, and the currency exchange and inflation rates.

“I cannot say whether the rebate will be reduced or increased or the (fuel) subsidy maintained. That decision lies with the government,” he said.

The cost of piped gas is currently fixed at RM15.20 per MMBTU (million British Thermal Unit) for the electricity tariff period from Jan 1, 2014 to Dec 31, 2017.

However, it is believed the government has allowed Petronas to raise the price of its piped natural gas to RM22.70/MMBTU. If true, this will add RM200 million to electricity generation cost in the second half of this year.

The savings from lower prices of liquefied natural gas (LNG) and electricity supplied under power purchase agreements (PPA) from independent power producers are balanced out by higher costs of piped gas.

This, possibly, could be a factor to influence the government to reduce the electricity tariff rebate, according to the Chinese-language daily.

The paper said operational costs of TNB are also likely to inflate based on proposals by the government to install smart meters and high voltage cables, and build new power stations in the next three years, which will further reduce the tariff rebate passed on to consumers.

The rebate of 1.52 sen/kWh for consumers in the peninsula came into force on Jan 1 last year.

In 2015, the rebate was 2.25 sen/kWh. Consumers who qualify pay less for electricity use if the rebate rate is higher.

On Dec 14 last year, Minister of Energy, Green Technology and Water Maximus Ongkili was reported to have said the government agreed to maintain the electricity tariff rebate at 1.52 sen/kWh in the peninsula and 1.20 sen/kWh in Sabah and the Federal Territory of Labuan from Jan 1 to June 30, 2017. -FMT