TNB Raises Tariff - The Good The Bad & The In Between

Folks it not just the TNB tariffs that are going up. Have you seen this picture ? It has been taken from forum.lowyat.net. It shows some "resmi" type document that purportedly shows "cadangan kenaikan" for intra-city tolls.  Well its only a "cadangan". But you never know. I recall the PM saying that the 'intra-city' tolls will not be raised.  

The gomen aint got money. Where has all the money gone? Yesterday northern folks said that for this year the Langkawi Area Development Authority or LADA has not been given the 'peruntukan' they asked for.  And even the "peruntukan" that has already been approved for Langkawi has not been delivered. Duit dah tak ada kut.

OK the TNB tariffs have been raised.  

I do not disagree with the rise in tariffs. Folks, everything is going to go up. It will go up. You cannot avoid higher prices.  Lets learn to deal with it now. 

However there are always better ways of doing things. Someone just asked 'Why 15%?' In 2011 the tariff increase was just 7.5%. Two years later the jump is 15%. Twice as much. What is the science behind the 15%? Ada logic kah?

Here are some images from "Otai Bloggers" WhatsApp group. "Otai Bloggers" is a very influential group of people. I am NOT inside their circle ok. Someone else sent me these images.

But as you can see they are really upset with the TNB tariff rise.  Ini bukan saya cakap ok. Ini 'Otai Bloggers' yang cakap. The gomen better not ignore these people.

Above : Blogger Otai not mincing their words. Tapi punasihat PM rasa ngko orang 

semua bodoh lah bro. Punahsihat kata huluq sikit ngko semua akan diam.

Below : A stinging caricature of the PM, before and 

after elections. Otai Bloggers got skills. I like.

 Below:  This one is funny. 'Renjatan elektrik' means electrocution. 

Ha ha ha. Otai bisa. 

Below : Otai Bloggers are planning a 1 hour blackout at 

8PM on 01/01/14. Jangan lupa tulis dalam diari ok.

I want to share two things first. Firstly the gomen is making a mistake by saying that all these tariff increases are being done to save more subsidy money for the gomen so that the gomen has more fiscal "leeway" to do other things. 

Because my belief is that despite all these subsidies being cut or rationalised, the gomen is still not safe from going broke.  The gomen going broke has absolutely nothing to do with the subsidy regime in this country. The gomen will go broke because the gomen is getting dumb and dumber.  

(Please show evidence to the people that RM3.0 Billion or more of taxpayers money that is stashed away by 1MDB at the Cayman Islands is still there. We want proof. Please show proof. Or has the money disappeared into the Bermuda Triangle - which is not too far from the Cayman Islands?)

They have not a clue about what they are NOT doing right. The gomen is clueless. Assuming all the subsidies have been cut and the gomen still goes broke, then what else are they going to say?  So my advice to the gomen is to play down this 'reduce subsidies to improve the country’s fiscal position' rubbish. Be like the fish. They know when to keep their mouth shut.

Secondly Ani Arope who has been criticising TNB over the IPPs and the PPAs that were negotiated with YTL 18 years after the end of the Vietnam War (yes that was how long ago it was - I just want to provide some perspective) is way out of touch.  

Ani Arope has failed to state that YTL is NOT the largest supplier of independent power to TNB. The largest supplier of independent power to TNB is Syed Mokhtar Bukhary - with over 6000 MW. Plus both of YTL's plants in Pasir Gudang and Paka are built on land that belongs to TNB. This means AFTER the concession is over (not long left) the power plant reverts back to TNB.  

Ani Arope must also explain why it took TNB more than three days to restore power after that disastrous blackout in the 1990s which precipitated the move to create an independent power industry? Who was the CEO of TNB at that time?

Anyway here is The Star about the tariff rises :

Power tariff up by average of 4.99 sen

• increase 4.99 sen/kWh (15%) to 38.53 sen/kWh
• take effect on Jan 1
• 70.67% of consumers in Peninsular & 62% in Sabah not affected 
• no tariff increase on consumers who use lower than 300kWh 
• gas from RM13.70 per (MMBtu) to RM15.20
• 1.52% or 0.51 sen/kWh to tariff increase
• imported LNG at RM41.68/MMBtu contributed 10.17% or 3.41 sen/kWh
• coal price RM272 per tonne to RM280 result  in 0.51% or 17 sen/kWh addition 
• TNB's essential tariff review accounted for a 2.69% or 90 sen/kWh rise

(Something tak betul here. Either Bernama's figures are out or TNB has not done a proper job. If 1.52% translates to 0.51 sen/kWh, how can 0.51% translate into 17 sen/kWh? If imported gas contributing 10.17% translated into 3.41 sen/kWh how can TNB's essential tariff review of 2.69% translate into 90 sen kWh? Please read The Star report. Higher mathematics kut? Anyone care to explain?)

• savings from revised tariff would be used for infrastructure development
• reduce subsidies to improve the country’s fiscal position
• to reduce subsidies to RM39.4bil next year from the almost RM47bil 
• Subsidies for power cost RM8bil to RM12bil per year
• Gas 50% of fuel for electricity generation, coal 40%, hydropower 8% 
• Average domestic tariff 31.66 sen/kWh, an addition of 1.21 sen/kWh
• Average commercial tariff  47.92 sen/kWh from 41.01 sen/kWh
• Average industrial tariff 36.15 sen/kWh from 30.94 sen/kWh
• The electricity tariff was last revised in June 2011 

Ok here is another Star Report. My comments in blue :

Why must the cost of electricity be increased again?

• restructure subsidies more targeted and sustainable (That is yet to be seen)
• electricity tariffs one of steps to restructure subsidies 
• FAQ on tariff rationalisation, prepared by MyPOWER Corp

1. Why does the electricity tariff need to be reviewed?

• The Government cannot continue to subsidise increasing fuel prices. 

I agree fully with MyPOWER Corp here. We have to move away from subsidies. O'wise forget about becoming a high income nation. 

• blanket inefficient allocation of resources and distorts the economy  
• energy subsidies benefit only the top 20% of society
• only 7% reaching the lowest 20% of the population.

Here I beg to differ. When the rich subsidise the poor, the rich will always become richer and the poor will become poorer. Why? Because the rich are the people who work harder (excluding UMNO-putras, the monopoly freakos, the AP cronies, air jampi ostats & lebais who live by conning people). The rich are usually smarter, more educated and they control the economy. They are the business, trading and commercial community. So if they suffer higher costs they will pass it on to the consumer. Simple as that. So if you cut subsidies to the rich and give it to the poor instead, the business and commercial classes (the rich) will raise the prices of goods even higher and get back the subsidies that have been taken from them and given to the poor. 

The rich have long ago figured out that the higher the prices of things, possibly the more subsidies that will be given to the poor. It goes in a circle. Now add to this equation our unavoidable Malaysian component - race, race & race.   

• there is a big reserve margin in electricity. Are we paying more for this excess capacity?
• After taking into account scheduled and unscheduled outages and de-rating, the operating reserve margin is now between 5% and 21%.
• The recent Sabah experience has shown that the lack of a healthy reserve margin entails a system to become unreliable and unstable.

Again I agree with MyPower.  Reserve Margin is the total excess capacity in all the power plants around the country.  To be safe we need at least 25% reserve margin at all times. In Malaysia it is better to have a little bit more. Why? Because our service and maintenance culture is not good. Let me rephrase - it is very bad.  Just because there are 10 turbines in a power plant it does not mean that all 10 are running all the time. Two may be down for maintenance. That means only 80% power capacity is available at any time. What if another two "rosak". The power plant's availability will drop to 60% in an instant.

I agree that we must maintain a comfortable level of reserve margin in our Grid.

(Folks our RMAF has 18 MIG29s. Guess how many can fly? 16, 12, 10? The answer is two - former defense contractor told me. Spare parts tak ada. That is only 11% readiness for war for the MIG29. Nasib baik the Sulus only know how to fly kites. Esok kalau the Sulus get some MIG17s na'as kita. We only have two MIG29s that are air worthy. Our maintenance culture is zilch.)

• TNB has to be profitable. It pays taxes and its performance is benchmarked against both local and global peers. There are KPIs to meet.

TNB has assets in excess of RM60.0 Billion. They make profits of about RM4.0 Billion.  6.7% return on assets. That is a very low number. The lower their ROA, the more money TNB must borrow for CAPEX (capital expenditures) etc. So kasi chan lah sikit. If they make a little more money, TNB should be able to borrow less. 

So now with this tariff hike, I hope TNB will not have to borrow more money. However if TNB does borrow more money, please do invite me to the loan signing ok. Lama tak terasa macam banker bagi pinjam duit kat orang.

• Budget 2014, GST imposed on all consumers with effect from April 2015
• consumers using 1-200 kWh per month will not be subject to the GST

Ayoyo. Folks, this means that all of us who consume more than 200kWh per month will not only pay a higher tariff but also pay another 6% GST added on. Kan saya dah cakap itu hari, the GST will only compound price inflation. Some dunggus called me all sorts of names. 

Listen carefully. Can you hear that crackling sound? You are suffering "renjetan elektrik" (electrocution)  inside your behind. You are being liwatted. First you will kena the TNB tariff hike.  Then you will get whacked with another 6% GST tax on top of the tariff hike. Here is some consolation.

• Why do I need to contribute to the Renewable Energy fund?
• Monies collected for RE Fund will be administered by the Sustainable Energy Development Authority Malaysia to pay RE players who generate electricity from RE sources 
• The best thing about FiT is that individuals who generate power from solar PV systems installed on roofs can connect to the grid and get paid from the fund through TNB (approximately RM400-RM500 per month for 21 years for a 4kWp system).

This one I call cheating the people. Its like this. Some of our electricity bill money will go into this Renewable Energy fund. (Its those Solar Panels you can fix on your roof tops and then sell the power back to TNB).  Then when TNB buys the excess power that our rooftop solar panels produce, we will get paid from OUR electricity bill money that has already been deposited in this Renewable Energy fund. Use our own money to pay us for electricity that we sell to TNB. Banyak cantik. Then TNB again resells that electricity back to us for more money. Pasal apa pula? 

And if you dont put any solar panels on your rooftop the gomen gets to keep your contribution to the Renewable Energy fund anyway.

No need lah Renewable Energy fund. We put up the solar panels, TNB just pays us from their cash (which they collect from us anyway).  

By the way is it true that the daughter of a former senior gomen servant (plus a very few more) hold APs to import these solar panels that are to be fixed on our rooftops? Tak baiklah macam tu. Lama-lama kerajaan akan jatuh.

• The Government is running on a budget deficit, and this is an issue that requires immediate action. By reducing the subsidies, the Government can manage its funds more efficiently to provide for the needy.

I say MyPower cakap pasal ekonomi pula. Sudah lari topik Dato. Leave the economy to the economists and the bloggers. The gomen is running a budget deficit because the gomen does not know jack sh*t about properly running a gomen. That is why the gomen is running a deficit. They cannot trace RM3.0 Billion they put in the Cayman Islands. The gomen may not even be able to point out the Cayman Islands on a map. 

Now here is another angle to the electricity tariff hike.  How will this tariff hike affect the IPPs yang Ani Arope marah tu?

It should NOT affect them because IPPs have already signed long term PPAs with TNB. Their prices have been locked in. Well except for one IPP.

In the beautiful State of Kedah there is an IPP among the oil palms in a place called the Kulim Hi Tech Park. It is a 250 MW gas fired plant that is now running at full capacity (That means about RM30.0 million a month cash collection, which is a lot of money). This IPP does not have a PPA with TNB. The license condition states that they sell their power directly to the tenants and consumers at the Kulim Hi tech Park.  

And the license conditions of this IPP state that they can only sell power at the same tariff rate as TNB. So with this 15% hike in tariffs, NUR Holdings earnings should jump up by another 15%.

Guess who owns this IPP now? It is none other than  J....J...

This IPP ran into problems with the banks after the Asian Financial Crisis of 2000. When Jamaludin Jarjis was Chairman of TNB he was well aware of the troubled IPP.  Fast forward to 2012 and JJ  "succesfully put in a bid to buy the IPP from the banks". If you have a calculator please add '2 plus 2'. 

So folks, JJ will profit handsomely from this 15% electricity tariff hike. At least from the electricity consumers at Kulim Hi Tech Park. 

And get this - a higher cashflow for JJ's 'dapat terpijak' IPP will make the power plant more 'listable' on the Bursa. Esok kalau ada IPO, akan melonjak lagi lah harga saham IPO.

Dont some people have all the luck? You and I are just regular folks. Salt of the earth. Yes thats what we are. And let us be proud of that. 

Then there are people like JJ. Friend of the PM. Kaya raya. He can buy a power plant. Kaya lagi. Tariff elektrik naik. Kaya lagi. Then he can go for an IPO. Kaya lagi.