NO END TO BN PRICE HIKES! More electricity tariff hikes on the way - analysts

KUALA LUMPUR — Malaysians consumers and firms still adjusting to the recent electricity tariff increase have been warned to expect more to come, with analysts at one of Australia’s biggest banks predicting ASEAN countries will hike power rates this year.

Pointing to steadily increasing prices for liquefied petroleum gas, the primary fuel source for power generation in Malaysia and many other ASEAN states, analysts at ANZ forecast that governments in the region will be under pressure to hike electricity rates further.

Climbing demand for power by factories relocating to the region to take advantage of lower wages will also further strain the electricity infrastructure already in need of additional investment for expansion, the Financial Times reported analysts at the bank as saying last week.

Putrajaya has stated previously that it was spending too much on subsidies, which it insists must be reduced to allow Malaysia to achieve its goal of becoming a developed nation by 2020.

“The combination of firm domestic demand as a result of urbanisation, an improving global backdrop underpinning manufacturing usage and external circumstances that are prompting more prudent fiscal policy and a wind-back on energy subsidies are all crucial ingredients in a mix that suggests the strong price increases in electricity witnessed in 2013 will surely continue into 2014 and given the lags in improving or boosting supply, most probably in 2015 as well,” ANZ analysts were quoted as saying in the FT report.

Increase approved

Local power tariffs rose by an average of 15 per cent effective January 1, after Putrajaya announced on December 2 last year that it had approved the increase by utility firm Tenaga Nasional Berhad (TNB).

Despite the increase, Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili said the government would still have to spend RM14 billion on subsidies and rebates.

Predicting that energy costs will add another half per cent to inflation rates, ANZ also warned of possible fallout from citizens who are yet to come to terms with being weaned off decades of subsidies and price support.

Inflation accelerated to 3.2 per cent in December, according to Bank Negara Malaysia this month, surpassing previous estimates. That annual rate was the highest in two years.

ANZ further said that the pressure to increase prices was due to “structural issues” that were unlikely to be addressed in the short term, leading to added discontent from the public already unhappy over rising prices.

Changes to power tariffs in Malaysia invariably lead to accusations of cronyism and nepotism enjoyed by so-called Independent Power Producers (IPPs) that generate and sell electricity to Tenaga Nasional Bhd (TNB) using subsidised gas.

Although authorities repeatedly deny that the IPPs profit from increases to energy rates, the secretive nature of the concessions continue to fuel speculation that the firms were enjoying supernormal profits at the expense of the public. - Malay Mail