KUALA LUMPUR - Tariff hikes in electricity are here to stay for the next few years, if what the top officials of Tenaga Nasional Bhd (TNB) say is anything to go by.
The Government announced a reduction in the subsidy for the fuel component of electricity supplied to Peninsular Malaysia last week.
This is in-line with the subsidy rationalisation programme to close the gap between the price of piped gas supplied to TNB and the market rate.
Under this programme, piped gas price was to be increased by RM1.50 per million metric British thermal units (MMBtu) every six months until it meets the market price.
Piped gas price was increased by RM1.50 MMBtu to RM18.20 MMBtu under the latest electricity tariff review, which will take effect from Jan to June next year.
“That’s what they mean by rationalising, in another words, over a period of time, they gradually allow gas price to go up bit by bit until it’s similar to the international market price.
“At the moment, it’s still heavily subsidised,” TNB’s chairman Tan Sri Leo Moggie told reporters after the utility giant’s AGM here yesterday.
So far, prices have been adjusted and the price of subsidised gas has almost tripled since some three years back, according to industry experts.
“Let’s say Japanese Crude Cocktail is selling at about RM30, that means prices for subsidised gas to TNB will need to go up until it nears the market price.
“But of course, the cost for domestic supplied gas should be lower without the logistics costs,” explained one observer.
President and CEO Datuk Seri Azman Mohd said the first 1,000 million standard cubic ft of gas per day is subsidised and the following consumption is based on market price that was agreed upon between TNB and Petroliam Nasional Bhd (Petronas).
The prices for liquefied natural gas is based on market price that’s agreed with Petronas and the impact of prices changes usually lag by six months.
“If coal plants are running efficiently, we’ll use more coal than gas,” he added. But due to weaker ringgit, its bottom line was impacted although coal prices has come down substantially. In 2015, we just finished one full year of incentive based regulation.
“We’ll have two more years for it to be reviewed.”
Within this, the imbalance cost pass-through mechanism will be reviewed every six months.
“Come next review for the rates for July 2016, the Government will look into how much savings we have and that will translate into the new tariff rebate. And TNB’s savings for power generation will be passed on to the customers,” he explained. - ANN
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