Maintaining ICPT rate will see customers bear brunt, say SMEs

 

William Ng said that Tenaga Nasional Bhd should be mandated to stick to a strict energy transition goal.

PETALING JAYA: Customers will bear the brunt of the government’s decision to maintain the electricity surcharge rate for non-domestic users under the imbalance cost pass-through (ICPT) mechanism, coupled with the rising cost of manufacturing, says an organisation representing small and medium-sized enterprises (SME).

Chin Chee Seong of the SME Association of Malaysia said that Tenaga Nasional Bhd’s high ICPT charges on medium-voltage (MV) industrial users – which include many SMEs – has caused an increase in SMEs’ overall manufacturing cost.

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“If manufacturing costs are increased, (manufacturers) have to increase the selling price of goods. Naturally, the costs have to be passed down. Otherwise, most manufacturers would have to close down due to the rising costs.

“Without price increases, who is going to pay for it? The consumers have to pay for it,” he told FMT.

The association’s secretary-general said the government should support and help the nation’s SME industry grow by not imposing ICPT charges on MV-user SMEs like plastic bottle manufacturers, who consume a high amount of electricity.

“SMEs from the MV (user) category should be exempted from any imposition of ICPT charges to support such local industries with limited financial support, which are the backbone of our local industries,” he added.

However, William Ng, the president of the Small and Medium Enterprises Association, said that maintaining the ICPT rate for non-domestic users would not create any immediate effect on product pricing.

“But if these rates are not adjusted in tandem with global energy prices, it will have a cascading effect on our mid-term export pricing and our competitiveness as an investment destination,” he said.

“If we are serious about lowering the cost of living, one of the levers we can pull is to lower energy costs and reduce production costs so that the pressure on SMEs to adjust prices upwards can be relieved.”

TNB must focus on energy transition

Ng said that the ICPT was meant to be a temporary measure to address the spike in operational costs and not as a mechanism to guarantee TNB’s profitability.

He also said that TNB, having plenty of time to transition from coal usage and achieve better operational efficiency, should be mandated to stick to a strict energy transition goal.

Being a major player in energy generation and transmission, Ng said TNB should focus on operational efficiency and diversifying its business to achieve continued profitability, instead of passing additional costs directly to consumers.

“Coal prices have dropped by more than half against their peak a year ago, so we would have expected a drop of 30-40% in ICPT, translating to at least 15-20% in tariff savings for commercial users.

“Since the ICPT has two main components – fuel price and generation costs – this points to continued inefficiency on the energy giant’s part.

“Hence our call for TNB to stick to its renewable energy transition goal,” he added.

Both groups were commenting on the Federation of Malaysian Manufacturers’ (FMM) criticism of the government’s decision to maintain the electricity surcharge rate at 17 sen/kWh for non-domestic users under the ICPT mechanism.

Saying that it had expected a rate reduction following the overall decline of global fuel prices this year and the six-month lag, FMM’s president Soh Thian Lai lamented the lack of industry engagement before the announcement and called for more details on the decision.

He said there was a need for consistent engagement to address concerns and challenges, particularly during periods of high ICPT surcharge rates, especially for MV small and medium-sized industries. - FMT