Higher tariff on electricity likely after Putrajaya studies subsidy mechani

Although this is an old story, a reminder to all my bloggers. RM 40 sen/kWh is not cheap guys! The end user will feel the impact which is us!

According to TNB – electricity tariff is 33.5 sen/kWh (with subsidy) and 40 sen /kWh (without subsidy)

BY RANJIT SINGH
August 29, 2013
Latest Update: August 29, 2013 02:29 pm

The electricity tariff is expected to go up after Putrajaya completes its pilot study on the effects of a fuel cost pass through mechanism which provides for subsidies of up to RM12 billion a year.

Energy reform manager MyPower Corporation said today any likely price increase is a government decision after the pilot study begins next month as part of the subsidy rationalisation programme.

"The gradual removal of subsidies is part of the government's rationalisation subsidy programme," MyPower chief executive Datuk Abdul Razak Abdul Majid said at a media briefing in Kuala Lumpur today.

Government subsidies for electricity range between RM8 billion and RM12 billion a year. The prevailing tariff rate for electricity is 33.5 sen per kilowatt hour (kwh)

Gas constitutes 50% of the fuel used for electricity generation while coal provides 40% and renewable energy makes up 2% in Malaysia. The remaining 8% comes from hydropower.

Gas is currently supplied by Petronas at subsidised prices while coal is obtained at market rate.

Higher gas prices have made subsidies for electricity generation untenable. The situation is accentuated by state electricity company Tenaga Nasional having to import liquid natural gas (LNG), mainly from Australia. This is expected to further pressure the government's coffers with the weakening ringgit.

If subsidies were removed, electricity tariff could spike to 40 sen per kwh and this will greatly burden the end users, critics say.

The government has also decided to introduce the Incentive Based Regulation (IBR) framework which means that TNB's transmission and distribution network's annual performance will be benchmarked against a set of performance targets. Tariffs and TNB's returns will then be adjusted based on achieving these performance targets.

Abdul Razak also maintained that the gas subsidies did not "enrich" the Independent Power Producers (IPP's). He said that "the subsidised gas cost is passed through to TNB and ultimately, to consumers.

"Many global studies have shown that continuous provision of subsidised gas or electricity over the long term weakens rather than strengthens the economy," he added.

He said that TNB's electricity bill to consumers would also be restructured to show the breakdown in costs, in terms of generation, transmission and distribution.

The separation of these costs will be implemented in a few months time. - August 29, 2013.