Govt yet to decide on power tariff review

STAR, 12 July 2013

KUALA LUMPUR: The Government has yet to decide on the electricity tariff review.

Energy, Green Technology and Water Minister Datuk Seri DrMaximus Johnity Ongkili said there was a need to look at the cost of fuel, gas and other inputs which have been increasing. “There is also a need to look at how Tenaga Nasional Bhd and Petroliam Nasional Bhd can absorb the increase,” he told a media briefing here yesterday.

He said there should be a mechanism for fuel price increases, not only when one party had to bear the cost, be it the Government, utility companies or consumers.

On the water issue in Selangor, Ongkili said what was available in the state was insufficient for its own use, as well as that of the Federal Territory and Putrajaya.

Ongkili said there was a need to work together with the Selangor state government to resolve the issue. — Bernama

Higher electricity tariff next year?

The Edge Financial Daily, 9 July 2013

KUALA LUMPUR: Malaysians may have to pay more for electricity as Tenaga Nasional Bhd (TNB) is set to resume the fuel cost pass-through (FCPT) mechanism next year.

Deputy Energy, Green Technology and Water Minister Datuk Seri Mahdzir Khalid told Parliament yesterday that TNB will start implementing the mechanism next year to more efficiently regulate the electricity tariff for users.

The FCPT mechanism allows any changes in fuel cost to be channelled to users through tariff rates implemented by the government. Any additional fuel cost incurred due to higher fuel prices will be reflected by a higher electricity tariff and any reduction or savings will be returned to consumers.

FCPT has been adopted by utilities in many countries such as Singapore, Thailand, the Philippines, Japan, the US and Europe. It will be assessed every six months in tandem with the six-monthly natural gas price revision and taking into account the prevailing market coal and oil prices.

“With the implementation of FCPT, users will be given an incentive if power is used economically and a penalty would incur if power wastage is detected. “This programme will be implemented based on the country’s economic performance. Users’ cost of living will also be taken into account,” Mahdzir said in Parliament in reply to a question from Liang Teck Meng (BN-Simpang Renggam).

Mahdzir said the FCPT mechanism is a component in the incentive base regulation (IBR) programme. Although the mechanism was first introduced in mid-2011 and was supposed to be reviewed every six months to reflect movements in fuel prices, TNB has only revised its power tariff once.

The last adjustment in 2011 reflected the increase in gas price, which jumped from RM10.70 per million British thermal units (mmBTU) to RM13.70 per mmBTU, while the coal price is still assumed at US$85 (RM234) per tonne. The rates were revised to partly cover for the increase in electricity cost of supply since the last base tariff review in June 2006.

The last round of adjustments saw an average tariff increase of 7.12% following the 28% upward revision of the natural gas price. There was also an average 2% increase to partly cover the increase of electricity cost of supply since June 2006. Industrial and commercial consumers saw an average increase of 8.35%.

Domestic or residential consumers whose monthly consumption falls within the “lifeline band” of up to 200 kWhsaw no tariff increase as rates remained unchanged at a highly subsidised rate of 21.8 sen per kWh or approximately RM44 per month. The last tariff review of the lifeline band was done in 1997.

Consumers using 300kWh per month and below saw tariffs maintained at 33.4 sen per kWh. Those who use more than 300kWh per month will have to pay a rate of at least 40 sen per kWh.

According to TNB, about 75% of the household consumers, or 4.4 million people, use less than 300 kWh so they were not affected by the tariff increase.

Additionally, Mahdzir said consumers who use below 200kwh a month are subsidised, while payment from those with usage below RM20 is waived.

In April 2011, a 1% charge was imposed as feed-in-tariff for the renewal energy fund.

TNB is still paying RM13.70 per mmBTU for natural gas, which has been unchanged since June 2011. Gas remains the largest component of TNB’s fuel generation mix followed by coal and oil.

Recently, the power sector was badly hit by a gas shortage. TNB, in particular, saw an additional RM3.07 billion in fuel costs to burn distillates as an alternative fuel from Jan 1, 2010 to Oct 31, 2011.

Two million TNB consumers to pay 1% levy from Dec 1

STAR, 22 November 2011

PUTRAJAYA: An estimated two million (25%) of Tenaga Nasional Berhad (TNB) consumers in Peninsular Malaysia will pay a levy of 1% out of their total electricity bills starting Dec 1.

This will follow the launch of the Government's Feed-in Tariff (FiT) system for the development of renewable energy next month.

Energy, Green Technology and Water Minister Datuk Seri Peter Chin said Tuesday that electricity consumers will contribute 1% of their total electricity tariff bills issued by TNB to the Renewable Energy Fund if they use more than 300kWh of electricity per month.

"Nonetheless, 75% of TNB's customers who consume less than 300kWh per month will be exempted from contributing to this fund," Chin told a press conference here.

The FiT system is a funding mechanism under the Renewable Energy Act (REA) 2011 and Sustainable Energy Development Authority (SEDA) Act 2011 designed to encourage the development of renewable energy via cost-sharing among electricity consumers.

It was originally set to be launched in September but was postponed to wait for legal mechanisms under the REA to be in place.

RM454mil Q4 loss for TNB

STAR, 29 October 2011
KUALA LUMPUR: Tenaga Nasional Bhd (TNB) posted a net loss of RM453.9mil for the fourth quarter ended Aug 31 due to higher fuel costs, its second consecutive quarter of losses as widely expected by analysts.

The company reported a net profit of RM555.2mil in the same corresponding period a year ago. Loss per share was 8.33 sen compared with earnings per share of 10.22 sen.

Revenue, however, was 13% higher at RM9.12bil in the fourth quarter from RM8.07bil previously.
For the financial year ended Aug 31, 2011 (FY11), TNB's net profit plunged to RM499.5mil from RM3.2bil in FY10. Revenue for the year was higher at RM32.2bil versus RM30.3mil.

The utility giant's cash has also fallen due to the higher cost incurred. As at Aug 31, TNB's cash and cash equivalents stood at RM3.25bil from RM8.01bil a year ago.

In the second half, TNB reported a 31.4% increase in operating expenses mainly from independent power producer (IPP) energy payment and fuel costs due to higher consumption of oil and distillate and higher coal price and consumption. The IPP energy payment and fuel costs for the second half of FY11 increased by RM3.2bil, or 50.5%, from the first half.

It also made a foreign exchange translation loss of RM227mil for the whole of FY11, compared with a gain of RM632.6mil last year.

TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said the losses were mainly due to continued gas shortage resulting in an additional fuel cost of RM2.1bil from oil and distillate.

“TNB has to burn an additional 1.1 tonnes of coal amounting to RM400mil to supplement the lower gas volume,” he said at a briefing to announce its financial performance.

Che Khalib said its additional fuel cost did not factor in the extra coal it had to burn. “It we were to calculate it, the additional fuel cost would be about RM2.5bil.”

“We started FY11 with high coal prices but it was still manageable as the existing tariff structure allows TNB to partially recover the coal cost. However, in the second half of the financial year, TNB was hit by severe gas curtailment resulting in higher utilisation of distillate and oil.

“The cost of generation using these alternative fuels is five times more expensive compared to the cost of using gas,” he said.

To a question, he said TNB was currently in discussion with Petroliam Nasional Bhd (Petronas) to seek some compensation concerning its huge losses due to severe gas curtailment. However, he said no decision had been reached as talks were ongoing. “Some form of compensation is required,” said Che Khalib.

Concurrently, Che Khalib said TNB was also in discussing with its stakeholders, Petronas, the Governemnt and IPPs to resolve the shortfall in gas supply.

“We don't think the industry can go on longer (with the severe gas curtailment). We are having many discussion at the moment.

He was quoted as saying recently that, on average, TNB was getting about 900 million std cu ft per day (mmscfd), far from the usual rate of 1,250 mmscfd.

Che Khalib said it was unlikely for Petronas to fully restore its gas supply. “I think they have their own challenges as well,” he said.

He added that TNB's first quarter results may be “similar” to that of the fourth quarter and expected FY12 to be challenging. “Profitability is still too early for us.”

Separately, Che Khalib said the fuel cost pass-through mechanism had been formulated but there was no indication when it would be implemented.

He expected electricity demand to grow 4% next year. For FY11, electricity demand in the peninsula recorded a growth of 3.1%, driven by the commercial sector.

Petronas Forgoes RM133 Billion To Keep Gas Prices Low

June 22, 2011

PUTRAJAYA, June 22 (Bernama) -- Petronas should have saved almost RM133 billion between 1997 and end-March 2011 if gas prices were not fixed by the government to the power and non power generation industry.

Gas prices have been capped for almost 10 years at RM6.40 per million metric British thermal unit (mmBtU) since 1997 as an interim measure to alleviate the rakyat's burden.

The decision to cap prices had to be extended beyond the original schedule as the region faced the Asian financial crisis.

"It was an attempt to help with the economic recovery process," said Minister of Energy, Green Technology and Water Datuk Seri Peter Chin at a press conference here today to explain the gas subsidy to the power generation industry.

He said the decision to fix the price resulted in Petronas having to forego a certain percentage of its revenue based on the difference in gas prices being sold in the international market.

"The price cap on the industry is also to ensure the electricity tariff paid by the rakyat is kept low," he said.

The gas price was increased by RM3 per mmBtU to RM13.70 per mmBtU on June 1, resulting in an increase of 1.6 sen in electricity tariffs.

And, if gas prices are not adjusted by RM3 per mmBtU, every six months as proposed by the Performance Management and Delivery Unit or PEMANDU, it would result in Petronas forgoing another RM2 billion.

Chin reiterated that no funds were being transferred to either Independent Power Producers (IPPs) or Tenaga Nasional Bhd (TNB).

He said that the fuel cost for electricity generation by both TNB and IPPs was a pass-through component which would be reflected in the end-tariff to consumers.

"It is, however, subject to government approval," the minister said.

Gas accounts for 54.2 per cent of the main fuel used for electricity generation in the Peninsula and the generation cost increases in tandem with every increase in gas prices," he said.

If the gas to the power generation sector had been allowed to increase according to market price, he said the average electricity tariff would be increased by 16 sen per kilowatt hour (kWh) to 47.31 sen/kWh.

"It is still lower than Singapore's tariff of about 57.5 sen/kWh where the country's gas prices is floated in tandem with the international market," he said.

The international market price for gas is currently at about RM40.70 per mmBtU.

The government had earlier decided to gradually increase gas prices as it recognised the implications of the policy on future generations and to allow Petronas to redeploy its revenue for other activities such as exploration in new areas to ensure sustainable gas supply to the nation.

Chin also slammed opposition parties who were unable to grasp simple concepts such as the subsidy scheme and chose to misrepresent the details for political mileage.

Denying recent allegations that the gas subsidy was being handed out to benefit IPPs and TNB, the minister said:"I am surprised at such allegations...it is inaccurate and grossly misleading.

-- BERNAMA

Industries grapple with rising power bills

Written by Sharon Tan & Chua Sue-Ann

Edge Financial Daily, 01 June 2011 14:03

KUALA LUMPUR: With the upward adjustments of natural gas prices and electricity tariffs, heavy duty power users now have to grapple with additional cost pressures as analysts estimate the increase of an average power bill  to be between 6% and 10% for industrial and commercial users. The worst hit industries include those in the steel, oil and gas, food processing, cement and electronics and electrical sectors. In a note yesterday, Maybank IB Research opined that the tariff increase was fair and manageable for commercial and industrial customers given that Tenaga Nasional  Bhd’s (TNB) tariffs remain competitive compared with regional rates. Maybank IB Research noted that the tariff hike was more subdued this round compared to that in July 2008, where natural gas price jumped 111% to 135% and electricity tariffs rose 24%. It added that the gradual RM3 per mmbtu rise in natural gas every six months would allow commercial and industrial users to plan ahead. In announcing the tariff hike, the government explained  that 75% of consumers would be shielded from the direct brunt of the rise in rates. However, increasing margin pressures are expected to  force manufacturers to pass rising costs to end-users, which would further drive up the cost of goods. Apart from the direct impact on companies’ earnings, HwangDBS Vickers Research noted that the decision to increase electricity tariffs and gas prices may also translate into higher inflationary pressures as the multiplier effect works its way through the economic chain. The research house expected a reassessment of the timing of a potential snap general election, initially rumoured to be held this year, to allow time for the public to adjust to the higher cost of living. The Edge Financial Daily spoke to industry players in the affected sectors to find out the impact of the electricity and gas price increases and their strategies to grapple with the rising cost pressures. Rubber gloves According to CIMB Research,  higher energy costs are negative for the rubber glove sector given that electricity accounts for 2% to 4% of total costs while natural gas makes up between 3% and 9% of total operating costs. “Glovemakers that are already battling with higher input costs, a weaker US dollar and weak demand now have to squeeze out further operating efficiencies to offset the higher energy costs,” the research house said. As for Maybank IB Research, the average 7% hike in electricity tariffs and 20% rise in industrial gas price could result in a 1% to 2% increase in glovemakers’ total production costs. “In our view, an immediate average selling price adjustment in response to the higher energy costs is not likely as glovemakers also face mild over-capacity, a weaker US dollar and higher raw material (NBR) cost,” the research house said. Lim Wee Chai: We hope the government will provide sufficient advance notice should there be any future revision. Tai: Adjustments to the steelmaking process and grades of raw material used can also cushion the effects of higher tariffs. Yam: In the long term, property prices could trend higher as contractors and suppliers pass on additional costs. Maybank IB Research also said average selling prices would need to be revised upwards by 2% to 3% to fully neutralise the impact of higher power costs. It opined that glovemakers should still have the pricing power to fully pass on the higher costs  but producers’ competitiveness could be impacted in the longer term by rising energy and raw material costs. Company remarks Top Glove Bhd chairman Tan Sri Lim Wee Chai The overall impact of natural gas and electricity price increases is less than 1% of our total manufacturing costs. Top Glove started using biomass in 2005 to avoid depending entirely on natural gas. Currently, around 60% of the heat energy comes from natural gas as we have turned to biomass. Our new factories will no longer use natural gas. More research and development will be conducted on our production process to find ways to minimise energy costs. We will feel the short-term impact as we are unable to make any adjustment to the selling price some of the orders we have sold forward. This is because of the short short notice [less than two days] of the tariff increase. We hope the government will provide sufficient advance notice should there be any future price revision. We will have to pass on the additional costs to consumers just as we have done in the past. We will review the costing to factor in the current latex price and exchange rates in deciding how much to revise our prices. The price revision will be reflected in all new orders received from June 1 onwards. Steel The steel industry is expected to feel the impact of rising power prices given its intensive use of energy with electricity and gas contributing almost 10% of total production costs. Maybank IB Research anticipated that near-term margins for steel could be hit and local steelmakers would not be able to easily pass on additional costs as average selling prices are subject to international pricing. Company remarks Malaysia Steel Works (KL) Bhd CEO and managing director Datuk Seri Tai Hean Leng The degree of impact of the electricity tariff hike on steel players is largely dependent on three factors — size of the steel plant, process equipment and raw material used. The larger the steel plant, the higher the quantum of electricity cost. Steel plants with specialised equipment or with direct access to large quantities of alternative fuel such as oxygen can help reduce the impact of higher electricity tariffs. Adjustments to the steelmaking process and grades of raw material used can also cushion the effects of higher tariffs. In the case of Masteel, the new tariff will increase its electricity cost by approximately 10.5%. Masteel believes it will be able to partially reduce its electricity cost by making adjustments to the three factors mentioned and partially pass the remaining cost to its customers. Masteel’s strategy is to deploy the appropriate equipment to use alternative fuels to supplement the usage of electricity in steelmaking. Company remarks Ann Joo Resources Bhd group managing director Datuk Lim Hong Thye The natural gas price increase has an insignificant direct impact on Ann Joo as it is not a substantial cost component. As for our electric-arc-furnace operator, electricity is the second largest cost component, accounting for 8% to 10% of total costs for billet production. In anticipating future hikes in energy price, Ann Joo embarked on a blast furnace project in 2008. The blast furnace, used for iron and steel production via hot metal charging, ultimately reduces electricity and natural gas consumption. We are currently at the hot commissioning stage of the blast furnace project, the first blast furnace in Malaysia. We expect to reduce up to 40% of our electricity consumption per tonne of steel with the hot metal charging technology. In addition, the blast furnace off gas will be used to replace the natural gas that is currently used in the rolling mill operation. Real estate and housing The burgeoning real estate and property market is likely to feel the heat of higher costs, particularly if the cement and steel sectors begin to pass on rising costs to end-users. For the cement sector, Maybank IB Research said it may have to bear the brunt of the adjustments to gas and electricity prices at least for the next six months with cement prices rising about 7%  last month. Company remarks Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Seri Michael Yam In the short term, developers are obliged to maintain their pricing for ongoing projects which have had their prices locked in already. Unsold units of ongoing projects would still be sold according to the launch price. However in the long term, property prices could trend higher as contractors and suppliers pass on additional costs. The dilemma is often about whether to launch property projects prior to starting the tendering process or vice versa. Steel and cement prices are volatile and very often, tender prices are higher than the pre-contract estimates. Consumers can expect property prices to rise not more than 5%, although it is difficult to gauge as there are many factors to consider such as price increases in steel, cement and other raw and finished materials such as tiles. The property market will still be alright for this year. Next year when the price increases start to feed through, it will be interesting to see if there are salary adjustments. If salaries are adjusted accordingly, then maybe we will not feel the impact so much.

Ani Arope blames high power tariffs on ‘Economic Plundering Unit’

By Debra Chong

Malaysian Insider, June 03, 2011

 

KUALA LUMPUR, June 3 — Former Tenaga Nasional Berhad (TNB) chief executive Tan Sri Ani Arope is blaming the Economic Planning Unit (EPU) for rising electricity tariffs, saying the powerful agency forced the national power company to sign lopsided purchase deals nearly 20 years ago.

Ani said EPU, which he sarcastically dubbed "Economic Plundering Unit", forced Tenaga to buy electricity from an independent power producer (IPP), believed to be Genting Sanyen, at 14 sen per kilowatt hour (kWh) despite an existing offer of 12 sen/kWh then. Other IPPs then were charging 16 sen/kWh Genting Sanyen became the first IPP to transfer 15 million watts (MW) in electricity to TNB’s national grid on April 15 and is scheduled to complete a RM1.8 billion upgrade on its existing gas-fired plant with a capacity for 720 MW by June next year.

“You don’t need to go to a fanciful business school to figure out why we need a tariff hike — just revisit the terms given to some IPPs,” Ani, who helmed the utility company between 1990 and 1996, said in his last Facebook posting three days ago.

“With the take-or-pay clause and with the 40 per cent excess reserve that we have today, one only has to produce half of one’s capacity and be paid 80 per cent of the agreed capacity. Well done the then-EPU — Economic Plundering Unit,” he added, mocking the economic unit under the Prime Minister’s Department.
Ani called for a review of the original terms with the IPPs as the storm over energy price deals continues to build up.

DAP publicity chief Tony Pua cited today Ani’s 2006 interview with English daily, The Star, to increase pressure on the federal government to declassify the power purchase agreements (PPAs) inked between TNB and the IPPs.

Ani caused a stir 15 years ago when he chose to resign from his executive chairman post rather than sign the imbalanced deals, which saw the first generation of IPPs created, such as YTL Power Services, Powertek and Malakoff during the Mahathir administration.

“TNB is the whipping boy. TNB has no control of the price it has to pay to the IPPs. Get to the source of the problem,” said the Penang-born now in his early 80s.

The Najib administration has been savaged for allegedly protecting the interests of IPPs rather than the public.
Putrajaya announced the 7.12 per cent hike in electricity rates in an effort to trim a subsidy bill that would otherwise double to RM21 billion this year and promised the hike will not affect 75 per cent of domestic consumers.

But power prices will now rise by as much as 2.3 sen per kWh in areas taking TNB’s electricity supply, a potential source of public anger just ahead of a general election expected within the year.
The Star daily reported today the government was close to inking a deal for a 1000 MW coal-fired plant in Manjung which will charge 25 sen/kWh.

Not Possible For TNB To Cut Tariff Further

June 16, 2009

PORT DICKSON, June 16 (Bernama) -- It is not possible for Tenaga Nasional Bhd (TNB) to reduce the electricity tariff further, said its president/chief executive officer, Datuk Seri Che Khalib Mohamad Noh.

"I also need to stress that whatever TNB collects today, almost 50 percent goes to the independent power producers (IPPs).

"What is there to reduce anymore? If you want us to reduce it, I think you should also ask the IPPs to do it," he said.

He said this to reporters after the ceremony to mark the completion of the second phase of its 750-megawatt Tuanku Jaafar power station rehabilitation project here Tuesday.

Minister of Energy, Green Technology and Water, Datuk Peter Chin Fah Kui, officiated at the ceremony.

He said as far as TNB was concerned, it would ensure that it did not over-charge or burden the customers.

"Considering the problem we have today, our rate is still cheaper compare to Thailand and Singapore," he said.

Che Khalib said industrial users should also play a role by being energy-efficient and undertake energy-saving exercise rather than to continuously ask TNB to lower the tariff.

"There is no way for the country to continue to provide cheap electricity just to make sure that the manufacturing sector can survive.

"I think it is a misleading economic model. The country as a whole must start to look into ways to save energy. If the energy continues to be cheap, people will continue to waste it," he said.

He said Japan was still competitive despite having the highest electricity tariff because they were the leaders in innovation and efficiency.