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.

Astro, Putrajaya in rate hike dispute

Malaysian Insider, 1 July 2011

KUALA LUMPUR, July 1 — Pay television operator Astro said today its rate hike was done after consulting regulators, hours after the Cabinet told the company to get clearance from the Malaysian Communications and Multimedia Commission (MCMC).

Information Communication and Culture Minister Datuk Seri Dr Rais Yatim had earlier said the Cabinet had rejected the rate hike announced last month.

“Astro noted the minister’s statement with concern as the price revision was conducted in consultation with the Malaysian Communications and Multimedia Commission (MCMC) and in accordance with the Communications and Multimedia Act (CMA) 1998 and the licence conditions,” an Astro spokesman said in a statement.

Astro recently announced that it would be streamlining the packages it was offering, which would take effect on July 11.

According to Astro, following the streamlining exercise, customers could make savings of between RM4 and RM14.95 or pay nominal increases of between RM1 and RM15, depending on packages preferred.
It is understood that Astro had notified MCMC about its proposed rate hike on May 13 but did not receive any feedback.

Bernama Online quoted Rais as saying that the matter was discussed at today’s Cabinet meeting and that the members felt it was not appropriate for Astro to raise its rate at this time.

“I agreed that Astro’s rates could only be hiked with MCMC’s approval and that any hikes must be reasonable and conform to the law,” he told reporters after chairing his ministry’s post-Cabinet meeting at Angkasapuri here.

He said Astro had violated MCMC’s regulations by issuing notices on its rate hikes to customers without the commission’s clearance.

“As such, I have asked MCMC to take appropriate action and instruct Astro not to continue with the rate hike until such a time deemed more suitable.

Explaining what he meant by “appropriate action”, Rais said this was up to MCMC to determine and that it could be a fine with the amount as allowed under the Communications and Multimedia Act 1998.

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.

Power Tariffs Raised, 75 Per Cent Of Rakyat Not Affected

May 30, 2011 18:06 PM

PUTRAJAYA, May 30 (Bernama) -- As part of its ongoing subsidy rationalisation exercise, the government Monday announced that average electricity tariffs will be raised by 2.23 sen kilowatt per hour (kWh) or 7.12 per cent to 33.54 sen kWh, from 31.31 sen kWh, effective Wednesday, June 1.

However, the move will not affect about 75 per cent of the population who mainly consume less than 300 kWh per month.

The announcement was made at a joint press conference by Minister in the Prime Minister's Department Tan Sri Nor Mohamed Yakcop and Minister of Energy, Green Technology and Water Datuk Seri Peter Chin Fah Kui.

They said the 7.12 per cent hike was due to the increase in natural gas price to the power sector.

As a result, Tenaga Nasional's average tariff had to be reviewed upwards by two per cent or 0.63 sen kWh.

"The review will enable the utility company to increase its investment in better electricity infrastructure including supply and distribution," he said, adding that it would invest about RM4.5 billion, annually.

Chin also said in line with the government's effort to rationalise energy prices in accordance with global market mechanism, the government has agreed to use the fuel-cost-pass formula to determine future tariff prices.

To encourage the use of electricity generated from renewable energy, the government has also decided to impose an additional one per cent feed-in-tariff portion which will be channeled, to the RE Fund, to promote the purchase.

-- BERNAMA