By Khairie Hisyam
Electricity tariff may rise as the Energy Commission (ST) and Tenaga Nasional Bhd (TNB) begin a one-year trial run of the Incentive-Based Regulation (IBR) framework next month as part of the government’s subsidy rationalisation programme, MyPower Corp acknowledged today.
Embedded in the IBR framework is the fuel cost pass-through (FCPT) mechanism where electricity tariff rates would be revised regularly depending on raw material costs such as coal or natural gas, while taking into account foreign exchange fluctuations.
The IBR framework will see TNB’s performance in transmission and distribution benchmarked against pre-determined performance targets, which will then be the basis of determining tariff rates and TNB’s returns.
“Every six months, the regulator (Energy Commission) will see how much variance (there is) in the fuel bill that has gone into the system, and they will do a slight adjustment,” said MyPower chief executive officer Abdul Razak Abdul Majid in a media briefing today.
At the moment Petronas supplies gas at subsidised prices while coal is procured at market prices. Fuel for electricity generation in Peninsular Malaysia comprises 50% gas and 40% coal, with 8% from hydro power and 2% from renewable energy.
Acknowledging the possibility that tariff rates may rise when FCPT kicks in, Abdul Razak added that rate fluctuations will be dependent on the fuel component going into the system as well as on how much subsidy cost the government is willing to bear at any given point.
“The gradual removal of subsidies is part of the government’s subsidy rationalisation programme,” said Abdul Razak. “The (total electricity subsidies bill) is creeping up from RM12 billion and perhaps more if gas prices become more expensive, so if the government doesn’t do anything then the fuel subsidies bill will be growing higher and higher.”
“But the government is also conscious on how it is going to impact on the customers,” said Abdul Razak.
At present, the prevailing tariff rate for electricity is 33.5 sen per kilowatt hour (kwh) and gradually removing fuel subsidies would push the actual cost of power generation beyond the 40 sen/kwh mark.
You must be logged in to post a comment.