The Ministry of Energy, Green Technology and Water today issued a list of Frequently Asked Questions (FAQs) pertaining to the new electricity tariffs.

When will the new electricity tariffs become effective?

The new electricity tariffs will take effect on June 1, 2011.

How much is the electricity tariff increase for this tariff review?

a) The average electricity tariff will be increased by 2.23 sen/kWh or 7.12 percent from 31.31 sen/kWh to 33.54 sen/kWh. The 7.12 percent increase is made up of:

  • 5.12 percent or 1.60 sen/kWh due to increase of the natural gas price to the power sector from RM10.70/mmBTU to RM13.70/mmBTU in line with the increase in global energy prices; and
  • 2.0 percent or 0.63 sen/kWh for TNB to partly recover the increase of electricity supply cost since the last base tariff revision in June 2006.
b) 1.0 percent to be imposed to consumer's monthly bill as the Feed-in-Tariff (FiT) to promote Renewable Energy (RE). Domestic consumers with consumption of less than 300kWh/month will be exempted.

What are other special rates or discounts being offered to TNB consumers?

The tariff review package also provides the following special rates and discounts:

  • The 10 percent discount on electricity bills currently enjoyed by government schools, government institutions of higher learning, places of worship and welfare homes registered with the government is maintained. The 10 percent discount will now be extended to educational institutions partially-funded by the government;
  • Thermal Energy Storage (TES) consumers will enjoy higher discount for off-peak electricity consumption;
  • Reduction in Firm Standby charge for Co-generators to encourage Green Technology, Energy Efficiency and Demand Side Management (DSM) initiatives; and
  • Water treatment, water distribution and sewerage companies to be categorised under Industrial Tariff.
How much is the average electricity bill increase for every consumer segment?

taman wahyu tnb electrical power cables tower 051206 02 Industrial consumers will experience an average increase of 8.35 ppercent (ranging from 6.2 percent to 10.3 percent), while commercial consumers will experience an average increase of 8.35 percent (ranging from 6.2 percent to 10.3 percent).

However, all domestic consumers with monthly consumption up to 200kWh (lifeline band) and the next 100kWh will not be affected by the tariff increase. Domestic consumers in these bands will continue to enjoy the subsidised unit rate of 21.8 sen/kWh and 33.4 sen/kWh respectively.

Domestic consumers in the 301 to 400 kWh per month band will experience minimal electricity bill increase (i.e. 0.1 percent to 6.0 percent or RM0.07 - RM6.60).

What is the impact on the Lifeline Band consumers?

The Lifeline Band is maintained at 200kWh/month. Domestic consumers in the Lifeline Band had never experienced any electricity tariff increase during the past tariff adjustments since 1997.

Around 3.3 million households will continue to enjoy the subsidised unit rate of 21.8 sen/kWh. This number of households safely encompasses all 200,000 poor households (i.e. income less than RM750 per month).

What is the main rationale for the electricity tariff revision?

The increase in electricity tariff is largely contributed by the increase in the natural gas price to the power sector from RM10.70/mmBTU to RM13.70/mmBTU (28 percent) with effect from June 1, 2011.

The increase in natural gas price is unavoidable due to the increase in global energy prices since 2009 and is based on the government natural gas pricing mechanism, in which the price is periodically reviewed in tandem with the Medium Fuel Oil (MFO) market price trend.

Since natural gas cost constitutes around 54.2 percent of the total fuel cost mix (FY2010), the additional fuel cost incurred due to the gas price revision is reflected via the increase in end-use electricity tariff.

How are gas prices determined?

Gas prices are determined based on their alternative fuel pricing. For example, if fuel oil is used in power generation and if gas is used to replace fuel oil as an energy source, than the price of gas will be the same as that of fuel oil. The practice of pricing gas relative to its alternative fuels (e.g. fuel oil prices) has been adopted in all countries in the region.

Historically, the power sector in Malaysia has used fuel oil to generate electricity. To offer incentives to the power sector to convert from fuel oil to gas, in line with international practices, gas prices were pegged to fuel oil prices, which are widely traded and published. Hence, fuel oil prices are used as a reference for determining gas prices in Malaysia for power generation.

The gas price formulae agreed between buyers and sellers are stipulated in the gas sales agreements (GSAs). This provides transparency between both parties. The effective gas prices, which are computed based on these contractual gas price formulae, fluctuate according to market prices of fuel oil.

How is the gas subsidy determined?

A subsidy is defined as the difference between Market Price (reflected by the effective price computed from contractual price formulae) and government fixed price (subsidised price).

Currently the market price for gas for the power sector is about RM47.42 per mmBTU while the subsidised price is RM10.70 per mmBTU. Therefore, the subsidy is the difference between the market price and the subsidised price, i.e. RM36.72 per mmBTU.

What is the cost of the gas subsidy to the nation?

petronas petrol oil facility in terengganu kerteh 141108 01 Up to the end of 2010, Petronas has extended about RM131.3 billion in gas subsidy to both the power and non-power sectors.

If the gas prices remain unchanged (i.e. power sector at RM10.70 per mmBTU; non-power sector at RM15.35 per mmBTU), about RM27 billion in 2011 would have to be incurred. As this situation is not sustainable, the government had no choice but to restructure the gas subsidy.

(Note: The gas subsidy estimate is based on fuel oil price of US$93.98 per barrel at the exchange rate of RM3.0467 per US dollar).

Shouldering gas subsidy would limit Petronas' ability to contribute in terms of dividends and corporate taxes. It also limits Petronas' ability to reinvest to sustain future streams of revenue.

- Bernama

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