The electricity tariff hike is unfair as consumers are paying for the failure of power producers to use their fuel price advantage to produce cheaper electricity, the Federation of Malaysian Manufacturers (FMM) says.

In a statement today, FMM president Mustafa Mansur said that even with the gas subsidy cut of RM3 per mmBtu, the price of gas in Malaysia is still lower than that in the rest of the region, which makes the tariff hike unjustifiable.

It noted that as of tomorrow, the price of gas will be RM13.70 mmBtu, and this is lower than in Thailand (RM18.23 per mmBtu), Singapore (RM43.32 per mmBtu) and Indonesia (RM21.04 per mmBtu).

tenaga "Despite the fuel price advantage, the cost of electricity in Malaysia following this hike is nearly at par with Thailand; at 62.2% of Singapore's and 131.3% of Indonesia's rates.

"If we compare with Thailand's rate for low, medium and high voltages, Malaysia's electricity tariffs for all these categories are higher!" Mustafa said.

FMM added that it was equally unjustifiable to burden end-consumers when "price rigidities in the supply chain" were in fact driving costs up.

While Mustafa did not explicitly mention this, the oft-criticised "rigidity" in the power supply chain has been the power purchase agreement between Tenaga Nasional Bhd (TNB) and independent power providers, which forces TNB to buy power at an inefficient price.

The agreement is, however, not publicly available.

"FMM reinforces that it is critical to ensure transparency and predictability in energy pricing.

The components and computation of the fuel pricing mechanism should also be publicised," Mustafa said.

'Why are we paying more than our importers?'

TNB is also not faultless, said Mustafa, as the energy giant still falls short of providing consistent supply to users.

economy china 280706 manufacturing "While there appears to be some improvements in TNB statistics on unplanned outage, transmission system minutes and system interruption, the industry is strongly of the view that the utility provider is obligated to its customers to provide quality and uninterrupted supply," he said.

FMM also believes that the just thing for the government to do is to benchmark natural gas prices on export prices and not on world prices, as targeted for 2016.

"The Malaysian industry should not be paying higher than the country's export pricing for liquefied natural gas," he said.

Further, FMM maintains that there should not be an automatic pass-through of fuel pricing to consumers and that any fluctuations should be averaged out, as practised in Singapore.

The federation also called for electricity to be pegged at a certain margin below regional tariffs as a means to maintain regional competitiveness.

"There should not be any further automatic electricity tariff hikes when the natural gas price increases again," Mustafa said.

Yesterday, the government announced that natural gas prices would increase by RM3 mmBtu every six months until 2016, when the price of gas will be floated according to market price.