Electricity tariffs were raised 24% in June. Oil prices have since fallen dramatically and people are now demanding Tenaga Nasional reduce power tariffs. But our electricity is generated using gas and coal, for which prices are still high.

In fact, the main beneficiary of the higher electricity tariff is Petronas, which more than doubled its gas price to Tenaga – to RM14.31/mmBTU, from RM6.50/mmBTU.

Besides higher gas prices, Tenaga is also incurring higher coal prices, which at about US$95 today, still 25% higher than the average US$76/MT Tenaga incurred in its last financial year ending August 2008.

The pain will be made even worse by the depreciating ringgit.

Some numbers will illustrate this. That 24% tariff hike will add about RM5.5 billion per annum to Tenaga’s revenue. Of that, RM5.3 billion goes to third parties, leaving Tenaga with just a measly RM200 million of the RM5.5 billion additional revenue:

1. RM4.2 billion (76%) goes to Petronas to cover the increased price of gas;

2. RM1 billion to cover higher coal prices;

a. RM0.3 billion because of the US dollar increase in price to US$95 and

b. An additional RM0.7 billion due to the weaker ringgit, assuming an average exchange rate of RM3.70:US$1 instead of RM3.30

3. RM135 million for capacity payments to new Independent Power Producer Jimah.

In fact, by next year, Tenaga will be in a negative situation again because capacity payments to Jimah will rise to RM700 million!

I covered Malaysian utilities for over a decade as an investment analyst. I saw the rise of the independent power producers (IPPs) that decimated Tenaga’s profit, cash flow and balance sheet; and I’ve seen the BN government move Tenaga’s professional management to political appointees to, thankfully, professional management again.

If you want lower power tariffs, the appropriate targets are the IPPs which have earned exorbitant returns and Petronas, not Tenaga.

Tenaga is under-appreciated. Its services have improved tremendously in recent years. So tremendously that we don’t appreciate how much effort goes into delivering that stable and reliable power supply.

If Telekom were running the power sector, we would still be suffering frequent brownouts (noisy fixed lines is the Telecoms equivalent), blackouts (unstable Streamyx connections) and some areas without power at all (‘ Sorry, tak cukup kapasiti di sana untuk talian baru’ ).

And yet Telekom gets a RM2.4 billion handout of taxpayers’ money to do high-speed broadband while Tenaga is pilloried for high power tariffs which is no fault of its in the first place.

If there’s one GLC to target for inefficiency, it’s Telekom. Why do we still have to pay Telekom RM25 per month for fixed line ‘rental’?

My housing estate was built in the 1970s. Surely after over 30 years Telekom has already more than covered its capital cost of laying down the telephone lines.

And then there are the huge issues with Streamyx.