The federal government has raised electricity tariffs by an average of 7.12 percent beginning June 1 as part of its subsidy reduction exercise.

The average rise is 2.23 sen/kW unit, from the current average rate of 31.31 to 33.54 sen/kW unit.

Natural gas prices are also set to rise by RM3 per mmBtu every six months until it reaches market levels by 2016, when its price would be fully floated.

Domestic users who use less than 300kW unit per month or RM77 on their bill will not be subjected to this new electricity pricing scheme, which is multi-tiered according to usage.

NONE According to Energy, Green Technology and Water Minister Peter Chin ( left in picture ), this means that 4.4 million or 75 percent out of a total 5.94 million households would not be affected by the new tariff.

The rate of monthly usage below 200kW unit will stand at 21.8 sen/kW unit while for usage between 201 to 300kW unit the tariff will remain as 33.40 sen/kW unit.

For those using 301kW to 1000kW units, the tariff has been raised from 0.1 to 10 percent, or RM0.07 to RM30.30.

However this only involves 23.5 percent or 1.39 million domestic users.

The waiving of the electricity bill for those who record less than RM20 usage monthly would cease on Dec 31, 2011.

The government has to fork out RM122 million annually in order to provide free electricity to 900,000 such users.

Result of natural gas price review

The announcement was made by Minister in the Prime Minister's Department Nor Mohamed Yakcop and Chin in the latter’s ministry office in Putrajaya this afternoon.

Chin explained that the electricity tariff rise is the result of the review of natural gas price and Tenaga Nasional Berhad (TNB)’s base tariff.

The hike in gas price from RM10.70 to RM13.70/MMBtu has increased the cost of electricity by 5.12 percent or 1.60se/kW unit, while the new TNB base tariff has contributed 2 percent or 0.63 sen/kW unit, he said.

On the other hand, both industrial and commercial consumers will experience an average increase of 8.35 percent (ranging from 6.2 percent to 10.3).

TNB will also introduce Feed-in-Tariff starting from September 2011, which is one percent of consumer's monthly bill, in order to promote Renewable Energy. Only domestic consumers with consumption of less than 300kW units per month will be exempted.

Both Nor Mohamed and Chin expected the rise will only contribute a minimum of 0.27 percent of inflation to the current economy.

Meanwhile, the government has also decided to raise the price of Petronas natural gas sold to power and industrial sectors, from RM10.70 per mmBtu to RM13.70, also from June 1.

Encouraging efficient energy use

The price will then be increased by RM3 per mmBtu every six months until December 2015, before allowing it to float with market levels in 2016.

"The step to review gas price gradually is aimed at addressing the issue of market distortion and reducing the government and Petronas gas subsidy, as well as encourage efficient energy consumption," Nor Mohamed said.

The Petronas gas price sold to Gas Malaysia Sdn Bhd for daily usage below 2 mmscfd will also be raised from RM11.05 per mmBtu to RM14.05. The average price will be increased from RM15.00 per mmBtu to RM16.07 per mmBtu.

For the industrial sector that uses more that 2 mmscfd, the price will be increased from RM15.53 per mmBtu to RM18.35 per mmBtu.

Nor Mohamed said Petronas had forked out RM131.3 billion in gas subsidies between 1997 and 2010.

However, with today's decision to raise the gas price by RM3 per mmBtu beginning June 1, Petronas is expected to save RM1.58 billion in gas subsidies this year, from the initial estimate of RM27.22 billion to RM25.64 billion.

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