Proposed electricity rate hike due to rising fossil fuel prices, ministry says

Editor’s note: This story earlier inaccurately reported that electricity tariffs had been hiked recently. The hike is still at a proposal stage and has not been decided upon. Malaysiakini regrets the error.

Summary

• The proposed electricity rate hike is due to rising fossil fuel prices, says the Energy Transition and Water Transformation Ministry.

• The ministry explains that the lower projected fuel price from 2022-2024, resulted in a high adjusted surcharge rate after the period.

The proposed hike in electricity tariff is due to the rising prices of fossil fuels, the Energy Transition and Water Transformation Ministry said.

In a written parliamentary response, it said the largest component in calculating the basic electricity tariff is the projected price of coal and gas for electricity generation.

“The projected price of coal and gas was much lower during the determination of the average basic electricity tariff rate for the Regulatory Period 3 (RP3), which was from 2022 to 2024, resulting in the adjustment of the electricity tariff surcharge under the Imbalance Cost Pass-Through (ICPT) mechanism being very high. 

“Therefore, the determination of the new projection for the Regulatory Period 4 (RP4) will further narrow the current fuel price gap so that the ICPT adjustment, which is reviewed every six months, can be controlled more efficiently and effectively,” it said.

It was responding to Labis MP Pang Hok Liong, who asked why Tenaga Nasional Berhad (TNB) was raising the electricity tariff rate when its annual net profit exceeded RM10 billion.

To that, the ministry said the government sets a limit on TNB’s profit every three years as part of its regulatory oversight.

‘Only ultra-rich, industry affected’

On Feb 2, Prime Minister Anwar Ibrahim clarified that electricity tariffs will only be raised for industrial users and the “maha kaya” (ultra rich).

He said the hike in electricity rates must be done to fund other sectors such as healthcare and education.

Last year, TNB announced a 14.2 percent increase in the base electricity tariff for Peninsular Malaysia effective July this year, from 39.95 sen/kWh to 45.62 sen/kWh.

It cited higher fuel costs as the main reason for the increase.

For context, the base tariff refers to the average tariff borne by all electricity users. The actual tariff imposed differs based on the type of user and consumption trends.

The final bill is also affected by any surcharge or rebates under the ICPT scheme, which is adjusted every six months to reflect actual fuel prices.

TNB previously assured there would be no increase in electricity tariffs for 85 percent of domestic users for the first half of this year, as the government is absorbing the cost through mechanisms such as the Electricity Industry Fund.

The next tariff review is slated for July 2025.

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