KUALA LUMPUR – Domestic consumers are expected to have a surcharge imposed on their electricity bills next month due to rising fuel prices arising from the Russia-Ukraine conflict that began early this year.
Tenaga Nasional Bhd, like most power companies worldwide, is experiencing difficulty in keeping rates at the current level, especially under the weight of rising coal prices. Prices for coal, which powers almost half of the nation’s power generation needs, have gone up fourfold since the war broke out.
For instance, the benchmark Newcastle coal price hit a record high of US$440 (RM1,945) per tonne in early March, from US$67.5 previously, fueled by fears of a supply shortage after Western countries imposed sanctions on Russia’s financial system and energy products after the country’s attack on Ukraine.
According to a source, Putrajaya is mulling over the matter, especially on whether it would allow the cost to be passed on to consumers. There is an Imbalance Cost Pass-Through (ICPT) formula, which is reviewed every six months, where the cost of fuel could be translated into the final consumers’ bills. The next ICPT review is due next month.
While surcharges have been applied to commercial users, this is the first time it would be implemented for domestic consumers. The quantum of the surcharge would be decided by the Energy Commission (EC).
The government decided in January that the tariff remains at 39.45 sen per kilowatt-hour (kWh), and domestic consumers would continue to enjoy a rebate of 2 sen/kWh without any surcharge.
The EC in January said the government had utilised available funds amounting to RM715 million from Kumpulan Wang Industri Elektrik, made up of cess-like contributions from power players, to maintain the current rebate for domestic users.
According to TNB’s website, the ICPT mechanism under the Incentive-based Regulation framework allows TNB to reflect changes, either an increase or a reduction, in fuel and other generation-related costs in electricity tariffs every six months.
Through the ICPT mechanism, the government stipulates that in the case of a drop in global fuel prices and generation costs, the savings will be returned to the public in the form of an ICPT rebate, and in the event of an increase in fuel and generation costs, the extra costs will be channelled as an ICPT surcharge.
Other countries raising tariffs, too
Higher fuel costs have also led other governments and regulators to review their electricity prices to reflect the increase.
For instance, in Singapore, its electricity tariff has increased by 23% from 20.76 cents/kWh in the first quarter of 2021 to 25.44 cents/kWh in the same quarter this year due to higher fuel costs. From January to March this year, its tariff rose 5.6% to an average of 25.44 cents/kWh.
Thailand increased its electricity tariff by 4.6% from January to April to an average of 3.78 baht/kWh as the country needs to import costly liquefied natural gas for electricity generation.
In Hong Kong, both its power companies have increased the average net tariff from January 1 this year as well.
The Hongkong Electric Company increased its average net tariff by 7% to 135.3 cents/kWh, while CLP Power and Castle Peak Power raised the average net tariff by 5.8% to 128.9 cents/kWh.
Other European countries have also increased their electricity prices with Italian energy regulator Arera raising electricity prices by 55% and gas prices by 42% for the first quarter of 2022.
According to independent research and consulting firm Enerdata, the electricity prices in Italy would have increased by 65% and gas by 42% if there was no government intervention that cancelled general charges, reduced VAT rates on gas bills for 35 million domestic customers and enhanced social bonuses, as well as introducing the option of paying in instalments for families facing difficulties.
In Germany, 4.2 million households saw electricity bills rise by an average of 63.7% this year and 3.6 million stand to pay 63.3% higher gas bills as suppliers pass on record wholesale rates. – The Vibes, June 15, 2022
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