What you need to know about electricity tariffs


Syndicated News
Written by Syndicated News

KUALA LUMPUR, Aug 1 2018 : There may be those who are still unclear or do not understand what are tariff, tariff rate adjustment, rebate, and surcharge as well as how these are related to the electricity bill.

Eight major questions on electricity tariffs are answered below.

It is hoped that the information shared here, which is based on previous news reports, will reduce any misunderstanding and increase the knowledge of all parties regarding this.

Q: Is it true that electricity tariffs were increased from July this year?

A: Not true. The average base tariff will remain at 39.45 sen/kWh until December 2020. Accordingly, the tariff rate for every consumer category, whether residential, commercial or industrial, will remain unchanged until December 2020.

Q: What is tariff rate adjustment?

A: Tariff rate adjustments are carried out every six months based on the actual cost of generating electricity. The Energy Commission (EC), the statutory body that regulates electricity tariffs, adjusts the rates using the Imbalance Cost Pass-Through (ICPT) mechanism.

ICPT is part of the new electricity policy appraisal framework known as the Incentive-Based Regulation, which has been implemented since January 2014.

Q: How are rebates and tariff rate adjustment connected?

A: During the half-yearly review of the cost of generating electricity, the actual costs are studied and compared with the base tariff costs set. When fuel costs fall, the cost reduction will be passed on to the consumers in the form of an ICPT rebate.

However, when fuel costs escalate, the additional cost needs to be passed on to the consumers in the form of an ICPT surcharge.

Q: How many times have the people in Peninsular Malaysia enjoyed rebates?

A: Rebates have been given seven times during the first seven ICPT cycles (from March 2015 to June 2018). The rebates, given to all categories of electricity users, amounted to RM6.3 billion.

Q: What is a surcharge and how is it related to tariff rate adjustment?

A: A surcharge is imposed when the fuel and electricity generation costs increase. This happened recently when global coal prices jumped while the value of the ringgit weakened.

This resulted in imported coal, paid for in US dollars, to soar in prices. Natural gas prices for electricity generation also continued to rise due to lower gas subsidies under the gas subsidy rationalisation programme.

This has raised the fuel cost for power generation in the peninsula.

Q: Why did the EC announce a surcharge (for July to December 2018)? Why are consumers no longer enjoying rebates?

A: Since July 2017, the power generation and fuel costs have exceeded the cost approved by the government under the base tariffs. This cost increase cannot be fully absorbed (in the form of rebates). Nonetheless, the government has decided to use funds from the Electricity Industry Fund (EIF) to offset part of the cost for the July-December 2018 period.

A large portion of the fund originated from savings achieved from the renegotiation of power purchase agreements with the first-generation independent power producers (IPPs).

However, the government can only spend RM114 million of the EIF’s monies to ensure the 7.1 million residential users (81.7 per cent of Tenaga Nasional Bhd customers) do not have to pay the electricity surcharge. This is to ensure that the rest of the fund can be used for the upcoming ICPT cycle.

Hence an ICPT surcharge of 1.35 sen/kWh is imposed on customers in the industrial and commercial categories (other than residential customers).

Q: What are the steps that can be taken to brace for this electricity surcharge?

A: Rebates enjoyed in the past will not continue for ever, as mentioned by the EC through reports in the mainstream newspapers over the past year.

Surcharges have already been imposed on industrial and commercial customers. Sooner or later, it may be imposed on residential consumers as well.

To help residential consumers, the EC has implemented star ratings labelling for energy-efficient equipment found in electrical stores. While fairly expensive, the products will benefit them in the long run through lower electricity bills.

Various smart energy measures can also be practised — including examples that can be found at https://www.tnb.com.my, through the use of smart electrical devices that can be accessed at https://maevi.my, and by monitoring and controlling electrical use via the Home Energy Report application at https://www.mytnb.com.my.

Meanwhile, industrial and commercial consumers can practise measures to save electricity and use energy-saving equipment. They can also obtain energy audit and other services in order to achieve the most optimum electrical consumption at http://tnbes.com.my.

Q: What are the proactive and reactive measures to ensure electricity is generated at the most competitive prices for the people?

A: In 2007, natural gas was the main fuel in the power generation fuel mix in the peninsula, at 68 per cent. When natural gas prices rose due to the gas subsidy rationalisation programme, efforts were made to diversify the fuels used for power generation.

As a result, power generation now relies mainly on coal (53 per cent), followed by natural gas (42 per cent) and hydro, together with other forms of renewable energy (5 per cent).

To increase the efficiency of generation using coal, all power plants built from 2011 use ultra super critical technology (USC). Compared with conventional technology, USC coal-fired power generation is more efficient and capable of producing more energy using the same amount of coal. It also complies with the more stringent environmental standards.

Manjung 4, a 1,000-megawatt power plant owned by Tenaga Nasional, was the first coal-fired USC plant in ASEAN when it began operations in April 2015.

In the future, more coal-fired power stations will be built that optimise the benefits from the latest technology.

The government has also announced a review of IPP contracts and the award of future power projects by open tender. This move is intended to give the best value for the power industry.

A study will also be conducted to develop an industry focusing on renewable energy with the aim of reducing dependence on imported fuels. – Bernama



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