Power tariff set to increase every 6 months?

Malaysian may have to endure an increase in electricity tariff every six months over the next years in tandem with a scheduled increases in natural gas price sold by Petronas to power producers.

Energy, Green Technology and Water Minister Peter Chin said that the government had agreed to adopt a ‘Fuel Cost Pass Through’ (FCPT) mechanism that will determine electricity tariff rates in the future.

“The quantum of fuel cost (cent/kW unit) that will be passed to the consumers will be calculated according to the real cost of fuel, which are the gas and coal that will be used for power generation purpose for a period of six months,” said Chin in Putrajaya today.

He said this when explaining the government directive for Petronas to increase the price of natural gas by RM3 per mmBtu for every six months until it reaches market levels by 2016.

Statements by Tenaga Nasional Bhd (TNB) chief executive officer Che Khalib Mohamad Noh at a separate press conference in Kuala Lumpur said the FCPT meant consumers have to absorb the cost.

"The government will also introduce a FCPT mechanism for the power sector. Under the FCPT, the fuel cost will be reviewed every six months.

"Any changes upward or downward in the fuel cost due to the fluctuation in fuel prices, namely gas, coal and fuel, will be passed to the end users' tariff," he said.

Still subject to government approval

Chin said that one of the two reasons for the June 1 tariff increase was due to the increase of Petronas sale of gas price to RM13.70 per mmBtu, from the current subsidised price of RM10.70.

He said that natural gas is the main source of fuel for power generators in peninsula Malaysia (54.2 percent) and followed by coal (40.2 percent).

Asked if whether the government will review electricity tariff every six months with every increase in natural gas prices, Chin replied: “Fuel is a pass through element, so it does not mean that if there is a future revision of the gas price, the electricity tariff will be automatically reviewed."

When the same question was posed to Che Khalib (middle), he said any increase in electricity tariff was still bound to government approval.

However, there are signs that a new electricity tariff structure would be in place on Jan 1, 2012 because it was announced today that it was scrapping the ‘lifeline band’ category.

Households which use less than RM20 worth of electricity a month fall under the ‘lifeline band’ and are exempt from paying their electricity bills.

Minister dodge question on IPP 

Minister in the Prime Minsiter's Department in charge of the Economic Planning Unit (EPU) Nor Mohamed Yaakob said that Petronas had been forking out RM131.3 billion in gas subsidies from 1997 to 2010. 

With the decision today, he said Petronas is expected to save RM1.58 billion in gas subsidies this year, which was initially estimated to cost RM27.22 billion.

Meanwhile, Che Khalib claims that the increase in gas price meant that TNB's gas bill will increase by RM1.5 billion annually, thus justifying the tariff increase.

On demands for the lucrative contracts between TNB and independent power producers (IPPs) to be made public, both Chin and Nor Mohamed refused to make any commitments.

“We are just limiting it to the energy issues today. I will answer at an appropriate time,” said Chin.

He also revealed that there has been "progress" in negotiations between the two parties but refused to divulge any information.

Chin maintained that the government does not subsidies IPPs because the term "gas subsidy" mentioned by critics should be defined as income forgone by Petronas.

“Therefore it should not be politicised in any way to mislead the public," he said.

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Frequently asked questions on new electricity tariffs