Electricity tariffs to go up 10%-20% next year

KUALA LUMPUR – Consumers should brace themselves for a 10 per cent-20 per cent hike in electricity tariffs next year.

“The quantum (of increase) is not finalised … but anything below 20 per cent is reasonable,” said Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili.

The final decision on the increase has yet to be made by the Cabinet, but the hike could happen anytime in 2014, he told reporters on the sidelines of a Parliament session yesterday.

The move, he said, would be in line with the Government’s plan to gradually cut subsidies.

It would also be in line with its efforts to boost efficiency and competitiveness in the Malaysian power industry, as well as to ensure sufficient returns to capital for utility company Tenaga Nasional Bhd to cover its costs.

A tariff hike will see rates for both industrial and households increase, but any hike for businesses will be mitigated against the need for them to remain competitive.

A home appliance that is rated at 1,000 watts, if left switched on for one hour, would use 1 kilowatt-hour (kWh) of electricity.

A 10 per cent-20 per cent hike would translate into an increase of 3.35 sen/6.7 sen per kWh to 36.85 sen/40.2 sen per kWh.

This is based on the prevailing tariff rate of 33.5 sen per kWh, which is about 8.5 sen below the “true cost” of power at 42 sen per kWh.

In comparison, electricity tariffs in the Philippines and Thailand are 58 sen per kWh and 48 sen per kWh respectively.

Ongkili said the Government would implement a “stabilisation” programme to protect consumers, especially the low-income group, when the tariff hike takes effect.

Details of the programme have yet to be finalised.

The electricity tariff was last revised in June 2011 after the Government raised the subsidised gas price for the power sector to RM13.70 per million metric British thermal unit (mmbtu) from RM10.70 per mmbtu.

Gas accounts for about 50 per cent of electricity generation in peninsular Malaysia. Coal accounts for 40 per cent, hydropower about 8 per cent and renewable sources around 2 per cent.

Subsidies for the power sector are RM8bil (S$3 billion) to RM12bil per year, depending on the prevailing price of gas.