The Ministry of Finance has announced the government will foot a RM5.8 billion bill to subsidise electricity for the second half of the year, keeping tariffs at the existing rate for all (West) Malaysians despite steeply rising energy costs. This comes after prime minister Datuk Seri Ismail Sabri Yaakob said on June 24 that those in Peninsular Malaysia will continue to enjoy the same water and electricity tariffs as in the first half of 2022
As Tenaga Nasional (TNB) explained in its FAQ, the subsidy will ensure the Imbalance Cost Pass-Through (ICPT) will be maintained at the current rate. The ICPT, in case you were wondering, is a mechanism under the Incentive Based Regulation (IBR) that allows the utility to pass changes in fuel and other generation-related costs down to the customer.
The IPCT rate, which is adjusted every six months by the Energy Commission, would’ve been affected by the increased costs borne by TNB from January 1 to June 30. The company said global coal prices soared from USD79 per metric tonne – set as the base tariff in TNB’s Regulatory Period 3 (February 2022 to December 2024) – to USD265 per metric tonne. For your information, Malaysia derives 59% of its electricity from coal power.
The sharp increase, attributed to the current global crisis (which we assume to mean the Ukraine invasion and continuing COVID-19 restrictions) and worldwide coal supply restraints, has increased TNB’s fuel and generation costs by a whopping RM7 billion in the first half of the year. This would’ve resulted in an ICPT surcharge of 11.81 sen per kWh.
As such, the government has stepped in, offering RM2.3 billion to help offset the costs and another RM3.5 billion to ensure non-domestic customers (i.e. commercial and industrial users) maintain their current ICPT surcharge. It also said it has guaranteed a further RM6 billion in financing to TNB to ensure the company’s electricity generation costs do not impact Malaysians, as well as sustaining the local energy industry.
Domestic consumers will therefore receive the same ICPT rebate as before at two sen per kWh, while businesses will continue to pay a surcharge of 3.7 sen per kWh.
The rates for domestic customers that use less than 300kWh per month are also unchanged, with those that use between 201 and 300 kWh continuing to pay the same 33.4 sen per kWh since 2009. The 21.80 sen per kWh rate for those in the Lifeline Band (zero to 200 kWh) has also not changed since 1997. Additionally, hardcore poor citizens registered under the E-Kasih programme will receive RM40 in electricity subsidies.
However, TNB said the implementation of an ICPT rebate or surcharge for consumers that use up to 300kWh is subject to the government’s discretion. The latter has previously decided to release any ICPT rebates to consumers in this bracket during the COVID-19 pandemic.
Minister of Health Khairy Jamaluddin retweeted the government’s announcement, claiming that Malaysia’s headline inflation is “among the lowest in the region” due to broad subsidies implemented to cushion any impact.
Malaysia’s headline inflation among the lowest in the region due to the government’s decision to cushion inflationary impact through broad subsidies. RM5.8bn to prevent higher electricity prices from being passed through to the people. https://t.co/EOw0HEbr0Z
— Khairy Jamaluddin(@Khairykj) August 27, 2022
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