The new electricity tariff will take effect on 1st June 2011. During the transition period, i.e. in the first month where the new tariff is effective, the electricity bill will be prorated based on the number of days lapsed. In other words, the units consumed before the effective date will be calculated using the old rates and the units consumed after the effective date will be calculated using the new rates.

The average electricity tariff will be increased by 7.12%. The increase is contributed by:

• Average 5.12% increase due to the 28% upward revision of natural gas price to the power sector from RM10.70/mmBTU to RM13.70/mmBTU; and
• Average 2.0% increase to partly recover for the increase of electricity cost of supply since the last base tariff revision in June 2006

This tariff review package also provides the following special rates and discounts:

• The 10% discount on electricity bills currently enjoyed by Government schools, Government institutions of higher learning, places of worship and welfare homes registered with the Government is maintained. The 10% discount will also be extended to educational institutions partly-funded by the Government.
• Thermal Energy Storage (TES) consumers will enjoy higher discount for off-peak electricity consumption. 
• Reduction in Firm Standby charge for Co-generators to encourage Green Technology, Energy Efficiency and Demand Side Management (DSM) initiatives.
• Water treatment, water distribution and sewerage companies to be categorised under Industrial Tariff.

In line with the Renewable Energy (RE) Act which was passed in April 2011, the Government will impose 1% as Feed-in-Tariff (FiT) for RE Fund, effective 1st December 2011. The fund will be utilised for promotion and development of RE projects and initiatives. The fund will be managed by Sustainable Energy Development Authority (SEDA) under the Ministry of Energy, Green Technology and Water.

• Industrial consumers will experience an average increase of about 8.35% (ranging from 6.2% to about 10%)
• Commercial consumers will experience an average increase of 8.35% (ranging from 6.2% to about 8.35%) 
• Domestic consumers with monthly consumption of up to 200kWh will experience no tariff increase. Domestic consumers in this band will continue to enjoy the subsidised rate of 21.8 sen/kWh
• Consumers using 300 kWh per month and below will not experience tariff increase
• Hence, no tariff increase to 75% of the household consumers (4.4 million consumers):
  • No tariff increase for Lifeline Band (3.3 million consumers)
  • No tariff increase for 201-300 kWh band (1.1 million consumers)

The Lifeline Band is maintained at 200kWh/month.
Domestic consumers in the 1 to 200kWh per month band had never experienced any electricity tariff increase during the past tariff adjustments since 1997. Around 3.3 million households will continue to enjoy the subsidised rate of 21.8 sen/kWh. This number of households safely encompasses all 200,000 poor households (i.e. income less than RM750 per month)¹.
 
Source: ¹ – GTP Roadmap Chapter 9

The increase in electricity tariff is largely contributed by the increase in the natural gas price to the power sector by 28% from RM10.70/mmBTU to RM13.70/mmBTU with effect from 1st June 2011.

The increase in natural gas price is based on the Government natural gas pricing mechanism in which the price is periodically reviewed in tandem with market price trend. 

Since natural gas cost constitutes around 50% of the total fuel cost mix (FY2010), the additional fuel cost incurred due to the gas price revision is reflected via the increase in end-use electricity tariff.

Another major cost component of TNB fuel cost is coal (i.e. around 48.3% of the total fuel cost mix in FY2010). TNB is only partly recovering the cost of coal procured as the new tariff is still based on the average coal price of USD85/tonne CIF¹ (CV5500 kcal/kg) (i.e. the price used in March 2009 tariff adjustment) even though the average coal price for the first half of FY2011 is at USD100/tonne CIF and currently at even higher price of about USD 120/tonne CIF.

Note: ¹ CIF : Cost, Insurance & Freight

The base tariff was last reviewed in June 2006. Over the years, the electricity cost of supply has been increasing particularly because of the uncontrollable costs which include capital cost, equipment and material cost and cost of development of electricity supply infrastructure.

Currently, TNB’s Return on Ratebase (RoRb) is much lower than its Weighted Average Cost of Capital (WACC) and will continue to deteriorate if current base tariff is maintained. Base tariff review is needed to ensure the future viability of the Malaysian Electricity Supply Industry.

TNB’s current loan amount is high at RM21.3 billion in 2010.  It further needs to finance RM4 billion to RM5 billion a year in capital expenditure (capex) for future electricity supply infrastructure.   

Rebate from the Government for Domestic consumers utilising electricity up to RM20 per month is maintained until December 2011.

Under the Government’s five-fuel policy, TNB is required to diversify its fuel sources and one of the options is to use coal. This is also to reduce TNB’s dependency on natural gas since it is a fast depleting resource. Diversification of fuel sources will ensure long term energy supply security to the country.

The decision by the Government to plant up coal-fired power plant was made in early 1980’s at which point coal price was low. However, the rapid increase in commodities demand (not only for coal) over the recent years has driven price increases significantly.

Currently, TNB has been generating electricity from clean sources such as hydro, mini hydro and landfill waste. Some of the main RE projects in the pipeline are the Hulu Terengganu and Ulu Jelai hydropower projects and also a biomass plant project jointly developed with Felda and a pilot 5MW solar PV project in Putrajaya.

Nonetheless it should be noted that electricity generation from Renewable Energy (RE) sources is currently very costly (i.e. not competitive) as compared to conventional sources in particular for large scale electricity generation. Besides, current technologies in RE can only allow for generation in limited capacities and scale.

It is expected that the implementation of Feed-in-Tariff (FiT) will further encourage and facilitate the development of Renewable Energy (RE) generation in Malaysia.

TNB encourages its consumers to use electricity efficiently. For instance, consumers could use energy-efficient light bulbs and electrical appliances. Large power rating appliances such as for heating, air-conditioning and industrial motors should also be used prudently to conserve energy. Consumers are also advised to opt for high-efficiency appliances.

TNB will continue to provide 10% discount to Government schools, Government institutions of higher learning, places of worship and welfare institutions registered with the Government. Furthermore, the 10% discount will also be extended to educational institutions which are partly funded by the Government.

This is in line with the Government’s effort to gradually reduce subsidies to industries. Even with this increase, SIT consumers will continue to enjoy discounted tariff rates as compared to the rates for normal Industrial consumers. Comparison of Industrial tariff rates in regional countries shows that TNB’s new Industrial tariff is still competitive.

For this new electricity tariff, there will be new rates for Top-Up and Standby charges. The main difference in this new tariff is that there will be no more Firm and Non-Firm charges for Standby but only a single Standby charge.

The new Standby rate (as of 1st June 2011) is applicable to the following customers:

• All new Co-generators; and
• Existing Co-generators who wish to migrate to this new Standby rate.

For Co-generators under the existing contract who wish to maintain the previous Standby (Firm and Non-Firm) rates, the previous Standby (Firm and Non-Firm) rates together with the new Top-Up rate (as of 1st June 2011) will be applicable. 

Feed-in-Tariff (FiT) mechanism is introduced to promote the development of RE in Malaysia effective 1st December 2011.  

The FiT contribution will be used to finance a RE Fund managed by Sustainable Energy Development Authority (SEDA) under the Ministry of Energy, Green Technology and Water. SEDA is the central body responsible for all national RE and FiT matters.

The RE Fund will be utilised to formulate attractive FiT rates sufficient to create justification for companies and individuals to invest in RE electricity production. However, FiT is not meant for excessive profiteering from RE businesses but to remove the market barriers for public to work alongside the Government to generate green electricity while contributing towards national energy security and generating new economic activities.

Currently electricity generation from RE sources is very costly and not competitive with large scale plants using conventional fossil fuel sources. The higher cost per unit has made investment in RE not attractive to investors and electricity utility.

The objective of FiT is to spur RE growth in Malaysia. FiT will be used to subsidise the difference between the premium tariff rate and the current selling price of a unit of electricity from RE developers to TNB under the SREP programme (i.e. at a maximum price of 21 sen/kWh).
FiT mechanism has been implemented successfully in countries such as Germany and Spain and is a major driver for RE growth in those countries.

The Government will introduce a Fuel Cost Pass-Through (FCPT) mechanism for the power sector.

FCPT mechanism will allow electricity utility to pass-through the uncontrollable electricity generation fuel cost due to the volatile fuel prices to consumers by increasing or lowering their electricity tariff. Additional fuel cost incurred due to higher fuel prices will be reflected by a higher electricity tariff and in the same manner, any reduction/saving in fuel cost will be returned to consumers by lowering their electricity tariff. This mechanism has been adopted by utilities in many countries such as Singapore, Thailand, Philippines, Japan, USA (e.g. Florida) and Europe.

FCPT will be implemented every six (6) months in tandem with the six-monthly natural gas price revision and also taking into account the prevailing market coal and oil prices.

Thermal Energy Storage (TES) consumers are offered higher discount for off-peak electricity consumption (i.e. increase from 1.5 sen/kWh discount rate to 3.5 sen/kWh discount rate).

Besides, the Firm Standby charge for Co-generators is reduced to encourage utilisation of Green Technology, Energy Efficiency (EE) and Demand Side Management (DSM) initiatives. Reduction in Standby charge is from RM25/kW per month to RM12/kW per month (High Voltage Co-generators) and RM14/kW per month (Medium Voltage Co-generators).