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Tariff & ICPT

What is Incentive Based Regulation (IBR)?

  • IBR is a tariff-setting framework which is widely adopted worldwide and is introduced by Suruhanjaya Tenaga (ST). This mechanism is guided by the Electricity Tariff Regulatory Implementation Guidelines (RIGs) issued by ST to ensure a sustainable electricity supply industry sector through efficient costs and fair returns with increased transparency.
  • IBR implementation ensures that TNB operates efficiently and charges customers competitively priced electricity tariff through linkages between revenues by TNB to the delivery of costs efficiencies over time through an incentive framework based on incentives and penalties.
  • Quality of service and performance of TNB are upheld and TNB gets the right incentives to improve its performance and enhance investments on an on-going basis.

What is Imbalance Cost Pass-Through (ICPT)?

ICPT is a mechanism allowing changes in fuel cost and other generation cost to be passed through as a rebate or a surcharge to the electricity customers.

The Government has approved for seven (7) periods of ICPT implementation:

ICPT Period ICPT Rebate
1/3/2015 – 30/6/2015 2.25 sen/kWh
1/7/2015 – 31/12/2015 2.25 sen/kWh
1/1/2016 – 30/6/2016 1.52 sen/kWh
1/7/2016 – 31/12/2016 1.52 sen/kWh
1/1/2017 – 30/6/2017 1.52 sen/kWh
1/7/2017 – 31/12/2017 1.52 sen/kWh
1/1/2018 – 30/6/2018 1.52 sen/kWh

The quantum of the ICPT is calculated by comparing the actual generation costs (including fuel prices) against the reference generation costs (including fuel prices) set in the Base Tariff. The ICPT is only applicable to the energy charge component in the consumer’s bill except Domestic consumers with monthly consumption of 300kWh (RM77.00) & below

Does TNB earn a profit from the ICPT and how is the ICPT amount determined?

No, the ICPT mechanism only allows for TNB to be kept financially neutral.

Regulatory Implementation Guidelines (RIGs), ensures that TNB does not make additional profit and also not adversely affected by fuel price volatility.

TNB is required to pass-through any savings as a rebate to customers. Similarly, additional costs of generation is allowed to be passed-through as a surcharge.

How will the ICPT impact my electricity bill?

  • ICPT is a charge that is applicable for every kWh of electricity consumed. It is a variable component in the electricity bill where the ICPT is charged based on your consumption of electricity on a monthly basis.
  • The ICPT is a straight “pass-through” charge and its calculation is based on the number of kWh consumed in a month multiplies by the ICPT rate (in sen/kWh).  The ICPT charge will then be added to or subtracted from your current bill amount.

Trial and First Regulatory Period

What is the mechanism used to determine the ICPT rebate/surcharge? Who determines the ICPT rebate/surcharge?

  • ICPT is a mechanism allowing changes in fuel cost and other generation cost to be passed through as a rebate or a surcharge to the electricity customers every six (6) months, subject to Government’s decision and approval.
  • The ICPT is a mechanism approved by the Government and implemented since 1 January 2014 as part of the IBR framework.
  • In total, the Government has approved RM6.3 billion of ICPT rebate and subsidy to be passed-through to  the electricity customers in the Peninsular over the period 1 March 2015 until 30 June 2018.

Who is responsible for tariff calculation methodologies and tariff setting?

The electricity tariff is set under the IBR framework and is approved by the Government.

What is the latest ICPT rate effective 1 January 2018 – 30 June 2018?

For the ICPT implementation period of 1st January until 30th June 2018, the Government has decided to maintain the ICPT rebate at 1.52 sen/kWh.

To maintain this rebate, the Government has decided to fund RM 929.37 million or 1.80 sen/kWh due to the followings :

  • 0.28 sen/kWh of surcharge from additional cost of generation
  • 1.52 sen/kWh to continue the current ICPT rebate for the electricity customers.

What are the cost components of supplying electricity to customers?

The key cost components of supplying electricity associated with generation, transmission and distribution of electricity through to the end-users are:

  • Fuel costs (e.g. coal, gas and other types of fuels utilised by the generators)
  • Power purchase costs from Independent Power Producers (IPP) and TNB generators
  • Operation and maintenance costs for the electricity supply industry infrastructure
  • Procurement of parts and equipment
  • Capital expenditures for building and refurbishing infrastructure projects – e.g. transmission and distribution network, sub-stations etc.

The last tariff review was in 2014. What is the justification for the recent tariff review?

  • Based on IBR Framework, the base tariff is revised every regulatory period lasting 3 years. The first Regulatory Period (RP1) has ended in 31st December 2017 while the second Regulatory Period (RP2) will start from 1st January 2018.
  • New electricity tariff for RP2 is still maintained at the current level. TNB will continue to invest in strengthening and maintaining the electricity supply infrastructure to ensure security and reliability of electricity supply in the Peninsular. In addition, TNB will also invest in advanced technological infrastructures and various initiatives to improve efficiency such as Advanced Metering Infrastructure (AMI), LED street lights and fiber optic network.

Why is there a need to rationalise the gas price subsidies in stages until it reaches the market price?

  • The gradual transition of the gas price until it reaches the market price will give maximum value to the economy in providing the basis for the development of a more sustainable energy sector. Gas pricing based on market principles will ensure effective allocation of energy resources costs, in accordance with the direction of the country into a high income economy by the year 2020.
  • In line with Government’s aspiration under Eleventh Malaysia Plan (RMK-11) from 2016 to 2020 to reduce the energy subsidy in stages, gas subsidy rationalisation program will continue to be implemented.
  • Fuel cost is the biggest component that makes up the electricity tariff; hence, the generation fuel mix needs to balance between optimising the cost of supply and ensuring fair and affordable electricity tariff to consumers.
  • Based on the Government’s decision in November 2014, the Regulated Gas Price is approved to be increased gradually by RM1.50/mmBTU every six months starting at RM16.70/mmBTU from July 2015 until it reaches the market price. Since January 2014, the Government has approved (7) seven instances of Regulated Gas Price increases.