Reduction Of Electricity Tariff Due To The Review Of Gas Price To The Power Sector

12/02/2009

Highlights of the tariff review : * Effective March 1st, 2009 * New tariff to reflect the reduction in gas price (i.e. from RM14.31 per mmBTU to RM10.70 per mmBTU) whilst taking into account the increase in coal price (i.e. from USD75 per tonne to USD85 per tonne) * Tariff for Lifeline Band (for household / residential consumers utilising up to 200kWh or RM43.60 of electricity per month) is maintained at 21.8sen/kWh * Government subsidy for household / residential consumers utilising electricity up to RM20 per month is maintained until December 2009 * Industrial Sector : average reduction of 5.0% (ranging from -4.8% to -5.2%) * Commercial Sector : average reduction of 2.7% (ranging from -2.6% to -2.7%) * Household / Residential Consumers : - average reduction of 2.54% - for consumption of more than 200 kWh, reduction ranges are from 3.0% to 4.7% - for monthly consumption of up to 200 kWh, no tariff reduction as the rate has been maintained at a highly subsidised rate of 21.8 sen/kWh in the past tariff reviews since 1997 Tenaga Nasional Berhad (TNB) would like to announce that in line with the Government’s decision to reduce the gas price to the power sector, TNB will revise the electricity tariff to its consumers with effect from 1st March 2009. The price of gas has decreased from RM14.31 per mmBTU to RM10.70 per mmBTU, while the estimated average coal price has increased from USD75 per tonne (in the last July 2008 tariff review) to USD85 per tonne. Gas and coal currently constitute approximately 64% and 28% respectively of the total generation mix in Peninsular Malaysia. Commenting on the new electricity tariff, TNB President/CEO Dato’ Sri Che Khalib said that TNB is able to reduce the electricity tariff to the consumers as the Government had reduced the price of gas for the power sector to RM10.70 per mmBTU (from RM14.31 per mmBTU). The current average tariff reduction of 3.7% is a net result of the reduction of gas price and the increase of coal price from USD75 per tonne to USD85 tonne. Although the price of oil has declined significantly, coal price based on delivered basis has remained at fairly high level. Coal and gas represent major components of TNB fuel costs (coal represent 40% of total power sector fuel costs). As such, TNB is only partially recovering the cost of coal procured as the revised tariff is based on the coal price of USD85 per tonne. “The reduction in electricity tariff is in support of the Government’s efforts to introduce an economic stimulus package to mitigate impact of the current economic slowdown”, Dato’ Sri Che Khalib said. However, he also stated that TNB has to still bear the excessive IPPs costs. Furthermore, under the power purchase agreements (PPAs) between TNB and the IPPs, fuel cost is fully passed through to TNB. Dato’ Sri Che Khalib also said that since the lifeline tariff rate for household consumers whose monthly electricity consumption is up to 200kWh has been maintained despite the tariff increases since 1997, there will be no change in their electricity tariff, in line with the Government’s decision. This group of consumers represents 59.1% of household consumers. Household consumers with monthly consumption of 201-400 kWh (representing 26.7% of total households consumers) are expected to experience between 0.9% to 2.0% reduction in their monthly bill. Commercial consumers will experience tariff reduction ranging from 2.6% to 2.7% in their monthly bill, whilst industrial consumers will experience tariff reduction ranging from 4.8% to 5.2% in their monthly bill. The Special Industrial Tariff (SIT) and the 10% discount for Government schools, Government institutions of higher learning, welfare homes and places of worship are maintained. Dato’ Sri Che Khalib also added that while TNB was committed to continue to find ways to reduce its operating costs, the company’s biggest challenge comes from the external factors especially high IPP power purchase costs and volatile coal prices which are beyond TNB’s control.