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NEWS UPDATES 22 July 2009

Power tariffs in Malaysia poised to rise

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The possibility of higher electricity rates will be discussed at the Malaysia Cabinet today and, if approved, will take effect next month, local daily the Star quoted Energy, Green Technology and Water Minister Datuk Peter Chin Fah Kui.

“The Cabinet’s decision is a crucial one. I am not saying there is a definite increase in electricity tariffs; the Cabinet could decide otherwise,” he said.

However, he pointed out that any potential increase would not be “too drastic” so that it would not overly burden consumers.

Electricity tariffs are expected to be raised in tandem with the upward revision in gas prices which Petronas supplies to the country’s power sector at a subsidised rate of 10.70 ringgit/mmbtu (million metric British thermal unit).

It is speculated that the gas price will be raised by 4 percent to 5 percent, followed by a corresponding upward revision in electricity tariffs.

In an interview, Chin said it would definitely be lower than what was speculated but he was not at liberty to disclose the quantum.

He acknowledged that higher power bills would not be viewed favourably by the public and that it rests with the Government to explain the rationale for any upward revision.

“If we explain properly the reason for the Government’s move, I believe they will understand,” he said, adding that the rates in Malaysia were already one of the lowest in the region.

CIMB Research, in its latest report, said the Government’s plans to move away from the subsidy mentality was evident from its commitment to review electricity tariffs once every six months, thereby allowing rates to reflect changes in international coal and gas prices.

In March, the Government allowed Tenaga Nasional Bhd (TNB) to reduce electricity rates by an average of 3.7 percent and said it would be reviewed again in July. The review is delayed but Chin had said that a tariff adjustment would take place soon.
On the revision of the gas price, he said it would be “a gradual movement towards the market price” and “that it’s good to start now”.

“It is all a question of fuel. Gas is our main component. The gas price has been fluctuating and has increased since the last tariff revision. The Government needs to look into this, otherwise there will always be a question of who is going to pay the subsidy,” he said.

A government officer said that even if the electricity tariff adjustments were made, the people were still enjoying lower rates because the price of gas was being subsidised until 2018.


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