Tar­iff ad­just­ment ex­plained

IBR al­lows EC to check ac­tual cost of gen­er­at­ing elec­tric­ity every six months

New Straits Times - - News -


THE fol­low­ing is the tran­script of an in­ter­view with En­ergy Com­mis­sion Elec­tric­ity Pric­ing Unit, En­ergy De­vel­op­ment and Mar­ket Reg­u­la­tory Depart­ment head Mar­linda Mohd Rosli on Ra­dio Tele­visyen Malaysia TV1’s pro­gramme.

The in­ter­view, ti­tled, “Elec­tric­ity Tar­iff Re­bate Ad­just­ment” was aired on July 19. Se­condly, the sup­ply is done in a cost ef­fec­tive man­ner while the tar­iff is set at a rea­son­able rate. And thirdly, the safe sup­ply of elec­tric­ity.

In ad­di­tion, we ad­vise the gov­ern­ment on the de­vel­op­ment of the elec­tric­ity sup­ply in­dus­try, as well as pro­mote the use of smart en­ergy among con­sumers.

The mech­a­nism that we are dis­cussing to­day is known as the ICPT mech­a­nism.

It is part of the New Elec­tric­ity Pol­icy Ap­praisal Frame­work known as the In­cen­tive-Based Reg­u­la­tion (IBR), which was ap­proved by the gov­ern­ment and im­ple­mented since Jan­uary 2014.

Through the IBR mech­a­nism, we ex­am­ine the ac­tual cost of gen­er­at­ing elec­tric­ity every six months.

How­ever, this time around, the Min­is­ter (of En­ergy, Green Tech­nol­ogy and Wa­ter) an­nounced on June 30 that the gov­ern­ment would spend RM1.3 bil­lion to en­sure that the cur­rent tar­iff rate re­mains un­changed.

Hence, what we will re­view in the next six months is the ac­tual cost com­pared with the base tar­iff cost that was set in Jan­uary 2014.

From this per­spec­tive, there has been an in­crease in fuel prices that we should pass on to con­sumers, but the gov­ern­ment had ab­sorbed it.

In ad­di­tion, un­der the sec­ond com­po­nent, the gov­ern­ment has agreed to main­tain the cur­rent re­bate rate of 1.52 sen/kWh (kilo­Watt hour) per unit. In short, what we can say is that con­sumers will not see any in­crease in elec­tric­ity bills by us­ing the same amount of kilo­watts.

We use the ap­pro­pri­ate fund (power pur­chase agree­ment (PPA) sav­ings fund) to cover th­ese ex­penses.

Let me sum up the com­po­nents. The first com­po­nent is called sur­charge.

The sur­charge is im­posed due to higher coal prices and the de­pre­ci­a­tion of the ring­git.

That means, when we set the base tar­iff in Jan­uary 2014, we fixed the coal price at US$87 (RM373) per tonne, but now with the de­pre­ci­a­tion of the ring­git, the cost of coal has in­creased, com­pared with the cur­rency ex­change at RM3.1 pre­vi­ously (first com­po­nent).

In ad­di­tion, we car­ried out a re­vi­sion of gas prices — a sub­sidy ra­tio­nal­i­sa­tion plan. We re­viewed the gas price of RM1.50 (per mmBTU) every six months, so that re­sulted in the cost of en­ergy sup­ply to in­crease between Jan­uary and June this year.

Se­condly, we main­tained the re­bate. We re­tained the 1.52 sen re­bate and it costs RM780 mil­lion. So, with th­ese two com­po­nents (sur­charge and main­tain­ing the re­bate), that is amounted to an en­tire re­bate of 2.54 sen/kWh per unit.

We have been ne­go­ti­at­ing with IPPs. When we ne­go­ti­ate, there are sav­ings we can take back be­cause at the time, we know that most of the first gen­er­a­tion IPPs were earn­ing slightly higher prof­its. Based on this con­cept, we used the money to off­set the costs.


The IBR mech­a­nism will be re­viewed every three years. Its ob­jec­tive is to en­sure that the elec­tric­ity tar­iff is fixed at a rea­son­able rate.

Mar­linda Mohd Rosli

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