‘ADJUSTMENT REFLECTS FUEL PRICES’
TNB supports govt decision to continue mechanism, says it will benefit consumers
TENAGA Nasional Bhd (TNB) said the government’s decision to adjust the Imbalance Cost PassThrough (ICPT) mechanism reflects the actual decline in global fuel prices for the past six months.
From January to last month, fuel costs had fallen in tandem with the decline in actual fuel prices below the benchmark fuel prices set in the base tariff for Regulatory Period 2 (RP2) from 2018 to this year, said TNB president and chief executive officer Datuk Seri Amir Hamzah Azizan.
The government on Tuesday decided to continue the ICPT in the second half but will adjust the power surcharge under the mechanism.
This will result in no electricity surcharge or rebate on non-domestic (i.e. commercial and industrial) customers compared to a surcharge of two sen per kilowatt hour (kWh) in the first half of this year.
For the second half, the average base tariff will remain unchanged at 39.45 sen per kWh.
Amir Hamzah said in a statement yesterday the average applicable coal price for January to last month stood at US$69.5 per tonne compared with the benchmark coal price set in the base tariff at US$75 per tonne.
Gas price for the same period stood at RM26.6 per one million British Thermal Units (mmBTU), which is lower than the benchmark gas price set in the base tariff at RM27.20/mmBTU.
He said the ICPT adjustment ensured consumers would continue to benefit from a transparent and fair electricity price.
“We are supportive of the decision to continue with the ICPT, which is a mechanism that has served the industry well since 2014, and remains relevant in a volatile fuel-price environment.”
Public Investment Bank Bhd (PublicInvest) said TNB was still shielded from exposure to fluctuations in fuel and generation costs despite the ICPT surcharge reduction.
It said any further increase in electricity costs would be addressed by the ICPT mechanism every six months, hence resulting in neutral impacts to TNB’s earnings.
It said TNB had expected the overall electricity consumption for the year to drop between seven and 15 per cent year-on-year, mainly due to a slowdown in the commercial sector.
“Nevertheless, TNB’s earnings remain intact where the electricity demand growth under its regulated business (i.e. revenue-cap entities) is guaranteed at 1.8 to two per cent.
“As at the financial year 2019, regulated business accounts for 83 per cent of TNB’s core net profit,” it said.
PublicInvest said TNB had proposed to the Energy Commission to defer the RP3 by another year by maintaining the same terms of the RP2 next year. The RP2 is due to end in December.
PublicInvest said the deferment was meant to allow for a stable market and better assumptions.
“We believe this is positive for TNB where the return for regulated business will be maintained at 7.3 per cent weighted average cost of capital as in RP2 compared with 7.5 per cent in RP1,” it added.