TNB says cost increase due to rising coal prices, govt to bear RM1.30 bln cost

KUALA LUMPUR: Utility company, Tenaga Nasional Bhd (TNB), yesterday announced that the government will bear a total cost of RM1.303 billion with the Imbalance Cost Pass-Through (ICPT) subsidy of 2.54 sen/kWh, effective July 1, 2017, until Dec 31, 2017.

In a filing to Bursa Malaysia, TNB said the actual imbalance cost for the January to June 2017 period of RM523.23 million, resulted in a surcharge of 1.02 sen/kWh, which was mainly due to rising coal prices in the global market and the impact of foreign exchange rates on the ringgit.

Additional gas cost of RM280 million, following the government’s subsidy rationalisation plan and decision to further increase the piped gas price by RM1.50/mmBTU to the power sector from the current RM21.20/mmBTU to RM22.70/ mmBTU, was also a contributing factor, it said.

The new gas price of RM22.70/ mmBTU will be effective from July 1, 2017.

The cost to continue the current ICPT rebate of 1.52 sen/kWh would amount to RM780 million.

The government would fund the RM1.303 billion by utilising the Power Purchase Agreement (PPA) Savings Fund, which is a fund set-up to accumulate savings from the re-negotiation of power purchase agreements with the first generation independent power producers.

The objective of the PPA savings fund was to cushion the impact on tariffs to the customers due to the fluctuation in fuel prices, it said.

This 1.52 sen/kWh rebate would be applicable to all consumers, except domestic consumers, with monthly consumption of 300 kWh and below.

The ICPT is a mechanism approved by the government and implemented by the Energy Commission, since Jan 1, 2014, as part of a wider regulatory reform called the Incentive Based Regulation.

The ICPT mechanism allowed TNB to reflect changes in fuel and generation costs in consumer’s electricity tariff every six months, subject to government’ s decision and approval.

TNB also noted that the impact of the ICPT implementation was neutral on TNB and would not have any effect on the business operations and financial position.