Tenaga ... July 2009

The electricity tariff review scheduled for this month (July 2009) has been delayed but end-users may have to brace themselves for higher rates not too long from now, according to Energy, Green Technology and Water Minister Datuk Peter Chin.

There was a likelihood that the next electricity tariff review would involve a rate hike. The principle of it is we are moving towards market rates which his referring to natural gas prices. Much of the electricity generated in Malaysia uses natural gas subsidised by the Government.

While 60% of power generated in the country comes from gas and 30% from coal, in terms of cost, coal takes up 60% of fuel cost while gas comprises 40%.

It is known that Tenaga Nasional Bhd (TNB) submitted its proposal for a tariff review at end-April 2009 and that a decision on the matter will be made by the Government this month or next.

In the energy value chain in Malaysia, the Government subsidises the natural gas element, which constitutes more than 67% of the total electricity generation mix, while coal, which is not subsidised, represents about 25% of the total electricity generation mix.

The Government would eventually have to allow the prices of natural gas to float according to market rates, which would mean higher gas prices and inevitably lead to higher electricity rates.

In March 2009, TNB’s average electricity tariff was reduced by 3.7% following a 25% reduction in the price of natural gas (supplied to the power sector) from RM14.31 to RM10.70 per mmbtu (million British thermal units).

TNB president and CEO Datuk Seri Che Khalib Mohamad Noh was recently quoted as saying that TNB had been absorbing the additional costs and had not been passing it on to consumers even though its profits were being eroded.

Meanwhile, TNB and Sarawak Energy Bhd signed a Share Sale Agreement with Sime Darby Energy Sdn Bhd (SDESB) in relation to their acquisition of 100 per cent interest in Sime Darby Power Link Sdn Bhd (SDPLSB).

The purchase consideration was RM15.6 million plus an adjustment amount to cater for additional cash advances made by SDESB to SDPLSB being payment for consultants before the completion of the deal.

SDPLSB is a special purpose vehicle established by SDESB to undertake the development and operation of transmission facilities to supply electricity from Sarawak to Sabah and Sarawak and Peninsular Malaysia.

TNB and SEB will each hold 50 per cent of the issued and fully paid-up capital of SDPLSB, while it is also intended that the Minister of Finance Incorporated participate in the equity of SDPLSB at the appropriate juncture.

By acquiring SDPLSB, TNB and SEB will have a time factor advantage and facilitate a seamless transition for the on-going studies and regulatory approval processes initiated by SDPLSB some 12 months ago.

The acquisition of SDPLSB will allow TNB and SEB to gain access and leverage on the preliminary studies conducted on the project including the on-going EIA on the Indonesian territorial waters.

77 per cent of the undersea HVDC transmission cable is expected to transverse across Indonesian territorial waters. It will connect the Bakun Hydroelectric Plant in Sarawak and Bentong in Pahang.

Related:-
TENAGA ... May 09
Tenaga ... March 2009
Tenaga ... Jan 2009
Tenaga (TNB)
Tenaga (2) ... Oct 2008
Tenaga (1)... Oct 2008