TNB may get an electricity tariff hike early next year when the Government reviews gas prices in January 2009.
With the previous gas price review on July 1 2009 turning out to be a non-event as the Cabinet did not approve the new price, the upcoming gas price review in January 2010 is overdue.
Industry observers think the Government may raise the price of gas with an associated electricity tariff hike to ensure a continued reduction of subsidies, although currently unable to make an estimate of the quantum of increase.
At the current oil price of US$66 per barrel, the reference price of gas would come in at around RM26.50 per million British Thermal Unit (mmBTU).
With the Government originally planning to cut its subsidy on electricity generation by gas to zero from 70% over 15 years, this would translate into a theoretical price of RM9.30 to RM10.60 per mmBTU for gas used in power generation. This theoretical price is still lower than the present RM14.31 per mmBTU.
The government may wish to be more aggressive in cutting back on subsidies or may be projecting a higher price of oil for 2010.
Any electricity tariff increase by TNB would build in a buffer to allow for the possibility of further increases in coal price and should in general be positive for its margins.
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