The electrical energy surcharge defined

COMMERCIAL and industrial (C&I) customers of electrical energy have questioned why Tenaga Nasional Bhd (TNB) ought to impose a surcharge on them following the approval of tariff setting for 2022 to 2024.

Many additionally query the necessity to use surcharges from C&I customers to re-invest into the system and grid, and in addition if the surcharge, which is definitely a pass-through mechanism, interprets into the next income for TNB.

Truly, TNB doesn’t make the most of the surcharge to re-invest and the surcharge doesn’t translate into increased income for TNB.

Whereas depleting assets are being utilized to help rebates for home customers, C&I prospects that had beforehand obtained some reductions, need to shoulder the pass-through prices.

Why cannot TNB take in the upper prices?

TNB must be financially sturdy to tackle investments that won’t solely help the power transition agenda but additionally reshape it.

The surcharge of three.7sen/Kwh imposed on C&I prospects, underneath the imbalance value pass-through (ICPT) mechanism, is on the again of a rise in gasoline prices of RM1.67bil from July to December 2021.

This was as the typical relevant coal costs skyrocketed and touched US$200 (RM838) per tonne within the interval.

The ICPT mechanism permits TNB to replicate will increase or reductions in gasoline and different generation-related prices within the electrical energy tariff each six months.

In instances of decrease world gasoline costs and era prices, financial savings will probably be returned to the rakyat within the type of an ICPT rebate.

Larger world gasoline costs and era prices will probably be handed by means of to the rakyat within the type of an ICPT surcharge.

In the meantime, an ICPT rebate of two sen/kWh for home prospects was maintained.

The federal government has used RM715mil from Kumpulan Wang Industri Elektrik (KWIE) to keep up this rebate for home customers.

However KWIE is unable to cushion the blow on C&I prospects, as its funds are depleting, after getting used to fund electrical energy reductions throughout the pandemic in 2020 and 2021.

For the reason that implementation of the ICPT in 2015, C&I prospects had loved numerous rebates from financial savings in gasoline and era value.

Of the overall rebate of RM8.5bil, C&I prospects had already obtained RM6.6bil.

For C&I prospects, the Covid Aid Bundle in 2020 and 2021 had comprised a:

> 5% low cost to small and medium enterprises underneath the business, industrial and agricultural tariff from July 1 to Sept 30, 2021.

> 10% low cost to 6 chosen sectors till Dec 31, 2021.

For the brief time period, ICPT changes each six months for gasoline value actions and era value will impression C&I prospects.

The rise in gasoline costs is a world phenomenon, pushed by regional provide and tightness in demand.

That is amid a collection of disruptions and provide cut-offs in key producing international locations in addition to geopolitical tensions.

Coal costs are persistently at excessive ranges as world coal provide tries to meet up with the rise in demand, following the restoration from the pandemic.

Newcastle index coal costs have risen to close document ranges, increased than the height in October 2021, and can proceed to be elevated.

This is because of provide tightness attributable to Indonesia’s export ban, logistical constraints and weather-related disruptions.

On March 2, 2022, the Newcastle 6000 kcal/kg coal value index recorded an all-time excessive at US$440 (RM1,845) per tonne on issues over geopolitical tensions between Russia and Ukraine.

This battle has the potential to disrupt the worldwide motion of power commodities together with crude oil, gasoline and coal.

As of March 1, 2022, a minimum of two of China’s largest state-owned banks have restricted financing for Russian commodities.

Russia is the world’s largest exporter of thermal coal and gasoline; that is more likely to tighten world seaborne markets, and may have spillover results in addition to additional jack up the costs of coal and liquefied pure gasoline.

Based mostly on the present market motion, Brent oil value had, for the primary time since 2014, surpassed US$100 (RM419) per barrel on the finish of February.

This spectacular oil value rally is because of issues over the Russian-Ukraine disaster, business strikes to chop again on manufacturing throughout the pandemic and management of provide by main producers.

Due to this fact, it’s anticipated that the facility sector will probably be paying the next gasoline value, which additionally contributes to further era value.

Electrical energy era value in Peninsular Malaysia accounts for 65% of the bottom tariff, with gasoline value forming the most important element.

A slight change in coal and gasoline costs may have direct impression on era value and therefore, the tariff to customers.

“If the upper prices will not be handed by means of to prospects, TNB’s earnings will be simply diminished, whereas nationwide electrical energy provide could also be jeopardised,” mentioned TNB CEO Datuk Baharin Din.

TNB could stop to speculate into sustaining and increasing the electrical energy grid, thus impacting the reliability of electrical energy provide.

It could additionally impression TNB’s ecosystem and help of native distributors whereas traders might doubtlessly lose confidence within the nation’s coverage and framework.

TNB is utilizing most of its earnings to make sure cashflow and in addition reinvest into the system and grid.

“We don’t get funding from the federal government, our electrical energy gross sales will fund our investments,” mentioned Baharin.

TNB requires a considerable amount of capital expenditure and big investments on land for transmission towers, substations and different excessive value buildings.

Power transition entails the transformation of the worldwide power sector from fossil-based to zero-carbon by the second half of this century.

TNB performs an vital function in guaranteeing that the nation’s electrical energy infrastructure is future prepared.

It has contributed in direction of low-carbon era by means of its participation in massive scale photo voltaic applications.

The Inexperienced Electrical energy Tariff and the Malaysia Inexperienced Attribute Monitoring System have been launched to respectively allow subscription to inexperienced power from the grid, and create a renewable power (RE) market based mostly on RE certificates which turbines can promote to prospects.

Consequently, the group has seen utility scale photo voltaic, which is massive scale era of electrical energy by means of concentrated solar energy, attain value parity with pure gasoline.

The rise in gasoline costs is because of extra demand whereas current occasions have precipitated the worldwide costs of coal to escalate.

For TNB, it’s crucial to develop the utilization of RE and wean away from coal, however within the transition, it has to face increased prices of gasoline.

Shifting ahead, this pattern of excessive gasoline costs will make it tough for the federal government to revert to a rebate place.

Yap Leng Kuen is a former SarBiz editor. The views expressed listed below are the author’s personal.


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