How will the government deal with rising energy prices?
WITH a review of power tariffs slated for the end of June, there have been rising concerns over what to do.
The imbalance cost pass-through (ICPT) mechanism would take into account the higher energy costs, namely, the price of coal, in pricing the new tariffs. This has the industry players jockeying over how to divvy the cost increase in the generation of power between the different stakeholders.
“The issue at hand is who will pay. Will it be the consumer, government or power companies?” asks an analyst.
Essentially a fuel price pass-through, the ICPT allows Tenaga Nasional Bhd (TNB) to reflect changes – either an increase or a reduction – in fuel and other generation-related costs in determining electricity tariffs.
The mechanism, which was introduced in 2014, has played a key role in electricity production and the price we pay to turn on the lights.
A system similar to the ICPT has been adopted by other countries such as Australia, the UK and closer to home in Singapore, Thailand and the Philippines.
Locally, tariffs are assessed and adjusted every six months to ensure that electricity prices can adapt to changing fuel prices.
Under this mechanism, consumers had enjoyed RM6.3bil in rebates as at end-December 2017 due to the low cost of coal, which makes up over 50% of the cost of generating electricity.
However, since 2017, rising coal and gas prices have impacted the ICPT adjustments. As a result, a surcharge for businesses was introduced in July 2018.
For the period of January-June 2019, the national utility company has been allowed to continue implementing the ICPT mechanism.