Tenaga Nasional Berhad Annual Report 1997

Finally, TNB re-energised

The national power company is now back in the game with renewed interest from investors, following the long-awaited decision by the Government to raise the price of natural gas to the power sector and correspondingly allow for an electricity tariff hike.

To recap, the Government over the week announced a gas price hike to the power sector from RM10.70/mmbtu (million British thermal units) to RM13.70/mmbtu and an average electricity tariff hike of 7.12%, both of which took effect fromWednesday. The average tariff increase was composed of a 5.12% hike to reflect the new gas price and a 2% rise in base tariff for TNB to partly recover from the higher of cost of power supply since June 2006.

(The base tariff was originally due for revision in 2009, that is, three years after the last tariff review in 2006, but this had been deferred until now, even though the cost of electricity supply had been rising over the years.)

Another positive surprise announced in this latest round of electricity tariff review has been the re-introduction of a fuel cost pass-through (FCPT) mechanism, under which the fuel cost would be reviewed every six months and any changes due to variations in fuel prices be it for gas, coal or oil - would be passed through in the end-user tariff. This could certainly help ease TNB's burden of future rise in fuel costs.

Running out of gas

But more than just benefiting TNB and helping to alleviate the company's rising cost burden, the latest round of revisions in the prices of power and its related sources is widely seen as a constructive measure to address what TNB president and calls a “real” structural problem in the Malaysian electricity delivery system.

“We've been keeping our gas prices suppressed way below market prices for far too long that the price we have today is probably relevant 15 years ago, and as a result of our inaction in addressing the issue, there have been very few new investments in our country to develop new sources of energy,” he tells StarBizWeek.

The market price of natural gas has already risen to around RM40/mmbtu currently, and that goes to show how severely under-priced the country's gas price to the power sector is, even with the recent revision in prices.

According to Che Khalib, the volume of gas made available to Malaysia has remained unchanged for the last 15 years at around 2,000 million cubic feet per day (mmcfd) even though demand has been steadily rising over the years and has exceeded the threshold at present. This, he says, is mainly due to the distorted gas price in the country.

State of the environment in Malaysia, a compilation of selected papers presented at the CAP-SAM National Conference, State of the Malaysian Environment, 5-9 January 1996, Penang

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