Higher electricity tariffs in Malaysia a shock

Higher electricity tariffs in Malaysia a shock

AFTER weeks of speculation, the government confirmed it will hike electricity tariffs by at least 14.89 per cent, as part of continuing efforts to reduce its subsidy bill and rein in its budget deficit.

Business owners - who will be the most affected - and consumer advocates immediately called the tariff hike excessive, especially coming after increases in petrol, diesel and sugar prices.

The tariff hike will affect heavy users who consume at least 300 kilowatt hours (kwh) per month, usually businesses and larger households. These businesses are expected to pass on the cost to consumers. Some 70 per cent of domestic consumers will not be affected.

Even so, consumer groups complained that the higher tariffs continued a trend of the government making decisions without consulting the public. They noted that consumers are already to be hit with a new Goods and Services Tax - of 6 per cent - set to take effect in April 2015.

"It's time to move away from closed-door decision-making," said Datuk Paul Selvaraj, head of consumer advocacy group Fomca. "Just giving yearly cash handouts does not translate to social safety nets."

Yesterday, Energy, Green Technology and Water Minister Maximus Ongkili announced a 14.89 per cent increase for electricity rates in the peninsula, or up 4.99 sen (1.9 Singapore cents) to 38.53 sen per kwh. In Sabah and Labuan, the hike is 16.9 per cent to 34.52 sen per kwh, while Sarawak is unaffected.

The true electricity cost is 42 sen per kwh and the government subsidises the difference.

The new rates, effective on Jan 1 next year, will affect only consumers who use more than 300 kwh per month, or about RM115.

Even with the new tariffs, Datuk Seri Maximus said the government will continue to foot RM2.4 billion a year for electricity. The tariff hike comes after the government raised petrol and diesel prices, as well as sugar prices. But it will raise cash handouts to low-income households from next year.

After the May general election, Prime Minister Najib Razak has taken measures to rein in public spending. After years of spending more than it takes in, government debt is hovering at 53 per cent of gross domestic product, just shy of the government's self-imposed limit of 55 per cent.

The tariff hike had been anticipated for weeks after the government announced it wants to reduce its RM24.8 billion fuel subsidy bill by cutting subsidies to power producers next year, as part of a long-term subsidy rationalisation.

On Sept 2, the government cut subsidies for petrol and diesel for the first time in two years to save RM3.3 billion a year and abolished the sugar subsidy costing RM325 million annually.

Shares of Tenaga Nasional were suspended for the afternoon session pending the tariff announcement. In a statement to Bursa Malaysia yesterday, the power distributor said it expects commercial and industrial consumers to see an increase of about 16.85 per cent in power spending.

Business groups say they will weather the tariff increase by passing on their costs to consumers, potentially leading to more inflation soon, particularly when the GST kicks in.

"This will be a great burden. With so much increases including cutting petrol and sugar subsidies, we expect a spiralling Consumer Price Index and artificial inflation," said Mr Shamsuddin Bardan, chief of the 4,800-member Malaysian Employers Federation.


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