KUALA LUMPUR (Dec 22): The government has kept electricity tariffs unchanged for commercial and industrial customers for the first half of 2024 (1H2024) but widened its targeted subsidy mechanism by removing a rebate for households with monthly electricity consumption worth RM220 and above.

In the revised subsidy mechanism, households consuming between 600 kilowatt hour (kWh) to 1,500 kWh of electricity monthly, translating to a bill of between RM220 and RM707, will not qualify for the two sen per kWh rebate. The rebate will instead continue for households with lower electricity consumption.

According to the Energy Commission, the elimination of the rebate will lead to an increase in the monthly bills of 1.2 million affected households by 4.2% to 6%, which amounts to an additional RM12 to RM32.

However, these households will continue to receive a discount by not having to pay the 10 sen per kWh surcharge, which has been applied since July 2023 to households consuming over 1,500 kWh of electricity per month.

In line with the government's efforts to expand targeted assistance programmes, the recent adjustment will continue the two sen per kWh rebate for seven million households with monthly bills below RM220, leaving 85% of households in Peninsular Malaysia unaffected while keeping business tariffs stable to avoid any increase in goods and services prices amid prevalent inflationary pressures and high fuel costs.

For non-household segments, low-voltage users (tariffs B and D), specific agriculture tariffs (H, H1 and H2), and water and sewerage operators continue to enjoy a low surcharge of 3.7 sen per kWh in the period.

Meanwhile, medium- and high-voltage users in the commercial and industrial segments also see surcharge unchanged at 17 sen per kWh.

RM1.9 bil in electricity bill discounts in 1H2024

While the tariffs saw minimal change, the government, through the Ministry of Finance, continues to provide electricity tariff subsidies, which totalled RM1.4 billion, for 1H2024.

This is on top of another RM538.77 million to subsidise the prices for public distribution licensees — owners of multi-tenanted premises which take a bulk supply of electricity from the grid — provided through the Electricity Industry Fund (KWIE), which gathers excess tariff collections when costs are low, and disburses them when costs are high to keep tariffs stable.

Hence, total subsidies for 1H2024 amounted to RM1.93 billion, which is lower than the RM5.2 billion seen in 2H2023, as costs of coal and gas have trended lower.

Notably, Malaysia’s electricity tariffs are revised twice a year under the imbalance cost pass-through (ICPT) mechanism.

The ICPT mechanism determines rebates or surcharges based on cost savings or increases during the prior six-month period to pass through fuel generation costs to consumers. This is currently determined against the benchmark fuel cost — of US$79 per MT (coal) and RM26 per mmBTU (Tier 1 regulated gas) for the first 800 mmscfd — projected under Regulatory Period 3 (RP3) (2022-2024).

While coal and gas prices have been trending downwards from recent highs, with average coal and gas prices falling to US$111.80 per tonne and RM44.90 per mmBTU in the third quarter of 2023, they remain elevated — higher than projected fuel prices which are used to calculate the base electricity tariff.

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