FMM calls for more transparent power pricing

By Yow Hong Chieh

May 31, 2011

KUALA LUMPUR, May 31 — There must be greater transparency and predictability in energy pricing in view of uncompetitive tariffs and inefficient supply chains, the Federation of Malaysian Manufacturers (FMM) has said.

“The components and computation of the fuel pricing mechanism should... be publicised,” the federation said in a statement today.

FMM pointed out the Malaysian power sector had yet to translate its price advantage in fuel prices into more competitive electricity rates despite paying less for natural gas (RM13.70 per mmBtu) compared to Thailand (RM18.23), Singapore (RM43.32) and Indonesia (RM21.04).

“Despite the fuel price advantage, the cost of electricity in Malaysia following this hike is nearly at par with Thailand... If we compare with Thailand’s rate for low, medium and high voltage, Malaysia’s electricity tariff for all these categories is higher,” it said in a statement today.

FMM said there were also “operational inefficiencies and pricing rigidities” in the energy supply chain that have yet to be addressed, even while conceded that Tenaga Nasional Bhd (TNB) had reduced unplanned outages, transmission system minutes and system interruptions.

While the RM1 per mmBtu increase in natural gas prices to Gas Malaysia Sdn Bhd customers was reasonable and gradual, the subsequent RM3 per mmBtu hikes were a matter of “some concern” to the federation.

It urged the Economic Planning Unit (EPU) not to use fuel oil as a benchmark for market pricing natural gas and suggested that a fairer peg would be natural gas price excluding Bintulu at discounted rates.

“Malaysian industry should not be paying higher than the country’s export pricing for liquefied natural gas,” FMM said, adding that the cost of electricity should be capped below regional tariffs to keep local industry competitive.

FMM added that TNB should open it books to be benchmarked against other generators to insure operational inefficiencies are not passed on to consumers and that fuel price fluctuations should be averaged out like in Singapore.