Tenaga - Power reforms

The reforms for the power sector will likely benefit Tenaga via the fuel pass through mechanism while the IPPs call for a level playing field in new power generation bids will be answered by the unbundling of Tenaga’s business units.

The catalyzed for the power reforms include the implementation of the FCPT mechanism, which is expected by end 2013. The main beneficiary of the industry reforms is Tenaga as the FCPT will allow it to recover its fuel costs through periodic tariffs adjustments.

Other reforms such as the continuation of FCPT and the implementation of the incentive based regulation are also expected by early 2014. The FCPT will be implemented which will likely result in an electricity tariff increase. This will allow Tenaga to recover its fuel costs every six months, which will bring the electricity tariff in line with market prices. The aim of the FCPT over the next four to five years from 2013 is to match energy costs with market prices.

The likelihood of delays in implementation reforms is low as the government’s political will is strong.