Wednesday, January 8, 2014

Tenaga - cost pass through

The 15% electricity tariff hike in Peninsular Malaysia since Jan 1 2014 this year marked the beginning of a fuel cost-pass-through mechanism executed by Tenaga.

The Energy Commission and MyPower Corp, the regulators set up to drive reforms in the Malaysian electricity supply industry, decided that a full fuel cost-pass-through mechanism will be implemented eventually, which means consumers will ultimately have to bear with changes in the fuel cost.

The cost-pass-through mechanism is definitely positive for Tenaga which will reduce its earnings exposure risk to fuel costs making operational efficiency the key deciding factor to its bottom-line.

Under the plan set by MyPower, prices for piped gas, imported liquefied natural gas (LNG) and coal will be reviewed half-yearly while the base tariff will stay until 2017 for the next review.

While a review on the tariff structure is expected every six months, expect the existing tariff to stay at least throughout 2014 given the wave of subsidiy cuts, resulting in rising living cost and inflationary pressure.

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