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What is Imbalance Cost Pass-Through (ICPT)?

Under Incentive Based Regulation (IBR) tariff setting mechanism (beginning 1st January 2014), the base electricity tariff (38.53 sen/kWh) is set for every 3 year and ICPT which is difference in fuel cost (energy recources price) and other generation costs will be passed to electricity tariff every six months. Under ICPT, if fuel cost rises above the values used during tariff setting in the current 6 months, the additional fuel cost will be passed through in the following 6 months as SURCHARGE. If the fuel cost reduces in the current 6 months, the savings from the fuel cost reduction will be REBATED in the following 6 months.

The current tariff cycle begins from 1st January 2018 until 31st December 2020 with base tariff 39.45 sen/kWh and the current surcharge (1.35 sen/kWh) is continued until end of February 2019. Beginning 1st March 2019 until 30th June 2019, new surcharge rate of 2.55 sen/kWh will be imposed for non-domestic sector. The surcharge for domestic sector are absorbed using Kumpulan Wang Industri Elektrik (KWIE) fund.

Is Tariff Setting and ICPT Mechanism Abused by Energy Commission?

Kumpulan Wang Industri Elektrik (KWIE) is a fund to keep savings from generation costs as well as other possible cost savings under the new tariff setting mechanism. This fund is contributed by domestic and non-domestic electricity consumers. However, the ICPT mechanism beginning 2018 does not see a fair implementation of surcharge mechanism. When KWIE is contributed by all types of consumers, why KWIE fund is used to cushion only domestic consumers?

Based on Performance and Statistical Information on Electricity Supply Industry In Malaysia 2016, domestic consumers only consume 23.36% of electricity generated in Peninsular Malaysia. A non-prorated surcharge implementation will cause a higher impact to industrial and commercial sector and eventually causing higher living cost. Business consumers will definitely pass the additional cost to their goods and services as there is no mechanism developed by Energy Commission to monitor profiteering due to tariff adjustments with relevant agencies.

Moreover, ICPT and tariff adjustment announcement should be done in the first week of June and December. If the non-domestic consumers needs 2 month lead, Energy Commission should announce the ICPT and tariff adjustment in first week of May and November. This is possible as natural gas and coal prices are determined in a 3 month cycle. Prorating either the surcharge or the rebate for 6 months is a fairer and smarter tariff implementation compared to what is announced first half of 2019.

Based on this, prices of goods and services for Chinese New Year should not be affected as the surcharge to non-domestic sector is maintained until end of Feb 2019. Is this the case? Furthermore, by pushing the increase of surcharge to begin on 1st March, Energy Commission is paving way for business community to use this as a reason to increase price of goods and services for the month of Ramadhan and Hari Raya festive season. Now, does Energy Commission have any plan to prevent increase of goods and services price for the month of Ramadhan and Hari Raya festive season?

Based on AWER's National Energy Security Survey (NESS) data, 69.94% of Malaysian would like to know how electricity tariff and fuel cost is determined and a majority of 73.87% of Malaysians opined that the government is NOT transparent in determining the electricity tariff and fuel cost. Therefore, it is evident that Malaysians are seeking more information and transparency on how prices are fixed for electricity and fuel cost.

Hence, transparency is the key element to depoliticise tariff setting. Energy Commission failed to publish the KWIE accounts for every 6 months since 1 January 2014. We did notice attempt to report lower savings in ICPT by including “forward costing” of piped natural gas in the past. We urge the Federal Government to ensure Energy Commission publishes the accounts of KWIE fund for every 6 month beginning 1st January 2014 until now. KWIE fund must be reported publicly as it is consumers whom are paying for this fund.

Lastly, based on our grassroot programmes, we did notice that the consumers are able to accept cost fluctuation when they can see transparently how electricity tariff is impacted by various cost inputs. This further proves that, the Federal Government must ensure Energy Commission is transparent in electricity tariff setting.

Piarapakaran S.
Association of Water and Energy Research Malaysia (AWER)














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