SMALL and Medium Enterprises Association of Malaysia (SAMENTA) urged the Government not to hike up electricity tariff as many businesses are still struggling to recover from the COVID-19 induced economic downturn.
“We urge Prime Minister Datuk Seri Ismail Sabri Yaakob to intervene and rescue our ailing SMEs as he had promised before.
“If the hike must be allowed, then we urge the Cabinet to consider a far lower quantum of increment without affecting Tenaga Nasional Bhd’s (TNB) continued profitability or it’s ‘resilient performance’”, its chairman Datuk William Ng said, in a statement.
On Jan, the Energy Commission (EC) announced that it would retain the current base electricity tariff for all electricity users in Peninsular Malaysia throughout the Regulatory Period 3 (RP3) from Feb 1 to Dec 31, 2024.
However, it added that the Government would impose an electricity tariff surcharge of 3.7 sen per kilowatt hour (kWh) for non-domestic users for the February to June 2022 period, while maintaining a two sen rebate for domestic users.
The surcharge, imposed under the Imbalance Cost Pass-Through (ICPT) mechanism, was on the back of an increase in fuel costs of RM1.67 bil from July to December 2021, as coal prices touched US$200 (RM838) per tonne in the period, EC added.
“The sharp rise in coal prices in the market resulted in power generation costs rising by 45%, and caused a big impact on electricity tariff in the peninsula as coal makes up 59% of power generation fuel source.
“The rise in coal prices is out of the Government’s control as it is based on global prices,” The Edge reported EC as saying.
On that note, Ng said that the “surcharge under the Imbalance Cost Pass-Through mechanism”, nevertheless, is going affect SME’s recovery, affecting more than 1.6 million commercial and industrial users where they will be paying between 11.8% and 18.4% more for electricity.
He reminded the Government that for SMEs in the manufacturing sector, power supply is either the second or third largest cost factor behind raw materials and labour costs.
Bad timing
“A hike of up 18.4% in utility bill for a business that’s running at sub-10% margin could mean a reduction of between 20% and 40% of its profit margin, which could even mean making or losing money,” Ng stated.
While he could understand periodic review on electricity tariff, Ng said the timing of such adjustment was clearly out of touch from the current economic reality, especially when TNB reported 9.6% and 4.6% jump in revenue and earnings, respectively, for the nine months ending Sept 30, 2021.
“TNB CEO Datuk Baharin Din was quoted as saying that demand is expected to improve in the coming months and into this year as more economic activities open for business.
“So, by TNB’s own admission, it will be doing better in coming months. So, there is no reason for the steep hike, especially since it is aspiring to slash its reliance on coal in its portfolio from 45% in 2021 to 10% by 2035, with the costs of coal stock chiefly blamed for this decision for the steep hike,” Ng mentioned.
The business leader added that while SMEs are doing their best not to raise prices, the authorities must understand that most of them were operating at razor thin profit margin amid the pandemic.
“If the proposed hike happens, it will be difficult, if not impossible, for businesses to absorb the increased costs without passing them partially to the consumers, just like what TNB is doing,” Ng concluded. – Jan 30, 2022.
