Thursday, August 11, 2011

Power tariff restructuring - Some win, some lose, and some are losing big time

The sweeping statement by SESB regarding the recent tariff rate increase is somewhat misleading, and to some extent disappointing even if one can understand the justification for the restructuring.

Granted, the more-or-less 75% domestic consumers are safeguarded. Some 70,500 consumers even get kind of pleasant surprise as a result of the exercise, they stand to pay less than the amount they are currently paying.

Those who are currently paying a monthly bill of RM20.00 and below continue to enjoy the rebate from the government. In other words they enjoy electricity for free until further notice.

The electricity supply provider, however, FAILED to mention the painful fact that there would be certain consumers (especially Commercial and Industrial sectors) that would suffer an increase of as high as 45% in energy cost. Now that's what I call HUGE jump! I have few case studies and this is exactly what I found out.

Few weeks ago I found myself in the wrong place at the right time to be sitting among journalists in a press conference. During the briefing, SESB's Managing Director, Datuk Ir. Baharin Din explained that:

The cost of producing 1 (one) unit of electricity in Sabah is -

75.54 cent - without subsidy on gas by Petronas, and
44.60 cent - without government subsidy on fuel.
31.69 cent - WITH govt subsidy.

How much does SESB charge consumers for each unit of electricity? That's 29.25 cent on average. From every angle one look at it, it is a losing business model. But, should it be that way?

Ir. Baharin further explained that even with the revision of tariff rates, the utility company is still not making money yet and it still need the assistance from the government to keep going.

Baharin Din press confrnce800
Ir. Baharin Din explaining the tariff restructuring to journalist

In the water industry there is a term Non-Revenue Water (NRW) to denote water that is lost between point of production and the consumer's tap. Sabah's NRW is currently among the highest in Malaysia. Let's not let SESB fall in the same pit as the Water supply. I recon that SESB's immediate challenge is the non-revenue electricity (if I can call it that) in the form of, or due to
  • power theft

  • equipment/cable theft

  • frequent power outage

  • ageing equipment

  • human resource restructuring
While calling for human resource restructuring may not be justified (and it may not even be an issue), the first four are factual. In fact, if one compares SESB's situation to SESCO and TNB, it is still lagging behind in terms of managing the above.

Summary of SESB Tariff increase WMARK
Table 1: Summary of the impact of SESB electricity tariff revision on consumers.

I mentioned earlier that some consumers (such as industry players) are affected by increase of power cost by more than 40%. The following is a typical scenario:

Company XYZ is taking supply at low voltage and is consuming 320,000 kWh of energy every month with Maximum Demand of 500kW.

Prior to July 15, 2011 Company XYZ would be categorised under Tariff ID2:
MaxDemand - RM7,500.00 (500 x RM15.00)
Energy Usage - RM64,000.00 (320,000 x RM0.20)

After July 15, 2011 Company XYZ is re-classified to Tariff ID1 (due to new criteria):
MaxDemand - none (no M.Demand charges)
Energy Usage - RM102,400 (320,000 x RM0.32)

Increase = RM30,900.00 or 43.2%

That is RM370,800 annually. Maybe the boss would think twice now about giving out bonus this year end. Sadly, this could be true for many enterprises.

The bigger industrial consumers do have associations of their own. They should bring their issues up to SESB through special meeting and or dialogue.

For your reference, check out the new rates you are paying in New Tariff Book. If the link is not working or is slow in downloading, check the simplified table here.

1 comment:

lina@happy family said...

It's a new knowledge for me.
Thanks for dropping by...