PETALING JAYA: Industry players are up in arms over the proposed 14.2% hike in the base electricity tariff for Peninsular Malaysia come July 2025.
Malaysian Iron and Steel Industry Federation (Misif) and the Malaysian Plastics Manufacturers Association (MPMA) are the latest trade groups that voiced their deep concerns about the hike.
In a statement yesterday, Misif said any further increases in electricity tariffs will place additional strain on the industry, where energy costs are the second-largest expense after raw materials.
Higher electricity prices will erode the competitiveness of local producers, further inflating production costs, which will ultimately be passed on to consumers.
Misif also urges the government to adopt greater transparency in itemising and justifying the components that determine the base tariff to prevent excessive benefits to the sole utility supplier – Tenaga Nasional Bhd
(TNB).
Besides the electricity base tariff, Misif seeks clarity on the imbalance cost pass-through (ICPT) mechanism.
“Misif recognises that the ICPT mechanism is reviewed every six months and is primarily driven by fluctuations in generation costs, which are linked to energy prices.
“However, upon reviewing the data on the Energy Commission’s (EC) website, Misif had identified discrepancies between the applicable coal prices published by the EC and the ICPT adjustments reflected in recent surcharges.
“The reduction in ICPT charges did not drop in tandem with the significant drop in natural gas and applicable coal prices as published by the EC,” it said.
Earlier, the Federation of Malaysian Manufacturers objected to the planned increase in electricity tariffs, pointing out that the manufacturing sector was currently facing its toughest time with escalating costs and uncertainties.
Its president Tan Sri Soh Thian Lai urged the government to keep the industrial tariff rates unchanged so that Malaysia continues to be competitive as well as attractive to foreign investors.
“The government also needs to hold immediate dialogue with stakeholders on this matter,” said Soh.
Meanwhile, MPMA has appealed to TNB and the government to reconsider the base electricity tariff increase as the industry players are already grappling with mounting operational costs.
It pointed out that the plastics manufacturing sector is particularly vulnerable to electricity cost increases.
“As an energy-intensive industry, most players in the sector operate on razor-thin profit margins of just 3% to 6%,” the association said in a statement.
It added that the proposed base tariff hike attributed to TNB’s projected capital expenditure (capex) is unwarranted.
“The anticipated increase in electricity demand, especially from data centres and other high-consumption sectors, is expected to generate higher revenue streams for TNB.
“These revenues should be sufficient to offset the rising capex without imposing additional financial burdens on businesses and households,” MPMA said.
The association urged the government to expedite the opening of the transmission and distribution segments to competition.
“In advanced economies like the United States and United Kingdom, competition in these areas has driven efficiency, reduced costs, and enhanced overall competitiveness.
“Adopting a similar approach in Malaysia would provide businesses with a more equitable and sustainable power supply framework,” it explained.
Amid the strong objections from industry players, Kenanga Research said some business sectors will be more affected than others due to the electricity tariff hike.
In its sensitivity analysis, Kenanga Research pointed out that glove makers and seaports were relatively insulated compared with healthcare for the same percentage of change in the electricity cost.
“Depending on the energy source, industries such as manufacturing, or downstream oil and gas, could see degrees of differentiation as well with regard to the electricity bill impact.
“Citing an example, for glovemakers, whose energy consumption is more gas reliant for heating, the impact is not pronounced. Ports are a close second.”
All else being equal, every 5% increase in the energy cost leads to about a 2% impact to earnings or lower, according to the research house. All in, most of the sectors that disclose energy usage have about 2% to 8% of their cost base in electricity cost.
Meanwhile, real estate investment trusts see a higher mix of electricity cost to total cost, but they are able to partially pass through such costs to their tenants who will be billed for their share of consumption.
“While the consumer segment has a relatively large exposure in its cost base, its earnings sensitivity to electricity prices is not high.
“Vis-à-vis impact to the bottom line on a 5% increase in electricity cost, most sectors are only mildly impacted, notwithstanding in recent years the cost of electricity has escalated somewhat more than this,” it added.
Nevertheless, Kenanga Research said it is watching the broader impact as businesses such as small and medium enterprises (SMEs) may have to navigate other cost pressures such as minimum wage cost increases, as there have been calls as well for the surcharge to be lowered for medium-voltage SMEs.
The realities would also be more nuanced, such as banks for example, which could be affected by the general disposable income of borrowers etc, although its direct exposure to electricity is negligible.
As for consumers, Kenanga Research said they have “less to worry”.
“Domestic users that currently use more than 1,500kWh pay a 10 sen surcharge which affects 85,000 consumers (1% of total), and the more vulnerable segment has been protected via rebates.
“The government has said that the majority of consumers would not be burdened by the proposal.
“At present, those using up to 600kWh are entitled to a two sen rebate.”
Prime Minister Datuk Seri Anwar Ibrahim reaffirmed that the government will not allow electricity tariff hikes that would burden the public.
Anwar, who is also Finance Minister, said any tariff increase should not impact the general population but instead target the ultra-wealthy or industries generating extraordinary profits.
While it is believed that the majority of the residential consumers will not be directly affected by the tariff hike, concerns arise about the impact on electric vehicle (EV) owners.
With current EVs in the market priced about RM100,000 and above, the buyers are typically upper-middle income or high-income earners that may not be eligible for electricity subsidy.
Datuk Shahrol Azral Ibrahim Halmi, president of the Malaysian Electric Vehicle Owners’ Club, told StarBiz that it remains to be seen how the rise in base tariff will affect the different tariff bands for domestic and commercial customers.
“Any rise in electricity tariff will have varying impact to different groups of users - those who can charge at home and have rooftop solar will not be affected as much as folks who live in high-rise buildings and have to rely on public charging.
“As things stand today the “breakeven” cost of charging the recently launched Proton e.Mas 7 EV is RM1.12/kWh when compared with the fuel consumption of its sibling, the Proton X70.
“This means that the e.Mas 7’s owner will have savings over petrol, if their average charging cost is RM1.12/kWh or lower.”
Shahrol also noted that there are over 40 charging point operators in Malaysia today, and that they are already struggling to get decent returns on their investments.
“So, it is very likely that any additional rise in electricity cost will be passed on to EV users.”
“However, even at the highest domestic tariff, charging an EV at home is still cheaper than fuelling an equivalent petrol vehicle due to the EV’s inherently more efficient powertrain.”
