Home 2006: 4 Electricity tariff hike sparks concern

Electricity tariff hike sparks concern

Follow us on our Malay and English WhatsApp, Telegram, Instagram, Tiktok and Youtube channels.

Egged on by investors, the government is allowing a tariff hike even though TNB and the IPPs are posting huge profits, says Ong Eu Soon.

When the public reacted with furore after the recent oil price hike, the government tried to assure the people that the oil price hike would not cause inflation.

The Prime Minister even pondered aloud, asking why there should be any price increases following the oil price hike: “I don’t understand why prices of goods increase?” The government even pledged to go all out to curb inflationary pressures following the oil price hike.

Betting on the short memory of Malaysians, Energy, Water and Communications Minister Dr Lim Keng Yaik announced on 24 May that the government will allow national power firm Tenaga Nasional Bhd to raise electricity tariffs from June 2006 — though small electricity consumers would not be affected..

Citing the spiralling cost of crude oil used to generate power as the reason for the tariff hike, Lim had earlier claimed that if the current tariffs were to be maintained, TNB would go bankrupt. The minister further noted that even with the new rates, the tariffs would still be among the lowest in the region.  

Soaring profits

Is the tariff hike justified?  It was reported that TNB’s profit for 2005 was up 57 per cent, with the company earning RM1.28 billion, compared with RM813.7 million a year earlier. (Source: Reuters, 25 Oct 2005).  The higher profit was due to forex gains and higher sales of electricity. According to a news report, TNB is expected to spend RM1.7 billion on fuel in the first half of this year against RM1.5 billion for the same period last year.  (Source: Business Times, 6 May 2006). This would mean TNB has to bear an additional RM400 million on fuel. But if we look at the profit of RM1.28 billion, the additional RM 400 million is not going to make TNB bankrupt.

Judging from the persistent strengthening of the ringgit over the past six months, the ringgit is expected to further rise against the US dollar – in line with the overall weakening of the US dollar – over the next six months. With Bank Negara relaxing its grip on exchange management to tackle the inflationary impact from rising oil prices on the local economy, TNB stands to gain further from forex gains. A 1 per cent appreciation in the ringgit translates into a RM150 million gain for TNB. Of TNB’s total debt of RM29.8 billion, RM13.7 billion or 46 per cent are foreign denominated debts (Source: StarBiz, May 6 2006). The local currency has appreciated by around 5 per cent, which means TNB has gained a total of RM750 million. It is clear that the increase in the cost on fuel did not outweigh the forex gain. The issue of TNB going bankrupt if the present tariff rate is to be maintained is clearly unfounded, misleading and factually erroneous. In the words of Lim Keng Yaik, the hike in fuel costs is just a mosquito bite for TNB.

Exorbitant IPP profits

If TNB is serious in boosting efficiency and productivity and in improving cost management, it should first target big power users with unpaid electricity bills, which run into more than a billion.  It should reject outright the slipshod power purchase agreements with independent power producers (IPPs), which allow these IPPs to piggyback on TNB and rake in exorbitant profits to the detriment of TNB.

When news of a proposed tariff hike was first announced, research houses immediately reacted by upgrading TNB stock.  Based on a forecast rate increase of 8 per cent for TNB, TA Securities upgraded TNB’s 2006 earnings by 5.3 per cent and 19.8 per cent for 2007. The research house also raised its target price for the stock to RM10.50, based on 18.9 times the 2007 earnings per share of 55.6 sen for the financial year 2007. It maintains a ‘buy” call on the stock.

According to CIMB Securities, every 1 per cent net increase in tariff rates would translate into an increase in earnings per share of 7-8 per cent (Source: Business Times, 6 May 2006).  The buoyant mood among investors reveals to us how much TNB stands to gain from the tariff hike.  This is a typical example of the indecent quest for profits and protectionism of big corporations with total disregard to the interest of the people.


Malaysia’s tariff rate was the second lowest in the region after Taiwan. Imagine the Taiwanese government telling its people to pay more just because its tariff rate is the lowest. The Taiwanese government would be voted out from office if it dared to suggest to its people to pay more just for the benefit of government-linked corporations. Only in Bolehland can you imagine the unimaginable taking place.

If the government is truly capable, it should promote the fact that our electricity tariffs are among the lowest in the region to foreign investors. It should tell investors who intend to invest or who have already invested in China or India that we have plenty of cheap electricity while both those countries are facing energy crises as a result of rapid development. The government should persuade investors to invest in Malaysia with this competitive edge instead of constantly reminding Malaysians that we should pay more just because our tariffs are among the lowest.  

Time and again, the government has attempted to take the easy way out by passing on the cost of TNB’s mismanagement and its erroneous policies to the people. The decision to raise tariffs while TNB continues to chalk up sizeable profits is set to increase public discontent.


The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

AGENDA RAKYAT - Lima perkara utama
  1. Tegakkan maruah serta kualiti kehidupan rakyat
  2. Galakkan pembangunan saksama, lestari serta tangani krisis alam sekitar
  3. Raikan kerencaman dan keterangkuman
  4. Selamatkan demokrasi dan angkatkan keluhuran undang-undang
  5. Lawan rasuah dan kronisme
Support our work by making a donation. Tap to download the QR code below and scan this QR code from Gallery by using TnG e-wallet or most banking apps:
Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x