Electricity rates in Malaysia are expected to rise next year as Putrajaya plans to trim fuel subsidies for power producers in the first quarter of 2014, a business daily reported today.
The Malaysian Reserve said estimates show that electricity could rise as much as 19%, from 33.5 sen per kilowatt-hour to 40 sen per kilowatt-hour, if all the subsidies are removed.
The business paper quoted Ministry of Energy, Green Technology and Water secretary-general Datuk Loo Took Gee as saying that the reduction in fuel subsidies for the power sector is essential to stabilise the economy.
She said the government consulted with stakeholders in the energy sector and a new power tariff rate would be announced next year.
Government subsidies for electricity range between RM8 billion and RM12 billion a year. The prevailing tariff rate for electricity is 33.5 sen per kilowatt-hour (kwh).
Gas constitutes 50% of the fuel used for electricity generation while coal provides 40% and renewable energy makes up 2% in Malaysia. The remaining 8% comes from hydropower.
Higher gas prices have also made subsidies for electricity generation untenable. The situation is accentuated by state electricity company Tenaga Nasional having to import liquid natural gas (LNG), mainly from Australia.
If subsidies were removed, the new electric tariff will greatly burden the end users, critics say.
MyPower chief executive Datuk Abdul Razak Abdul Majid, however, said: "Many global studies have shown that continuous provision of subsidised gas or electricity over the long term weakens rather than strengthens the economy." – November 8, 2013.
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