Wednesday, 11 December 2013

Electricity Tariff Hike! Is TNB To Be Blamed?

Ever since the announcement of the recent Electricity Tariff Hike by 0.0499/kWhour, there's been mass displeasure by many Malaysian towards TNB as a company. Such was the furor generated by the hike that many Malaysians including the Youth Chief of a certain ruling party joined in to lambaste the utility company, alleging them of hiking the tariff to increase profit.

Meanwhile on the internet, you can find also find open criticism of the Tariff Hike such as from this Facebook group created with the name "Anti TNB Naikkan Harga".

The funny thing about the group is that members are now posting advertisement marketing products instead of discussing on how to manage the tariff hike.

Not forgetting anti-TNB propaganda images such as this:

or this

While all the above served to illicit further hate among Malaysians towards the utility company, it does make me wonder if this recent tariff hike was meant for the benefit of the utility company?

Now if we look at things logically, for TNB to push through a tariff hike proposal through the Parliament, they would require an extremely strong justification for it to be debated. While the general perception of the society is that the tariff hike will increase the company's profit, would that reasoning be used as a logical justification after a series of hikes ranging from petrol to sugar pricing recently.

While I myself dislike the fact I might have to pay more for my electricity consumption, I believe we need to further understand the real reason behind the tariff hike. It sounds ridiculous to jump into the bandwagon of people screaming for blood and slandering a company that has continuously ensure reliable electricity supply to our homes. 

Actual Reasons for Tariff Hike:
1) Hike needed to cater for capital expenditure

Despite the misleading headlines reported by TheStaron the 7th of December 2013, the contents of the article state the following:

As stated in the article, with TNB's capital expenditure (money spent on building assets such as power stations, transmission towers, substations, etc) reaching RM7 billion in 2012, the net profit of RM4.2 billion seems rather insufficient for a so called "profitable" company. With profits proving insufficient to cover the expenditure of improving electricity supply, what else can any company do apart from turning to loans in order to cater the deficit. 

Year by year, consumers continue to seek for zero interruption of electricity supply yet demanding to pay the same tariff amount. However, can any utility company be able to meet to such demands without incurring expenditure on maintenance, expansion, upgrading and replacing old asset? 

2) The money from the Tariff Hike does not go to TNB alone.
A peek at TNB's company website indicates the following:

The point being that the biggest reason for the Tariff Hike is due to the Government's Subsidy Rationalization Program. You might or might not know that the fuel supplied by Petronas to TNB in order to generate electricity is largely subsidized by the Government in an effort to ensure low tariff over the years. 

Similar to the reason behind the petrol price increase, the subsidy for fuel has taken its toll with the present Government debt standing at exceeding RM500 billion. Reduction on fuel subsidy was first witnessed by Malaysians through petrol prices increase of 20cents/liter a few months ago. The reduction of subsidy on fuel used by TNB to generate electricity is all but another part of the Government initiative to reduce on its expenditure. 

However, TNB being the only entity providing electrical supply to consumers was used as many would term as a scapegoat by Malaysians. The fact is from the 0.0499/kWhour hike, 82% of that income goes to the Government while the remaining 18% (0.009/kWhour) is for TNB to supplement its capital expenditure.

Despite the tariff hike, the current Government is still subsidizing approximately 14billion per year on fuel. 

Some readers might see this post as pro TNB or pro Government, which I am not. The entire purpose of this post is to discover the truth behind the tariff hike and eliminate the misconception many have towards  a company that has served us faithfully throughout the years.

Obviously there will be the occasional black out here and there which is a norm for any utility company in any country. Yet I choose to believe that TNB as a whole will continuously improve on their service delivery for Malaysians. 

On the other hand, let us not forget that as paying consumers, we have every right to demand for fast response when there's an interruption or when we need a new meter installed.

Cheers and Happy Investing!

P.s : If a certain Youth Chief is criticizing the tariff hike which was initiated by his own ruling certainly tells us a lot huh...

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