Tuesday, January 25, 2011

Overpriced Electricity Despite Billions in Subsidies

Based on subsidies given to the IPPs, the BN government should immediately reduce our electricity rates by at least 17%

The Barisan Nasional government provided between RM6.2 billion to RM 8.1 billion of gas subsidies to the Independent Power Producers annually over the past 5 years.

These subsidies however did not reach the man-in-the- street in terms of cheaper electricity prices. On the other hand, these subsidies allow the IPPs to make billions additional profits per annum.

The IPPs have often refuted the fact that the subsidies benefited them and they are "passed through" to the consumers.

However a comparison of electricity prices in the region based on subsidies provided and the types of fuel used clearly shows that Malaysia is relatively much more expensive.

A very good example is Thailand where 70% of the fuel used is natural gas just like Malaysia.

When we compare the electricity tariffs between the two countries, Malaysia's average rate of RM31.31/kWh is only 8% cheaper than that of Thailand's at RM34.11/kWh. Worse, the commercial electricity tariff in Thailand is RM38.01/kWh only marginally more expensive compared to RM37.85/kWh in Malaysia. This is despite the fact that IPPs in Malaysia received subsidised gas which is a whopping 53.7% cheaper than in Thailand.

Based on Thailand's IPP efficiency and productivity, given the current subsidies the Malaysian IPPs receive and that fuel cost represents 40% of a typical power producer, the appropriate electricity tariff in Malaysia should be at least 17% cheaper than the current rates, or at RM26.7/kWh instead of RM31.31/kWh.

The fact that the BN government has decided to reduce subsidies of basic goods to the rakyat, resulting in significant price hikes, such as 55% for sugar but steadfastly refused to restructure the subsidies for the IPPs, mostly owned by BN cronies proves that BN does not have the interest of the rakyat at heart.

Worse, despite the overpriced electricity rates today on top of the billions of subsidies extended to the IPPs, PEMANDU has proposed that electricity rates be increased every 6 months!

Together with the hefty water price hikes in Johor by up to 63% due to lopsided privatisation deals, BN has long chosen to abandon the rakyat in the interest of its cronies.

The Tenang electorate must take this one-in-a-lifetime opportunity to take a stand and express Malaysians' frustration with the intolerable increase and artificially inflated prices for basic goods and services.
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