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FMM disappointed over non-reduction of ICPT surcharge for 1H2024

FMM In The News: THE EDGE, KUALA LUMPUR, December 23, 2023 - The Federation of Malaysian Manufacturers (FMM) said it is disappointed with the government’s decision to allow Tenaga Nasional Bhd to maintain the Imbalance Cost Pass Through (ICPT) surcharge for the first half of 2024 (1H2024) at 17 sen per kilowatt-hour (kWh).

"The FMM had anticipated a reduction in the ICPT surcharge following the overall declining trend in global fuel prices this year and the six-month lag. In particular, there was a drop in fuel prices from the previous ICPT and the current announcements, hence even a small reduction would still be welcomed by industries," said FMM president Tan Sri Soh Thian Lai.

The FMM hopes more details would be made available on the decision to maintain the surcharge at the current rate, as the industry was not consulted prior to the announcement this time around, said Soh in a statement on Saturday.

"There should be more consistent engagement with the industry to address concerns and challenges faced concerning the electricity tariff rate during the period of high ICPT surcharge rates, especially for small and medium industries (SMIs) under the medium-voltage (MV) category.

"In this regard, there should be a more robust customer profiling to review the eligibility of SMIs under the MV category to enable them to qualify for a lower surcharge at 3.7 sen/kWh as industries in general including SMIs continue to operate under a challenging environment since uncertainties around economic growth and the inflation outlook remain in 2024 amid concerns over the impact of subsidy rationalisation as well as geopolitical risks," he added.

The ICPT mechanism determines rebates or surcharges based on cost savings or increases during the prior six-month period to pass through fuel generation costs to consumers. This is currently determined against the benchmark fuel cost — of US$79 per tonne (coal) and RM26 per MMBtu (Tier 1 regulated gas) for the first 800 MMSCFD — projected under Regulatory Period 3 (2022-2024).

While coal and gas prices have been trending downwards from recent highs, with average coal and gas prices falling to US$111.80 per tonne and RM44.90 per MMBtu in the third quarter of 2023, they remain elevated — higher than the projected fuel prices used to calculate the base electricity tariff.

On Friday, the Energy Commission said the government is maintaining the ICPT surcharge for all non-domestic consumers between Jan 1 and June 30, 2024, while 85% or seven million domestic consumers in Peninsular Malaysia will not be affected by the electricity tariff adjustment for the period.

To date, the government has successfully implemented 19 cycles of ICPT since the introduction of the mechanism in 2015.

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