Malaysia recently saw a 23% spike in residential electricity usage during the COVID-19 nationwide lockdown, resulting in higher than expected electricity bills for consumers staying in. Energy Watch approached Mr. Ravinesh Uthayasuriyan, Executive Officer of Water and Energy Consumers Association of Malaysia (WECAM), to dive deeper into what this means for electricity customers.
Energy Watch: How important is it that consumers are protected in today’s economic conditions?
Mr Ravinesh: It is important that the electricity tariffs remain stable, especially now when a sudden fluctuation in bills can cause a massive cascade in economic conditions.
In March, Malaysia’s Department of Statistics stated almost 600,000 consumers had lost their jobs during the Movement Control Order (MCO). It’s expected that after the MCO there will be almost two million people who could lose their jobs. Many people will be facing a financial crisis, because other than just electricity bills, they have other commitments to pay.
Maintaining stable electricity tariffs at times like these benefits both the economy, and consumers alike.
EW: What do you think the indirect impacts from increasing electricity tariffs will be?
R: An increase in electricity bills will cause a cascading effect that would affect the bottom layer to the top. When energy bills get too expensive, consumers have no choice but to stop paying. Currently, cashflow is needed to revitalise the country’s economy, but this could only be achieved if consumers don’t have extra financial burden.
Electricity prices don’t just impact energy costs. Fundamentally, every single enterprise or industry in Malaysia functions by using electricity as one of their main ways of generating income. This is because industries must compensate their higher utility bills by increasing the price of the products.
However, employee salaries remain the same to ensure profit can be seen with the increase in electricity cost, thus consumers have to buy products that are more expensive, while not receiving enough pay to sustain the increase in product cost. That’s why the Water and Energy Consumers Association of Malaysia (WECAM) welcomed the Prihatin Tambahan package, introduced in March, especially for the B40 group, who have been hit very hard during the pandemic.
EW: Stability is crucial during these times, as you mentioned. How well are Malaysian households protected against electricity price rises?
R: We are very fortunate to be receiving rebates and discounts for our bills, but we are a unique case because Malaysia is a people-centric country. Not only do we get these discounts that everyone knows about, we also enjoy lower tariffs on our electricity prices than the rest of the region.
Did you know that among ASEAN countries, we have the lowest electricity tariff? It’s not even comparable – our first electricity tariff block is about 22 sen, and the nearest, Singapore, is more than double the price. We also provide more aid for residential users when the global market price for electricity is higher than the tariff price that was already set in Malaysia.
In other countries, this works the other way, where residential users pay more in energy bills to offset the bills of commercial and industry players. But this is counter-productive; industrial and commercial players are profit-based organisations, who need customers to purchase their products. If consumers are struggling with living costs and do not have purchasing power, businesses will also suffer. That’s the logic behind keeping the tariff price lower for residential users compared to industries and commercial users.
To explain how tariffs are set, you must understand that there are two factors to tariff costs in Malaysia. One is the fixed tariff, which is regulated every three years, and then we have the fuel costs tariff, which is revised every six months.
Through a mechanism called Imbalance Cost Pass Through (ICPT), the fluctuating fuel costs can be balanced by applying rebates or surcharges on electricity tariffs. However, all the increases we’ve see in fuel costs so far are completely disregarded for residential consumers, because it is subsidised by Kumpulan Wang Industri Elektrik (KWIE). This is where KWIE fund played a major role, to ensure the tariff is always fixed. No matter what happens, if the fuel price rises or drops, the tariff is fixed, and does not fluctuate.
EW: Can you explain a bit more about KWIE’s role in helping electricity customers in Malaysia?
R: Kumpulan Wang Industri Elektrik (KWIE) is a fund administered by Suruhanjaya Tenaga (Energy Commission). The objective of it is to manage and cushion the impact of electricity tariff to the customers. Not only that, KWIE can also function as a way to buffer electricity prices at times of financial crisis. So far, KWIE has been used to partly subsidise the ICPT surcharge for commercial and industrial energy consumers, and completely subsidise the ICPT surcharge for residential users.
Subsidies and discounts on the electricity tariffs are largely funded by KWIE, including the recent discount packages announced in Feb (PRE20), March (PRIHATIN), June (BPE) and July 2020 (extension of discounts until December 2020) which aimed to provide assistance to citizens and businesses impacted by the current global COVID-19 pandemic.
Some people think that TNB is just making profit and consuming that profit. But TNB is neutral to any savings from the lower fuel and generation costs to the system, as these savings will be eventually passed through to the customers via ICPT, which is reviewed every 6 months. However, when times are bad or the global market causes energy prices to be high, KWIE is there to absorb the worst of the impact for the most vulnerable Malaysians.
Only now are consumers starting to recognise the benefits of KWIE, even though it has always been there in the background, subsiding consumer needs. Without the KWIE fund, there wouldn’t have been the stimulus package, the tariff would have fluctuated. KWIE is why among all ASEAN countries, we are the lowest when it comes to electricity tariffs.
EW: Speaking about reliefs, do you feel that the recent stimulus package offered by the government is sufficient?
R: WECAM is affiliated with FOMCA, which is part of the international consumer movement, and we have insights from other countries. Malaysians should know that there are a lot of countries around the globe where no major actions are being undertaken, especially for consumers, to mitigate the effects of COVID-19 on the economy and electricity prices.
Malaysia on the other hand, has responded quite effectively through the recently announced stimulus plan and electricity bill discount – we have been an exemplary country in our response. However, it may have been better for consumers to have receive a flat discount instead of a percentage based discount. This is because we don’t want consumers to rely on big discounts for their electricity bills, especially since larger consumers will have a large portion of their bills reduced through the percentage discount.
Consumers should remember the first two blocks act as a safety net for those in need and should constantly be protected even through this era of modern technologies. The third and fourth tariff blocks are kept high to ensure consumers practice energy efficiency and energy conservation as those who reach these blocks are usually middle to upper class families. It is advised that consumers in this tariff blocks use appliances that have energy star ratings to reduce energy usage. This high tariff is meant to deter consumers from wasting electricity and spending money unnecessarily on electricity bills.
We want consumers to transition to a more sustainable mindset of practising energy conservation and energy efficiency to manage their consumption, which would be a more sustainable way to reduce their electricity bills.
EW: There has been a bit of confusion lately on the way that TNB calculates consumers’ bills. What are your thoughts on this?
R: There have been difficulties as we move from estimated bills during the Movement Control Order (MCO) to actual readings today. Our advice for consumers would be to wait for the actual bill, and not base your assumptions from the estimated bill. TNB will finally compare with your previous meter reading, and your current meter reading, and will only charge you for the difference.
A key issue is that the understanding of pro-rated calculation is still very low amongst consumers. There is a lot of division and multiplication involved to obtain the final value. To many consumers, it feels as if TNB is just lumping up all the numbers – to bill them according to the fourth block, and fifth block, and so on. This assumption gives rise to consumers’ dissatisfaction.
So, if we want to evade problems from consumers due to estimated bills, the only way is to educate consumers. And I believe there is a big responsibility for utility providers to educate consumers on things like pro-rated calculation. Why? Because this might not be our last MCO – we may face another lockdown in the future which will require the use of estimated bills.
Of course, all these problems would be solved by the installation of smart meters. That is one reason we have been supporting the implementation of smart meter. But until then, consumers might face the problem of getting estimated bills.
EW: What’s your advice to consumers in using digital platforms like myTNB to have better oversight and access to their bills and finances?
R: Due to the inability of consumers to get a physical bill, many resorted to downloading the myTNB app so that they could view their bills online. WECAM supports this move as consumers can better track their energy bill and usage, and the application also makes payment easier.
Malaysians would also have heard about the Smart Meters being deployed over the country. We would advise consumers to welcome the implementation of Smart Meter as the myTNB application works best when partnered with it. Together, they enable consumers to get a detailed energy bill, eliminate the need of estimated bills and allows consumers to plan their financial allocation for electricity bills as they are able to get real time data on a daily basis, allowing consumers to change their behaviour to reduce electricity usage.
If you do not have the financial backing, then we suggest you take TNB’s Easy Payment Plan. It has no interest, and you can pay gradually. If you’re uncertain, don’t be afraid to complain. Consumer rights includes the right to ask questions – because a solution that might work for one person might not be the solution for another person.
EW: What are your expectations for electricity prices in the near future – is KWIE along with the government’s funds stable enough to continue providing financial relief?
R: With all these discounts and subsidies, the question of sustainability for KWIE comes into mind. There is only a finite amount of funding available to subsidise the needs of the consumers. I believe it’s not just TNB’s responsibility to provide funds for KWIE, it also falls on all energy providers. In the end, KWIE stands for Kumpulan Wang Industri Elektrik, so every single stakeholder in the electric industry should contribute to KWIE.
As we look at the recent ICPT announcement in June, I think the discount given is sufficient for now. At the end of the day, we need to face our reality – if that is what the market price is, we need to pay for our energy usage.
Yes, it’s up to the government to help empower consumers, through rollout of smart meters and education about energy use. At the same time, consumers need to responsibly manage their energy usage by practicing energy efficiency and energy conservation. The KWIE fund can only sustain so much. We cannot put too much pressure on the fund, and if it was to deplete to zero, the consequences would be harder on consumers.