Govt to allow Tenaga to pass cost through to consumers

You see what I meant now? Crap.

Govt to allow Tenaga to pass cost through to consumers
by Tamimi Omar

KUALA LUMPUR: The government will allow Tenaga Nasional Bhd to pass any increase in gas prices to consumers when a review of the fuel subsidy takes place.

Second Finance Minister Tan Sri Nor Mohamed Yakcop said Tenaga would not be adversely affected if and when a review of the gas price takes place. He also refused to comment on when the review may take place.

“If and when the review takes place, Tenaga will not be adversely affected. And if Tenaga is affected, there will be a pass through,” he told reporters after a signing ceremony between CIMB and Pelaburan Hartanah Bumiputera Bhd here yesterday.

At present, based on an arrangement brokered by the government, Tenaga gets its gas at a subsidised price of RM6.40 per million British Thermal Unit (mmbtu) from Petroliam Nasional Bhd (Petronas). The current market price is about RM12 per mmbtu or even higher depending on the demand.

The difference between the market price and the subsidised price has caused Petronas to incur a huge opportunity cost in supplying gas at a cheap rate to Tenaga. For instance in the financal year ended March 31, 2007, Petronas incurred a cost of RM15.6 billion to supply subsidised gas, an increase of 9.1% from a year earlier.

The subsidy includes RM5 billion for Tenaga, RM6.7 billion for independent power producers (IPPs) and RM3.9 billion for industrial, commercial and residential users .

In light of the increasing subsidy, Petronas had in September this year, proposed to the government to raise the price of natural gas supplied to Tenaga and independent power producers. The agreement between Petronas and Tenaga had long expired and is being renewed on a monthly basis currently.

In relation to the subsidy, Energy, Water and Communications Minister Datuk Seri Dr Lim Keng Yaik had two weeks ago said that Tenaga and the IPPs will re-commence negotiations to review the power purchase agreement (PPA) which determines the electricity tariff. The first round of negotiations started a year ago but ended without an agreement.

Meanwhile Tenaga’s share price jumped 45 sen to close at RM9.70 on the back of positive comments by Nor Mohamed. His comments essentially confirmed an analyst report that Tenaga would not be affected by any gas price increase as it will be passed through to consumers.

CIMB Research in a report upgrading Tenaga stated that apart from a pass through of any gas price increase, another positive development for the utility is that it is seeing a stronger than expected demand for electricity.