Why is TNB raising electricity prices despite reporting profits?

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Tenaga Nasional Berhad's Justification for Electricity Price Adjustments Amidst Profitability

Tenaga Nasional Berhad (TNB) faces scrutiny from the Small and Medium Enterprises Association of Malaysia (Samenta) regarding proposed electricity price increases, particularly in light of the company's reported profits. Samenta argues that a substantial hike in utility bills could severely impact businesses, especially those with already slim profit margins. While TNB has not provided a detailed public statement solely addressing Samenta's specific concerns about this price increase in relation to its reported profits, general industry practices and the company's forward-looking statements offer some context.
Impact of Potential Tariff Increases on Businesses

Samenta has highlighted the significant financial strain that an electricity price hike could impose on small and medium enterprises. The association estimates that an 18.4 per cent increase in utility bills for a business operating with a profit margin below 10 per cent could lead to a reduction in profits of up to 40 per cent. This potential decrease in profitability raises concerns about business sustainability and the ability to absorb increased operational costs without passing them on to consumers, a move discouraged by the government.
TNB's Reported Financial Performance

The questioning of the price increase is further amplified by TNB's reported financial performance. For the nine months ending September 30, 2021, TNB recorded a 9.6 per cent increase in revenue and a 4.6 per cent rise in earnings. This financial growth has led Samenta to question the necessity and timing of a steep hike in electricity tariffs, especially when the company's financial outlook appears positive.
Anticipated Demand and Future Outlook

TNB's CEO, Datuk Baharin Din, has indicated an expectation of improved demand in the coming months and into 2022, driven by the reopening of economic activities. This forward-looking statement, acknowledged by Samenta's group chairman Datuk William Ng, suggests that TNB anticipates stronger financial performance. Samenta views this positive outlook as a reason to reconsider the proposed tariff increase, arguing that it negates the need for a significant price adjustment at this juncture.
Government Stance on Tariffs

The government has previously indicated that power tariffs could be subject to increases, with a potential start date of February 1. However, following these indications, the government announced that electricity tariffs would not be increased for domestic users. While the government has urged the commercial sector to avoid price hikes, Samenta contends that it is unrealistic for businesses to absorb increased costs without some form of price adjustment to consumers, drawing a parallel to TNB's own pricing strategies.

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Why is TNB raising electricity prices despite reporting profits?

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