Will industrial and commercial users keep paying the 3.7 sen per kWh surcharge in H2 2022?

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Industrial and Commercial Users to Continue Paying 3.7 Sen Per kWh Surcharge in H2 2022

Industrial and commercial electricity users will continue to face a surcharge of 3.7 sen per kilowatt-hour (kWh) during the second half of 2022. This decision means that while domestic consumers will maintain their existing rebate, the burden of increased energy costs will be partially passed on to these business sectors. The government will provide subsidies amounting to RM5.8 billion to mitigate the overall impact.
Surcharge Details for H2 2022

The government has confirmed that the tariff rates will remain unchanged for the latter half of 2022. Consequently, industrial and commercial entities will be subject to the 3.7 sen per kWh surcharge. This continuation of the surcharge reflects the ongoing elevated costs in the energy market, particularly concerning fuel prices.
Government Subsidies and Cost Recovery

To offset these higher costs, the government is allocating RM5.8 billion in subsidies for the H2 2022 period. Maybank Investment Bank estimates that the surcharge on industrial and commercial users will contribute RM1.2 billion towards cost recovery. When combined with the government's direct subsidies, Tenaga Nasional Berhad (TNB) is projected to recover approximately RM7 billion in total for the second half of the year.
Broader Market Context and Fuel Prices

The decision to maintain the surcharge comes amid persistently high global fuel prices, with coal prices seeing significant increases. For instance, Indonesia's coal benchmark price averaged US$282.02 per tonne in April and May, a substantial jump from the Q1 2022 average of US$183.52 per tonne. Under the Regulatory Period 3, the reference rate for coal is US$79 per tonne, highlighting the considerable disparity.
Impact on TNB and Market Outlook

These elevated fuel costs, particularly for coal, are estimated to increase TNB's coal expenses significantly. Kenanga Research projected an additional RM3.28 billion in coal costs quarter-on-quarter for Q2 2022, leading to a total coal cost increase of RM8.6 billion for the first half of FY2022. While the Incentive-Based Regulation mechanism allows for eventual cost pass-through with a six-month lag, the sustained high prices have led Maybank IB to maintain its view that Imbalance Cost Pass-Through (ICPT) concerns may persist.

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Will industrial and commercial users keep paying the 3.7 sen per kWh surcharge in H2 2022?

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