Tariff cut has no impact on TNB, says CEO

Tenaga Nasional Bhd (TNB) said the government's decision to cut electricity tariffs has no impact on the company, describing it as a normal business process.

"We are neutral on that because this is part of the economic regulatory framework called the Incentive Based Regulation (IBR).

"Under the IBR, anything to do with fuel prices and so forth will be reviewed every six months. It has nothing to do with our share prices and fundamental profit," President/Chief Executive Officer Datuk Seri Ir Azman Mohd told reporters when asked to comment on the impact of the tariff cut on the sidelines of the CAP10 CEO Summit here today.

Azman said the IBR comprises two components -- the fuel related cost or the imbalace cost pass through (ICPT) mechanism, and the base tariff.

The ICPT mechanism allows TNB to reflect changes, either an increase or a reduction, of the uncontrollable fuel costs in the electricity tariff every six months while the base tariff is reviewed every three years, taking into account TNB's cost to generate electricity and the revenue it should be making.

"The next base tariff review will be in 2018 and this would normally affect us," he said.

Energy, Green Technology and Water Minister Datuk Seri Dr. Maximus Ongkili announced yesterday the cabinet's decision to reduce electricity tariffs by 2.25 sen/kWh for consumers in Peninsular Malaysia, from March 1 until June 30, 2015.

TNB also announced that for Sabah and Labuan, tariffs would decrease by 1.2 sen/kWh (down 3.5 per cent) and the average tariff would decrease from 34.52 sen/kWh to 33.32 sen/kWh.