The Incentive-based Regulation (IBR) was introduced early 2014 in Malaysia for the electricity subsector as part of the modernisation of the electricity supply industry. This allows a structured, transparent and informed way of tariff setting taking into cognisance huge requirement for capital expenditure (CAPEX) and operational expenditure (OPEX) by the utilities. IBR ensures the utility companies to continuously enhance their efficiencies and increase transparency in providing electricity supply to customers in full compliance of the projected expenditures. In addition, Energy Commission (ST) continues to audit and review past performances as well as accommodate new requests from the utility companies.
The main components of the IBR are:
- Determination of the regulatory period to ensure the tariff revision is carried out periodically and consistently;
- Determination of the regulated and non-regulated business for the utility and the separation of accounts;
- Determination of financial performance and technical efficiency targets of the utility;
- Implementation of the imbalance cost pass-through mechanism to enable the recovery of actual fuel-related and other generation specific costs; and
- Implementation of efficiency sharing mechanism to provide the utility a continuous and sustained incentive to pursue cost efficiencies in every regulatory period.
Electricity Tariff Regulation in Peninsular Malaysia under the Incentive-based Regulation (IBR) Framework
1st Regulatory Period – RP1 : 2015-2017
1 - Regulatory Period 1 = RP1 [Trial Period: 2014 and RP1: 2015 – 2017]. In RP1, the base tariff for 1st regulatory period under incentive-based regulation (IBR) framework is 38.53 sen/kWh.
2 - The implementation of Imbalance Cost Pass-Through (ICPT) every 6 months from Mac 2015 until Dec 2017, resulted a total tariff rebate of RM5.4 billion been passed through to consumers. The rebates were made possible largely due to the savings derives from lower actual fuel price (i.e. Coal and LNG) as compared to benchmark prices. For the period of July – Dec 2017, apart from rebate of 1.52 sen/kWh, a surcharge of 1.02 sen/kWh or RM523 million was funded by Government through Electricity Industry Fund. The quantum of ICPT from year 2015 – 2017 is at an average rebate of 1.59 sen/kWh.
Electricity Tariff Regulation in Sabah & F.T of Labuan
1 - Base tariff for Sabah & F.T of Labuan is 34.52 sen/kWh from January 2014 to December 2017.
2 - The implementation of tariff adjustments started in year 2015, with a tariff rebate of 1.20 sen/kWh since then until today.