PETALING JAYA: Due to the magnitude of Covid-19’s impact to the global economy and the slump in crude oil market, the Association of Water and Energy Research Malaysia (AWER) has put forth a number of recommendations to the federal government, urging it to prepare for a worst case scenario.
In a press release, AWER said that the recent discount given in electricity tariff, as announced in the second economic stimulus package, comprises of funds from Kumpulan Wang Industri Elektrik (KWIE), contributions from Tenaga Nasional Bhd and the government.
“Due to the current Movement Control Order (MCO), TNB will face a drop in revenue collection that may impact funds channeled to KWIE for 2020. If our predictions are correct, the drop in crude oil prices will all rally a drop in coal and natural gas prices. This fuel price rally will add more funds to KWIE when fuel cost drops below benchmarked prices of fuel set in electricity tariff review,” it said.
It stressed that the government and the ministry in charge must be prudent in utilising the KWIE fund, so that the fund could continue to play a cost dampening role in for this year and the next.
In addition, AWER has also reiterated its proposal to establish an energy price stabilisation fund.
It reasoned that energy resources prices are volatile and can be subjected to manipulation by a cartel of producers as Malaysia also depends on the import of energy resources.
Furthermore, the country’s affordable energy resources supply is also affected by currency volatility.
Hence, the organisation stated that the fund is vital for consumers to absorb sudden shocks in energy resources price.
“This fund is not a form of subsidy and it is auto generated from the retail prices of energy resources via modelling of historic data and forecast. It is used only to cushion the sudden impact of fuel price volatility in the international market,” it said.
Meanwhile, on coal and natural gas prices, AWER said should it continue its down trend in tandem with the oil slump, Malaysia stands to benefit.
However, it also called for the government to venture into the spot liquefied natutral gas (LNG) market to reduce natural gas prices for the electricity and manufacturing sector, which will boost the economy by reducing the cost of doing business.
Finally, AWER also urged the government to postpone implementation of water tariff adjustment for six treated water licensees.
“The government must also cancel the ‘cost plus’ mechanism used by National Water Services Commission (SPAN) to set tariff as this mechanism does not remove inefficiencies in the operations and just adds a regulated profit margin on top of the proposed cost,” it said.
It opined that the tariff should be set by the benchmarking mechanism agreed upon in 2009, whereby similar operations’ input cost will be benchmarked to the lowest efficient cost and operators who operate higher than the benchmarked cost will not be allowed to pass through the inefficient cost to the water tariff.
“Due to our suggestion to postpone the water tariff adjustment, the Finance Ministry must also ensure that Pengurusan Aset Air Berhad (PAAB) is able to service existing bonds and any new bonds issued must also be government guaranteed bonds to ensure least cost pass through to the water tariff,” it said.
source https://www.thesundaily.my/business/awer-lays-out-recommendations-for-water-energy-sector-GX2202091
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