Electricity tariff rises more when fuel prices are up

By Leong Sze Hian


I refer to the Energy Market Authority’s (EMA) reply “Tariff changes mainly due to fuel price changes” (Today, May 17) to my letter “Tariff not falling in tandem with decrease in fuel price” (Today, May 17).

It states that “when fuel prices increased by 8 per cent from January to July 2006, the tariff increased only by 1 per cent; and when fuel prices increased by 26 per cent from April to July 2009, the tariff increased by just 7 per cent”.

Selected periods to show price increase

In order to determine whether the ratio of the tariff to fuel price rises much more, on a relative basis, when fuel prices increase more than when they drop, we need to look at the whole period when the fuel price was increasing, instead of just selecting part of the period.

Although the fuel price rose from January 2006 to October 2006, the EMA selected only the period from January to July 2006, to illustrate its point that the tariff fluctuates with fuel prices going up and down.

Similarly, the EMA selected the period April to July 2009, when the fuel price actually increased from April 2009 to April 2010.

In this regard, the tariff rose by 3 per cent against a 9 per cent increase in the fuel price from January to October 2006, and by 31 per cent against 70 per cent from April 2009 to April 2010.

The other three periods from January 2006 to April 2012, when the fuel price increased were from April 2007 to October 2008 (61 per cent tariff increase against 138 per cent fuel price increase), October 2010 to July 2011 (17 per cent against 31 per cent) and October 2011 to April 2012 (7 per cent against 12 per cent),

Recent tariff up more when fuel prices up than when down

So, according to the fuel price declines data, cited in my letter of 17 May referred to above, why is it that particularly in recent years from April 2010 onwards, whenever the fuel price drops, the tariff drops much less, on a relative basis, compared to when fuel prices rise?

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.