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ICPT Reduction Eases Cost Burden for Malaysian Businesses

KUALA LUMPUR: The reduction in the Imbalance Cost Pass-Through (ICPT) for commercial and industrial users will help businesses cushion the anticipated increase in input costs due to the rationalisation of diesel and rising wages.

Small and Medium Enterprises Association of Malaysia National President, Datuk William Ng said the association welcomed the government’s announcement on the reduction in ICPT charges for non-domestic customers by 1 sen/kilowatt-hour (kWh) from July to December 2024.

According to the Ministry of Energy Transition and Water Transformation, the ICPT surcharge for commercial and industrial users will be reduced from 17 sen/kWh to 16 sen/kWh in the second half of 2024 (2H24).

For low-voltage commercial and industrial users, specific agriculture sectors along with water and sewerage operators, the tariffs will drop from 3.7 sen/kWh to 2.7 sen/kWh.

The ministry stated that the targeted electricity subsidy borne by the government from July to December 2024 amounts to RM2.19 billion.

However, Ng argued that the ICPT should be replaced with a more efficient mechanism that considers the productivity of the energy producer.

He mentioned that Tenaga Nasional aims to be coal-free by 2050.

He said the ICPT is a temporary measure to help producers manage fluctuations in global fuel prices, not to guarantee their profitability.

“It must also ensure its operations, including headcount and other operating expenditures, are lean and supportive of the national agenda.

“As such, the ICPT Must be removed, otherwise, Tenaga Nasional must be held accountable to the public and industry, reporting on its transition and capital expenditure to ensure it meets its targets,” he said.

Meanwhile, the Federation of Malaysian Manufacturers (FMM) President Tan Sri Soh Thian Lai called for more transparency in calculating the surcharge and the 1 sen/kWh reduction for non-domestic users.

He suggested that the government review the eligibility of small and medium enterprises under the medium voltage category to enable them to qualify for rates similar to those given to the water services sector.

“Industries continue to operate in a challenging environment as uncertainties surrounding economic growth and the inflation outlook in 2024 remain a concern, following the impact of subsidy rationalisation and prolonged geopolitical conflicts,” he said.

He highlighted that micro, small and medium enterprises (MSMEs) make up 98% of business establishments in Malaysia, employing 7.3 million people.

“As the government reviews the incentive-based regulation for the regulatory period from 2025 to 2027, FMM hopes that the base tariff review, while addressing the revenue-cost structure mismatch for the energy transition and third-party access will ensure that industrial tariff rates remain competitive and competitive and attractive in the region,” he added.


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