Malaysia unveils cuts to electricity tariffs until 30 June

Mentioning lower electricity generation costs from coal.

Malaysia's Minister of Energy, Green Technology and Water was recently quoted on Bloomberg announcing cuts to electricity tariffs effective 1 March to 30 June, citing lower electricity generation costs from coal.

According to a research note from Nomura, the cuts amount to 2.25sen/kWh in Peninsula Malaysia and 1.20sen/kWh in Sabah and Labuan for commercial and industrial users as well as domestic consumers who use 300kWh or more.

Officials estimate that these represent average tariff cuts of 5.8% and 3.5% respectively from the average tariff rates of 38.53sen/kWh and 34.52sen/kWh.

Here's more from Nomura:

As the CPI weight of electricity is only 2.88%, we estimate only a small impact on CPI inflation of 0.1-0.2 percentage points.

This is unlikely to materially change Bank Negara Malaysia’s assessment of inflation, and we continue to expect no change to rates this year.

It is unclear whether there will be any fiscal impact as the government appears to be passing on cost savings to consumers.

In any case, any fiscal impact appears negligible – the minister was also quoted stating that the electricity subsidy bill would amount to MYR260mn following the cuts, which is just 0.02% of GDP – and we continue to expect the government to achieve its initial fiscal deficit target of 3.0% of GDP, below the revised target of 3.2%