Impact of TNB tariff methodology on workers

On 26th February 2021, Tenaga Nasional Berhad (TNB) had submitted its proposal to review the electricity tariff for Regulatory Period 3 (2022-2024). The federal government (Putrajaya) reviews the electricity tariff once every 3 years. TNB’s tariff was supposed to be increased from 1st January 2021, but this was postponed to 1st January 2022 due to the ongoing Covid-19 pandemic.

Contrary to popular belief, TNB revenue is capped under the Incentive Based Regulation (IBR) tariff methodology practiced by Putrajaya. TNB can experience excess revenue due to higher electricity sales, lower capital expenditure or lower fuel costs (coal & fossil-gas).

TNB must refund excess revenue back to consumers through the Imbalance Cost Pass Through mechanism (ICPT) with a certain amount transferred to Kumpulan Wang Industri Elektrik (KWIE). ICPT is a mechanism to impose rebate or surcharge onto consumers depending on whether TNB has a surplus or deficit in revenue.

ICPT is not imposed on households with consumption less than about RM77 (300kWh) as the KWIE fund is utilized to insulate them. The revenue cap methodology removes the potential for ulterior motives to tamper with meters. However, the revenue cap model was also the primary reason TNB made profits when Malaysia was battered with Covid-19 and recession.

IBR-ICPT tariff methodology ensures that TNB can provide a return measured as Weighted Average Cost of Capital (WACC) of 7.3%. Thus, TNB is insulated from any risks in exchange for fixed revenue. TNB’s revenue from the assets may be capped but the profits are not capped.

Henceforth, TNB’s upper management made up of technocrats and bureaucrats can increase the profit by minimizing workers renumeration. Profit for any corporation comes from difference between revenue and operational cost. TNB have minimal control on fixed cost such as fuel and equipments cost so minimizing workers renumeration is must to increase the profits.

Barely 30 years ago, TNB directly employed Malaysians for non-core operations workers such as gardeners, cleaners, plumbers. The non-core operations workers were treated as TNB staffs which received renumeration such as housing, fixed wages, and annual increments. Today, non-core operations are outsourced to certain companies with the workers paid at minimum wage.

TNB had also begun to outsource critical works such as meter installations and powerline repairs which were formerly done by TNB workers. It is becoming a common sight to see certain people working on TNB assets wearing shirt stating “Kontraktor TNB”.

These contractors had begun to employ migrant workers to widening their profits. The weak protection for migrant workers allows these contractors to overwork but underpay them. These reduce worker renumeration and jobs available for Malaysian households to exit poverty.

Any criticism towards the outsourcing policy is curtailed with the race card. MoF, Khazanah and TNB justify these outsourcing and labor policies on the pretext of developing Bumiputra entrepreneurs. Jobs and renumeration for the tens of thousands of working classes people are sacrificed to produce few wage-suppressed firm owned by handpicked crony contractors.

Meanwhile, renumeration for the technical workers has been eroding since the privatization effort. Majority of TNB’s technical field workers suffers from long term diseases such as Parkinson’s and heart ailments due to the rough nature of their job.

TNB provides lifetime medical support even after retirement to their employees, recognizing their contribution to national development. Several years ago, this lifetime medical obligation was removed for any newcomers citing burdening cost.

The argument that one should study hard to become a professional engineer with TNB to earn well is no longer valid. It is just a matter of time before this wage suppression policy comes knocking at the professional and engineers’ level. The wage suppression policy will always start from the bottom before finding it way upwards.

In 1996, the government put hospital cleaners on contracts rather than permanent employment causing the steady decline in their earnings. The doctors and pharmacists did not speak out against this because they thought their professional jobs would remain intact. But in 2016, the government put medical doctors in a contract system too!

On a micro-level, TNB’s widening profits under the fixed revenue system comes from suppressing worker renumeration by outsourcing direct jobs. These decisions are mostly made by business technocrats making up the highest management of TNB and Khazanah.

The eroding renumeration will cause a brain drain and impact talent acquisition which could jeopardies term reliability of Malaysia electricity infrastructure. The reliability of electricity infrastructure is crucial to power Malaysia’s economic growth and improving living standards.

Malaysia needs to replace the revenue cap model with a profit cap model to limit the dividend payout from regulated electricity assets. Limiting dividend payout will curtail the wage suppression-based labor policy within TNB.

Central Committee
Parti Sosialis Malaysia (PSM)
State Secretary
Parti Sosialis Malaysia Negeri Melaka (PSM Melaka)

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