Yahoooooo! The 11 gifts from jibby Altantuya’s 100 days in office can & will never replace this present, it will surely make your day: Electricity rates expected to rise 4.9pc

KUALA LUMPUR, July 22 — The government is today considering proposals to hike natural gas prices for power producers by 24.6 per cent from Aug 1, a source familiar with the matter told Reuters.

Under a twice-yearly review, to be discussed by the Cabinet today, that would result in electricity tariffs for customers of power utility Tenaga Nasional rising by 4.9 per cent, which will see a return inflation spike move back into positive territory by the end of the year.

The June consumer price inflation data, due later today, is expected to show the first bout of deflation since August 1986.

According to the median estimate in a Reuters poll of 14 economists, the consumer price index for June fell by 1.35 per cent from a year ago.

Malaysia has already announced price hikes for transport, that will push inflation higher and the new price rises would add to that.

“The housing, water, electricity and fuels component makes up 21.4 per cent of the CPI. With this 4.9 per cent hike in electricity tariffs, it will lead to an increase in this component by 0.82 per cent … or add 0.1 per cent (point) to the overall index,” said Patricia Oh, economist at TA Securities.

TA is forecasting annual inflation for 2009 of one per cent.

The price hikes could also hit demand at a time when Malaysia’s, Asia’s third-most export dependent economy, is expected to see its economy contract by up to 5 per cent this year, according to government forecasts.

“The housing, water, electricity and fuels component has been stable … but it will eat into consumer spending and that’s not good given the problems we already have with external demand with regards to the manufacturing sector,” said Philip McNicholas, economist at IDEAglobal.com.

News of the price hike for Tenaga sent its stock 2.38 per cent higher to RM8.60, outperforming the broader market.

Under the proposals, to be announced after a rise in benchmark oil prices, industrial gas prices will rise by 4.5 per cent, the source said.

Even so, Malaysian gas will remain much cheaper than the international price and state oil and gas company Petronas will subsidise prices to the tune of around RM6.4 billion over the next six months, the source said.

Petronas accounts for 44.9 per cent of government revenue and natural gas subsidies cost it RM19.5 billion in the company’s fiscal year just ended. — Reuters/ MI