A fair and transparent distribution system connection charge guidelines for Sarawak energy

Abstract

Sarawak Energy Berhad (SEB) is the sole electricity provider for Sarawak’s State in East Malaysia. SEB uses part of the revenue to construct, operate, maintain, and replace its network overtime via two primary sources, tariff and connection charge. This study was initiated by the recent increasing complaints amongst SEB’s key stakeholders regarding existing connection charge guidelines. Its aims were to revise the guidelines, produce a transparent, fairer, and more efficient connection charge policy and improve the company’s asset utilisation which leads to higher revenue through potential cost saving. Prior studies have shown that there is no one-size-fits-all model in setting the price for most industries including the energy sector. The reason is because each industry or company may have different factors to be considered in pricing their product. The present study involved gathering data using both qualitative and quantitative methods to understand the deficiencies and elements for improvement on the pricing structure of Sarawak Energy Berhad Connection Charge Guidelines (SEBCCG). The first part of the study investigated the limitations of SEBCCG compared to other electric utility companies’ connection charges guidelines, namely Tenaga Nasional Berhad and Sabah Electricity Sendirian Berhad using document analysis. One main key difference in these companies’ pricing structure is that SEB’s pricing structure is based on a deep approach whereas SESB and TNB are practising a shallow approach. Another two surveys were undertaken, namely Delphi and questionnaire surveys targeted on different groups of customers to ensure views were gathered from different perspectives. Three key limitations of SEBCCG were identified namely non-differentiation of shared and dedicated assets, variation in the charge and inconsistent treatment of applied load. The findings of these studies were validated by analysing selected projects to confirm the credibility and validity of the data obtained from the surveys. Moreover, this study also identified three key elements for improvement in SEBCCG. The elements identified were load requirement, asset utilisation as well as transparency and consistency. These elements appeared to be similar elements incorporated by various industries in computing their product pricing. The key elements were then incorporated into the revised SEBCCG, which was named as SEBCCG 2019 and accepted by the stakeholders. Overall, this study has provided some important information in revising the current SEBCCG to address the stakeholders’ concerns. At same time, it also fulfils the government’s social responsibility to the Sarawak people in ensuring the availability of electricity supply at an affordable and reasonable price. Besides that, this study adds to the currently limited literature on pricing structure study in energy industries. A full revision of the pricing structure is recommended to include the tariff structure to provide an overall view of this issue. Even though there were some limitations identified, this study has shown that a fair and transparent pricing structure can still be achieved by considering all relevant inputs from the stakeholders despite SEB being a monopoly company.