Fixing the right gas tariff

CALLS for a downward revision of the regulated piped gas tariff may be justified, considering the low gas price environment and the third-party access (TPA) framework that allows more suppliers in the market.

However, any adjustment of the fixed tariff must take into consideration the circumstances of both suppliers and consumers, which had to enter into long-term contracts to ensure security of supply and stable pricing, says the Malaysian Gas Association (MGA).

To recap, the government imposed an average regulated tariff of RM33.65 per mmbtu in January 2020 on consumers who source gas via Gas Malaysia Bhd (GMB), despite the introduction of the TPA regime this year.

International gas prices plunged far below the regulated cost of supply in March through May, raising the question as to whether a revision is due.

“Any call to revisit the regulated tariff should take into account the whole gas supply and pricing ecosystem and not just be limited to opportunistic reaction towards LNG (liquefied natural gas) spot pricing,” says MGA in a reply to The Edge.

The association, which represents 150 stakeholders across the value chain, also brought up the interval of the regulated pricing review, which was lengthened to every 12 months this year, instead of every six months, as was done from 2017 to 2019.