Industries want dialogue with govt over revised electricity rates
More Chinese companies are expected to set up data centres in Malaysia in the next five years, according to an academic. (Freepik pic)
PETALING JAYA : The Data Centre Association Malaysia has expressed concern over the potential ramifications of the new higher electricity tariff, such as an increase in operational costs, and potential investors being deterred.
The association's president, Mahadhir Aziz, said while he welcomed the revision and believed in its necessity, he had issues with clarity and accuracy of the revised rates, which may have led to 'unfair tariffs'.
He cautioned that the excessive tariff increase is likely to drive up operational costs, which could be amplified along the value chain and ultimately passed down to consumers .
'If you were to subscribe to cloud services, the cost would be slightly increased,' he told FMT.
The Energy Commission recently announced the rise in base electricity tariff per kilowatt-hour (kWh) to 45.4 sen from the previous 39.95 sen. The new rate will be in force from July 1 to the end of 2027.
Mahadhir said the new rates could result in data centre investors looking at other Asean countries, as well as India and Japan, which would present themselves as more attractive destinations.
While energy costs are not the only factor taken into account by investors, it could make investors consider other alternatives, he said.
'If the government makes drastic changes in policies, it might affect decisions for further reinvestment or expansion of investment, and also for new investors as well.
'So this is the part where I think the industry is also trying to share their concern in terms of their plans with regards to Malaysia, especially when competing countries like Thailand, Indonesia and Vietnam are also coming up as alternatives for data centre investments,'said Mahadhir, who is a former CEO of the Malaysia Digital Economy Corporation
He said the revised rates could also lead to market uncertainty.
'Unfair' rates due to inaccurate calculation
Mahadhir also questioned the method used to conceive the new rates and identified the possibility of 'double counting', where inflated demand projections might have been used as the basis for the increased tariff rates.
These 'phantom' demands could be attributed to overlapping customer bases among different cloud companies.
'So this is where we believe, from the industry's perspective, that some correction is needed in terms of determining whether the demand that is reported is real or if the regulators are essentially counting the same demand coming from the same customers.'
Mahadhir also called for the implementation of the revised rates to be postponed indefinitely until a comprehensive review is conducted, believing that the issue should be assessed holistically, taking different aspects into account.
Separately, the EU-Malaysia Chamber of Commerce and Industry said it opposed the increased tariff, as the revised rates were unfair to industry players in the manufacturing and export sector, when taking into account the job opportunities they provide.
Its CEO, Karl Godderis, said the increase was disproportionate. Furthermore, unlike most other economies, Malaysia's power rates for industry were higher than for residential use, he said.
Rates in most countries were the opposite because industries, which run around the clock, provide the base load for grid stability and also consume volumes that justify a lower unit cost.
'To now further increase these industry rates is highly counterintuitive,' he said.
Godderis said many of the chamber's members shared the Malaysian government's aspirations on renewable energy. These members were part of international industrial groups with aggressive global targets for the use of renewable energy in their operations, he said.
In many cases the decision to further invest in Malaysia in terms of an alternative location is considered on the basis of availability and cost predictability of renewable energy.
'For as much as we understand that for the Malaysian government energy security and fiscal stability are critical priorities, a broader perspective on what brings foreign investment to Malaysia through comprehensive engagement with the foreign business community on matters like the energy framework would be highly welcomed,' he said.
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