style="text-transform: uppercase;">Kota Kinabalu: Sabah Electricity Sdn Bhd (SESB) clarified that the tariff not being reviewed for over 25 years was among the reasons for it not being able to finance the capital cost on its own.

It said this in response to the recent statement by the Sabah Housing and Real Estate Developers Association (Shareda).

"Being the company entrusted with the responsibilities of managing the power utility in Sabah and Labuan, SESB is regulated by the authorities where tariff and Consumer Connection Charge (CCC) are approved by Energy Commission and the Energy, Green Technology and Water Ministry.

"In principle, for an ideally structured utility company, the tariff level should give a return which is close to the Working Average Cost of Capital (WACC) in order for it to be able to finance the capital costs on its own. However, this is not the case for SESB since the tariff was not reviewed for over 25 years until July 2011."

SESB said the Government had again approved the tariff review in January 2014.

"However, with these two reviews, SESB is still far from being financially independent especially to support the capital costs. As at the end of Financial Year 2014, SESB's return on assets (RoA) stands at 1.32pc.

"It must also be highlighted herein that as of the approved tariff structure effective Jan 1 last year, the Government is still supporting the operation of SESB in the forms of fuel subsidy and gas price cap.

"That is the very reason the Government is still funding major electricity infrastructure development projects to the tune of RM2.3 billion for the next five years in the form of grants.

"With the last tariff revision, SESB's connection charges were revised by the Government for all consumer categories effective Jan 1, 2014 with up to 50 per cent reduction under specified conditions for medium and low voltage applicants."

SESB said it will continue to review and improve the connection charges together with the authorities, as its financial condition improves.

"Currently we are studying the various approaches and methodology to increase the transparency and predictability of the charges together with the authorities, to come to a win-win situation for all parties."

SESB also provided some correction to the data quoted by Goh.

"The consumer contribution for connection of supply received by SESB for FY2014 amounted to RM72 million, which included ordinary consumers, against the claimed RM180 million paid by Shareda members.

"The connection charges for connecting 33kV supply to the Riverson project was only RM5.75 million, and not RM20 million as claimed.

"For supply projects above 5 Mega Volt Ampere (MVA), requiring Electrical Substations, SESB requests land from the developer.

"This is also the practice in Tenaga Nasional Berhad (TNB), subject to a nominal value of RM1 for the sublease agreement. If the developer is not able to provide the land, they would provide the substation building, usually more compact and attached to the main building."

On March 7, during its 22nd Annual General Meeting, Shareda President Francis Goh challenged SESB to send a letter of offer to Shareda if it is unable to manage its operational cost and continue to impose unfair capital contribution rates on developers in Sabah, saying the current capital contribution (CCC) imposed by SESB is 10 times higher as compared to Peninsular Malaysia.

According to Goh, the 180 members of the association had already paid SESB RM180 million in capital contribution.

Goh said TNB raked in a profit of RM6.7 billion last year where for SESB, TNB is the major shareholder with 80 per cent and the remaining 20 per cent goes to the Sabah State Government.

He added that a check with the Registrar of Companies (ROC) also revealed that SESB had actually reaped RM6 million in profits last year.

Shareda members have also unanimously resolved to urge SESB to accept its proposal for a fixed rate charges and not the CCC formula set by SESB and if all avenues have been exhausted, and negotiations fail to produce results that are fair and equitable to developers in Sabah, then Shareda will look into taking the issue to court for a judicial review.