Tomer Wittrock

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Once we understand why and what are being charged in our electric bills, we can identify ways to lower our monthly bills. This article explains what each item is in the electricity bills and how they are calculated by the utility company. I will show a few examples of electric bills with some basic calculations on electricity charges, KWTBB, GST and other surcharges that can be avoided.

There are generally two broad categories of charges

Electricity usage - It included two (2) items in users’ bill:-

(i)           Energy charge i.e. the amount you pay for electricity usage (kWh),

and

(ii)         Demand charge i.e. the amount you pay for maximum demand (kW) recorded in a month

Take the following example, an office building is under tariff C1 where kWh rate is RM0.365/kWh and maximum demand (MD) rate is RM30.30/kW. This means for every unit of electricity it uses, the user pays 36.5 cents, at the same time the user pays RM30.30 for each unit of maximum demand recorded during the month. (red box)

What is maximum demand or demand charge?

In layman term, demand charge is imposed by the utility company for use of its capacities. Capacities are the provision of generation plants, transmission and distribution of power system. Because the utility company spends millions of ringgits each year on those new assets to ensure reliable and secure supply of power to users at all times, therefore users (usually large power users) must pay for the use of those capacities. Domestic and small commercial users do not pay for demand charges as their uses of capacity are negligible.

How is demand charge calculated?

Maximum demand (MD) is the highest level of electricity demand recorded by TNB meter during a 30-minute interval in a month. The amount charged to a user is based on the recorded MD in kilowatt (kW) multiplied by the respective MD rate. Take the above for example, the amount payable by the user with 2,358.41kW of MD is RM 71,459.82 (2,358.41kW x RM30.30/kW). As we can see, the demand charge consists of a significant portion (23.7% in this case) of total electricity usages. Avoiding MD charge is not possible however it can be lowered. One common way to reduce MD is to run power intensive systems in stages, avoiding power up those systems within a short period of time can help mitigate the spike in maximum demand.

Note: There is MD management software available in the market that enables users to actively managing the use of energy. This software is not energy saving devices per se, but act as tools to help users to gain visibility of their energy usages so that they can find ways to improve energy efficiency.

Who pays for demand charges?

Electricity users who are under high & medium voltage include tariff C1, C2, E1, E2, E3. Domestic and low voltage users are excluded (tariff A, B & D). Tariff code can be found on your monthly electricity bill.

Non-electricity charges include ICPT, GST, KWTBB and other surcharges.

ICPT – The ICPT is a mechanism approved by the Government and implemented by Energy Commission since 1 January 2014 as part of a wider regulatory reform called the Incentive-Based Regulation (IBR). The ICPT mechanism allows the national utility - TNB to reflect changes in fuel and generation costs in consumer’s electricity tariff every six (6) months. You can read my previous article to find out more about ICPT.

KWTBB/RE fund– renewable energy fund is a surcharge to all users (except very low-income households). This surcharge effectively means all electricity users subsidising renewable energy producers at premium prices. The calculation of KWTBB is 1.6% of users’ total electricity usages which are the total of energy charge + demand charges (excluding all surcharges). In other words, the more electricity you use, the more you will contribute your money to subsidise towards the RE funds. Meanwile, Good and Service Tax (GST) is also calculated based on the total electricity usages including ICPT. Lowering energy and demand charges in your bills will impact the amount you contribute to not only the RE fund but also GST.

Take the previous example, to calculate the amount of RE fund contribution, multiply the sum of energy charge and demand charge by 1.6% i.e. (RM229,227.67 + RM71,459.82) X 1.6% = RM4,811.00.

To calculate the GST, simply multiply the sum of energy charge, demand charge and ICPT rebate by 6% i.e. (RM229,227.67 + RM71,459.82 – RM9,545.92) X 6% = RM17,468.49.

There are other non-electricity surcharges like power factor surcharge, Connected Load Charge (Caj Sambungan Beban) as discuss later in this article.

Power Factor Surcharge

A Power factor surcharge is imposed when your power factor is less than 0.85. Simply put, low power factor means the inefficient use of energy.

Power factor surcharge is calculated as follows:-

1.5% surcharge on the current bill – for every 0.01 less than 0.85 power factor and 3% surcharge on the current bill – for every 0.01 less than 0.75 power factor.

In the following example, a low voltage commercial user had a PF of 0.75 in a given month.

The formula for calculating PF surcharge is:-

X (RM 87 + RM 2,174.45) X 1.5% = RM 339.22

Note if the PF goes lower than 0.75, the penalty will be calculated based on 3% as stated.

Why is there PF surcharge?

The utility company supplies not only “Active power” (kWh) to the users but also what is called “Reactive power” (kVAr). Low Power Factor is generally caused by facilities with large fans and motors and equipment with a high number of transformers which requires high reactive power (KVAR). Facilities with low power factor cause the utiltiy company to increase its generation and transmission capacity in order to handle this extra demand. Money spent by the utility company will be recovered in the form of penalty/surcharge from those who cause the issues. Low power factor issue can be easily resolved by installing the right size of capacitors by a qualified electrical contractor.

Connected Load Charge (CLC)

CLC is applicable when the actual Maximum Demand (MD) recorded in any month is less than 75% of the declared maximum demand for the first 6 years of a new facility. It is imposed based on the shortfall between the 75% of the declared maximum demand and maximum demand recorded in a month. A penalty of RM8.50/kW will be charged for every kW shortfall between the actual Maximum Demand used compared to the Reference Maximum Demand (RMD) and it’s calculated monthly.

The method of determining Reference Maximum Demand for calculating CLC are as follows:

Note: CLC is applicable when MD recorded < Reference MD.

The below example shows a facility with a declared MD of 4,130 kW in its 3rd year of operation.

In the 3rd year, RMD is 75% X 75% X 4,130 = 2,323.13 kW

For this particular month, the actual MD was 1,943 kW, hence the shortfall was

2,323.13 – 1,943 = 380.13 kW, therefore CLC surcharge of that month was

380.13 X RM8.50 = RM 3,231.10

Bear in mind that this facility will continue to pay for CLC surcharges until the 6th year and the charges will increase from 4th year onwards due to increased in RMD.