The Impact of Optimized Electricity Tariff Changes on Malaysian Economy

Abstract

This study discusses the impact of the current electricity tariff, represented by optimized tariff calculation, towards 124 Malaysian sectors’ cost of production using the 2015 Malaysian IO Table. Overall, the findings show that 1) current optimized electricity tariff only led to a 0.55 percent increase in the current cost of production, and 2) there are only 0.77 percent changes in the cost of production if the electricity tariff rate is increased by 5 percent based on scenario analyses. This implies that the impacts of electricity tariff rate changes are not large and could be even smaller, as sectors have the option to rearrange their activities in favor of other factors of production, including labor and capital. Additionally, the results revealed a positive relationship between the composition of employees’ compensation (CE) in value-added (VA) and the price impact on its production costs.