Building operators call on EC to reduce bank guarantee requirement on power usage

• The associations raised the question as to why the EC requires such a large amount in deposit when the building owners are accountable for any replacement work.

KUALA LUMPUR (Oct 3): Shopping mall operators and building managements have called on the government and the Energy Commission (EC) to review the requirement for a bank guarantee on their electricity usage, which they said could reach millions of ringgit.

In a joint press conference by Malaysia Shopping Malls Association (PPK), Building Management Association of Malaysia (BMAM), and Malaysian REIT Managers Association, the associations proposed for the bank guarantee requirement to be replaced by a standard bank guarantee of RM100,000 instead.

The bank guarantee is to cover potential costs to be incurred if a licensee defaults and Tenaga Nasional Bhd (TNB) steps into the role of the licensee, said the associations.

It has been imposed since September 2020 on public distribution licensees (PDLs) — owners of multi-tenanted premises which take bulk supply of electricity from the grid.

The guarantee initially covered electricity usage across three months, which the associations said has since been reduced to one month following a meeting with the EC in December 2021. Building operators pay approximately RM500,000 to RM1 million in electricity usage each month, they said.

Arguing against the large guarantee required, the associations said under PDL arrangements, large electricity users such as mall operators are required to maintain, repair and replace any old, faulty electricity meters.

"The building owners already have the responsibility to take care of all their power requirements within the premises or commercial building. They already pay a deposit for TNB. So that's already covered as of now," said BMAM treasurer Prof S Venkateswaran.

As such, the associations raised the question as to why the EC requires such a large amount in deposit when the building owners are accountable for any replacement work.

"If anything at all, there will be a small labour cost involved for TNB technicians to change any meters, but yet the high bank guarantee does not justify the cost," he added.

Bank guarantee required on top of existing deposits

Further, the associations said the regulation, which requires PDLs to furnish the bank guarantee upon licence renewal, is in addition to the existing deposit already being paid to TNB.

"There are over 300 licensees and each of them is required to pay at least RM1 million in deposit. For a typical shopping mall that could be anywhere between RM3 million and RM5 million," said PPK president Tan Sri Teo Chiang Kok.

"Imagine this huge amount of money sitting ideally in the bank; [it] is not very sensible. All we ask for is that the amount has to be justified and has a correlation to cover the risk," Teo said.

He added the cost of applying for bank guarantee is also hefty for mall and building operators, as banks will likely require a deposit equivalent to the guarantee.

"This will further impact the capital flow and unjust cash position of these operators," Teo said.

Theo further urged EC to clarify the number of incidents in which operators fail to maintain meters and default payments to TNB.

"We are of the firm view that there must be a correlation between the actual costs to be incurred to the [bank guarantee] being paid. We feel that there should not be an arbitrary quantum imposed for 'security' in the form of [bank guarantee]," he added. The associations have reached out to the Ministry of Energy and Natural Resources to convene a dialogue.