"TNB" a monopoly in Malaysia!

 As we all know who is Tenaga Nasional Berhad (TNB). TNB was formed in 1990 by the National Electric Board (NEB). They are the one and only electricity utility company and their the largest in Malaysia and their also the largest power supplier company in South-east Asia with MYR 69.8 billion worth of assets. So the electric supply in Malaysia is a virtual-monopoly own by them.

What is a monopoly? A monopoly is a market with only one seller and the nation or the consumers do not have another alternative to purchase the product or the service. A monopoly normally arise due to the barrier of entry which restrain other companies from entering the market and the exerting pressure from the monopolist. A monopolist is also a price maker which means they can set the price to earn supernormal profits. There are multiple forms of barrier to entry. 

In Malaysia, one of the reason why there is no alternative to TNB is because the government itself don't allow or approve the license for another company to enter the market. Another reason is because of the existence of economies of scale. TNB produces large output of electricity in Malaysia which can also lower down their average cost of production. For a new company which newly entered the market, they have to start from scratch with a low output. That means their average cost of production will be too high and that will make the new company to leave the market. It is not cheap to produce electricity and most of the electricity in Malaysia are all run by hydroelectric dams. Building a new dam can cost up to billions of Ringgit which even banks will not give out such a big loan. So the initial investment or the modal to start up a new company will be to expensive which discourages new firms from entering the market.

There are several advantages and disadvantages for a monopoly market (TNB):

• A monopolist can facilitate the supply and demand every second as it make decisions to produce or not to produce electricity.
• A monopoly can also lead to lower prices with a greater supply.
• A good stock to buy with the return of great dividends.

But on the other hand there are also disadvantages:

• A monopolist can simply control the price of their product (Electricity).
• With the existence of "tariff" TNB losses money from every household or firms.
• Since TNB is a monopoly, if a consumer uses low electricity the "tariff" would be lower but when a consumer uses higher electricity, the higher the "tariff" would be.

Source: TNB