Conduct and performance of the electric utility in Malaysia

This research is focused on the corporatization and privatization of the National Electricity Board (Malaysia). It investigates how earlier form of regulation (under direct government ownership and control) has affected the conduct and performance of the NEB and what the implications are on its future operations and regulation. In particular the research studies the economic consequences of government control on NEB\u27s prices, static costs of production, and innovation and productivity growth. The results show that the industry was a weakly declining cost industry. Further evidence tends to show that NEB could very well be on a turning point to becoming an increasing cost industry. Analyses on total factor productivity implied that the government appeared to use the opportunity to reduce tariffs whenever NEB is performing well. With privatization, NEB loses previous privileges and this will have the immediate effect by way of increased cost of capital which is not matched by the provisions of the new tariff regulation. A challenging future awaits NEB where electricity demand is expected to grow unabated at its historical rate. The stage is ripe for new players and competition in the industry. But the major conclusion of the study is that an understanding of organizational culture is vital for the creation of an effective corporation. Cultural clashes should be avoided, and a strong leader is necessary to manage cultural change and renewal in a newly privatized company