Malaysia overhauls power tariff system with monthly fuel-based adjustments. (Photo: iStock)
Starting in July, Peninsular Malaysia will implement an Automatic Fuel Adjustment (AFA) mechanism for electricity pricing, replacing the current Imbalance Cost Pass-Through (ICPT) system.
Under the AFA, electricity tariffs will be adjusted monthly based on prevailing fuel prices and exchange rates, compared to the current biannual schedule. According to the Energy Commission (EC), base electricity rates may be reduced by up to 19% under the new system.
Base tariff cut by up to 19% with more frequent adjustments
The Energy Commission announced the updated tariff calculation method on June 20, to be applied during the upcoming Fourth Regulatory Period (RP4) from July 2025 to the end of 2027. The AFA will more accurately reflect market-based generation costs by automatically adjusting rates every month.
While the mechanism will be market-linked, there will be a cap on monthly adjustments—limited to 3 sen per kWh (about USD 0.007). Any adjustment exceeding that cap will require Cabinet approval. The EC will also publish all monthly changes on its official website.
Currently, the base electricity rate stands at 55.95 sen per kWh (about USD 0.13). If no additional adjustment is made under AFA, the revised rate would fall to 45.4 sen per kWh (about USD 0.11), representing a 19% reduction. If AFA rises by the full 3 sen, the net reduction narrows to 13%.
From tiered to usage-based pricing model
In another major change, Malaysia will eliminate the tiered pricing model, moving to a structure based strictly on actual electricity consumption. Charges will now be itemized by energy, capacity, network, and retail. Heavy electricity users will face higher charges under the new classification.
According to Communications Minister Fahmi Fadzil, 85% of residential customers are expected to see no change—or even a reduction—in their electricity bills, as long as their monthly usage stays below 1,000 kWh. Non-residential users consuming less than 200 kWh per month may qualify for an Energy Efficiency Incentive.
To encourage demand-shifting, off-peak hours will be extended to include all day on Saturdays and Sundays, as well as 10 p.m. to 2 p.m. on weekdays. Residential customers who shift their consumption to these off-peak hours can reduce their electricity bills under the new structure.
Source: The Edge Malaysia(1), (2), The Star
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