Good evening, everyone. Thank you for joining us today for our briefing title, Briefing on Electricity Tariff Framework, Recent Developments and Outlook.
Yang Berbahagia Puan Shahannom Binti Izham , Chief Regulatory and Stakeholder Management Officer. Puan Azlinda Binti Safian , Group Controller, Accounting and Reporting. Engineer Mohamad Fahmi Bin Jaafar, Head Strategy, Retail Division. It is a great pleasure to welcome everyone to today's briefing. Today's briefing will begin with a presentation, followed by a Q&A session before we conclude the briefing. Before we begin, for those who may have questions during the session, please feel free to type them into the chat box at any time. We will address the questions during the Q&A session. Without further ado, I am pleased to invite Puan Azlinda Binti Safian to kick off our session for today.
Thank you, Edwin. Good evening, everyone. Firstly, thank you for joining us at a relatively short notice. I think we recognize that the announcement over the past few days has raised a number of questions among our investors and analysts, particularly around TNB's decision to absorb part of the AFA related costs, the impact on earnings, and perhaps more importantly, what this means for the predictability of TNB's returns under the regulatory framework. The government's objective is clear, to provide an immediate relief to households that have seen higher electricity consumption, particularly during the recent hotter and hazier weather conditions. As Malaysia's national electricity utility, we understand that responsibility. Our new tariff structure took effect on 1st July 2025. This is to reflect the actual cost of electricity supply due to the global fuel prices amidst the Middle East crisis, which is currently driving the increase in AFA.
Coupled with weather-driven increase in electricity consumption, this has resulted in higher electricity bills for affected domestic customers. Following the Prime Minister's announcement on 17 September 2026, the protection threshold for domestic customer has been raised from 600 kW to 800 kW hour per month for electricity consumed from 1 September to 31 December 2026. Today, we will recap on the new tariff structure and current conditions. We will look at the Prime Minister's and TNB's announcement and the impact to TNB and its outlook. Let me hand over to Puan Shahannom to take us through the slide, and then we will be happy to take your questions.
Thank you, Azlinda. Asalamu alaikum, and good afternoon, everyone.
The slide is a recapping of what happened last year during our tariff revision effective 1 July 2025, which the intention is to introduce itemized billing to reflect the actual cost of electricity along the value chain. In term of cost recovery wise, it is the same whether it is prior to 1 July 2025 or effective 1 July 2025, whereby under the previous tariff structure, all costs by segment is being bundled. However, effective 1 July, we unbundle the cost to provide more clarity and transparency to our customers, whereby the charges is being itemized according to the three main cost structure, which are generation segment, network segment, as well as retail segment. Under the generation segment, which is the biggest contributor in term of cost recovery for TNB, we have three bill component, which is energy charge, capacity charge, as well as AFA or Automatic Fuel Cost Adjustment .
Next. This is 70% of electricity supply where it consists cost of generation. The balance 30% comes from network and retail cost. The parameters that is embedded under our current tariff structure, whereby coal base rate is $97 per million ton, gas based on tier one and tier two price, respectively, at MYR 35 per MMBtu and MYR 46 per MMBtu, and our Forex is set at 4.307. What happened in September 2026, our coal price increased to $122.85 per metric ton, whereas gas increased for tier two from 46- 57. However, we are blessed with a stronger Forex at 4.0944. These key parameters have been affecting our AFA, whereby TNB has introduced a surcharge, AFA, to ensure recovery of our generation cost.
Under this AFA mechanism, the most important part would be the protection for domestic customers using up to 600 kW hour per month, whereby they are exempted from all these charges, which was initially set at 85% of domestic consumers are protected from this AFA. Next. What we see from the trending of customer usage, the clear intention of protecting 86% or 85% of the customers has been reducing because customers use a lot more electricity for the past few months, whereby based on the current mechanism set at threshold level of 600 kW, the outcome is that as at August, only 80% of the domestic consumers are being protected under the threshold level of 600 kWh per month.
The increase in consumption is contributed by many factors, among others, the increasing temperature, staying more at home due to work from home policy, as well as holidays, World Cup, and et cetera. This has been the main issues raised by our consumers because many customers have seen an increase in their electricity bill, not only because the consumption is higher, but also because they have crossed the 600 kWh band. With this cross in band, resulted in additional bill component in customers' electricity bill that are AFA, service tax, and also retail charges. Next. This is some historical perspective of how our AFA looks like for the past few months. Since July 2025 up until April 2025, AFA has been in the form of rebate to our consumers because fuel cost is below what we set in our base tariff.
The total rebate given to customers during this period amounts to about MYR 3.1 billion. However, due to the crisis in Middle East, the fuel cost has increased, and effective May 2026, customers have been seeing a surcharge of AFA in their electricity bill. To date, the total surcharge amounts to about MYR 0.8 billion. However, to cushion the impact to our customers, the government has also contributed about MYR 435 million, taking the fund from KWIE to cushion increase in AFA from May to August 2026. Next. This is what has been announced by Prime Minister last week. With the new extension of the threshold level from 600 kWh- 800 kWh to protect the domestic consumers, effective from September to December 2026. This increased the protection up to over 8 million domestic customers or up to about 90% of our domestic customers.
Additional protection to about 1 million consumers. Those using up to 800 kWh per month are now exempted from AFA, service tax, and also retail charges. Based on this exemption, we estimate that TNB will absorb about MYR 120 million-MYR 150 million of the AFA difference during this additional protection, plus the retail charges. When we estimate the numbers, this is based on a high-case scenario, and we expect that the actual number may be less than the one presented here. We have been taking a very conservative number, whereby we took the highest fuel prices for the past few months as well as Brent outlook moving forward. Next. What the customers will see in their electricity bill, this is an illustration. For example, before the new policy, if customers consumed 500 kWh per month, the bill will be about RM165 per month.
However, because of the factors mentioned earlier, some of the customers have seen a steep increase in their electricity bill when they use about 700 kWh per month, whereby they see an increase in their electricity bill of about RM40. First they have to pay for the additional consumption at the energy capacity and network charge, plus the three additional bill component where they have not been seen in their previous electricity bill, that are retail charge, AFA, and service tax. For this example, the increase is about RM40. However, with the extension of the new threshold level to 800, the customers will see a lower bill for using the same amount of electricity at 700 kWh per month, which is effectively a reduction of about 13%. However, the bill is still high as compared to their initial usage of 500 kWh per month. Next.
Thank you, Ranu. This will be a one-off cost adjustment that Tenaga will absorb. Even on the high side of MYR 150 million, this is still manageable. More importantly, this is temporary and targeted. It does not change the underlying AFA mechanism or the fundamental economics of TNB's regulated business. We will be transparent about any policy-related financial impact while we continue to protect the long-term sustainability and predictability of TNB. We will continue to honor our dividend policy as we have done, while committed to deliver value to our shareholders. Now we can take questions. Edwin?
Thank you, Puan Shahannom and Puan Azinda, for your presentation. We will now transition into the Q&A session. Participants are welcome to raise your questions. We have a question here. It is Noah from Khazanah Nasional Berhad. The question reads, given that there is a delay in the reflection of global fuel, which is coal and gas, prices within the AFA rates and the predicted December AFA rate stands at $0.058 per kW. Does TNB foresee that this rate will continue in 2027?
Thank you, Noah. We mentioned before that what we are absorbing is only from September to December. If we look at the Singapore website, it also stated that the fuel prices are actually on a downtrend. Looks like the fuel prices are stabilizing. From January onwards, I think, the government is working on a more permanent solution to resolve the temporary design gap.
We have another participant who has his questions ready. Isaac Chow. The question reads, comparing 2021 and 2022 to now, why did TNB decide to absorb the rising fuel cost this time, but not in 2021 and 2022?
I think, if we remember, Tenaga has absorbed this kind of cost in the past during COVID. This is also the same, where the government has shown that there is a need to assist the public with the high weather and the high fuel prices.
Another participant who has his question. Ahmad from Nomura. How does this change the revenue gap and price cap in regulatory adjustment?
This adjustment is completely separate from the regulated return. Our work is still intact. The regulated return is still intact. This is a one-off outside the regulatory framework.
We also have Max from RHB. He has two questions. The first question is, can you share the individual fuel cost assumption, example, coal, gas price, and Forex, for 120 to 150 million one-off cost adjustment? The second question is there a possibility for tax exemption for this one-off cost adjustment?
Okay. All right. The assumption we use up to 150 million is based on the high side of the fuel prices, whereby Brent is at $110 per bbl. For coal price, hovering about MYR 136- MYR 138. For gas, we estimate it can go up until MYR 74 per MMBtu for LNG, and Forex is at 4.2. That is the assumption that we use, which is a bit on the high side to ensure that we have some buffers.
Next.
On the tax. Yes. This will impact the total revenue for the group. And yes, there is a reduction in tax, Max.
Okay. Next, we'll move on with this other participant, Hazmy from CLSA. The question reads: Should we assume that KWIE fund is now running thin, and hence why Tenaga need to absorb the cost this time around?
Actually, this is based on a shared basis. We believe that the KWIE is still there. Because moving forward, as per what we have been practicing earlier, the government would still be cushioning some of the AFA should it increase too high to ensure affordability of the rakyat.
Next.
Okay. Maybe I can add one more. I forgot just now. The amount that we absorb for these three months period is only about 6% of our estimated AFA moving forward. This is quite a small amount, actually, as compared to the forecast actual additional AFA cost moving forward.
All right. We will move on to next, which is Yusof from Labuan Reinsurance Ltd. He has two questions. Number one, will the MYR 120 million- MYR 150 million cost absorption continue in 2027? If yes, will it significantly impact its earning in FY 2027?
Based on the current concurrence with the government, TNB will absorb this as a one-off relief to our customers up to December 2026 only. Beyond that, the government will relook at the AFA mechanism for a more sustainable policy moving forward.
Yes. The second question is, why does Tenaga decide to absorb the MYR 120 million- MYR 150 million in AFA? Is it because KWIE fund is insufficient? Is this the first time?
We have answered this question just now. It is a shared cost and the estimated share is only about 6% of the total AFA projection moving forward.
Next, we have Rachel Tan from UBS. Assuming a period of sustained increase in fuel price, how can we be sure that Tenaga will not continue to absorb the cost? What exactly needs to be resolved going forward in order for the cost to be fully passed through?
We believe that the current AFA mechanism is still intact because the current relief is only a one-off assistance to our customers. Based on our discussion with the government, they are already looking at the new framework beyond December 2026.
Next, we have CJ Tess from AIA. Any indications on the balances of KWIE fund?
Sorry, we do not have any indication, as it is governed by Energy Commission.
We also have a question from Joey Lam from Aberdeen. The question reads, is the KWIE fund depleted?
We do not have that information, but we can see that the trend government keep on cushioning the impact of AFA from time to time.
There seems to be a reply from Ahmad from Nomura. Ahmad's question reads, how does this change the revenue cap and price cap regulatory adjustment? We have answered that. He replied with, "Okay, let me make it clear. Based on the revenue cap adjustment, if revenue exceeds threshold, then TNB will need to return back to regulator. Similarly, the opposite applies. In the case there is a revenue shortfall, then there will be a regulatory revenue, same like FY 2025. This applies, right? As the higher threshold of 800 kWh will mean lower revenue collection, and in the event it is below the threshold, then there will be a regulatory adjustment. Correct?
No, Ahmad. This will be an adjustment that we do not do in the regulatory framework. This is adjustment that we do at corporate. It is similar to a contribution.
We will move on to the next question. We have Hafriz from TA Securities. Can you share what are the key aspects of the AFA that you are being reviewed?
At the moment, we don't have that clear visibility. It is at the government level. What we will need to understand that January onwards, the government will have a new policy for AFA.
Next, we have Azri from EPF. Will this impact TNB's credit rating by both domestic and global credit rating agencies? Are there any preliminary feedback from the credit rating agencies?
At the moment, we do not believe that this will impact our ratings, and we have not gotten any indication accordingly because I think, like some of you have also noted, that this amount, even on the high side, is still very small in comparative to our earnings.
Moving on, Max from RHB has a follow-up too. When you mentioned that the government is looking at a new framework in 2027, does that mean that we might revert to six-month or perhaps three-month fuel cost adjustment, versus monthly cost adjustments to reduce tariff adjustment frequency?
I believe it will not happen because AFA will still remain intact as it is. But if you look previously how ICPT works, they have differentiated ICPT, so I am not sure. Maybe that would be one of the solution moving forward, if that can give you some comfort level.
We also have another participant who also has a follow-up. Hasni asks, how should we think about the impact of this development to the upcoming RP5 submission and discussion?
We don't think that this will impact our submission because this is a one-off relief that TNB offers to our customers. Giving a one-off relief is not something new that TNB has done. We have given previously through the stimulus package rebate during the major flood. This is just another one-off relief to our customers, and probably this will give us some good positive way forward, being seen as a very proactive and supportive GLC to the country. Yeah.
Next, we have Fung from CIMB. His question reads, "Is there a room to restructure the electricity tariff further during RP4, such that if there are continued AFA exemption given to the users up to 800 kWh beyond 2026, that it could be absorbed by other electricity users?
If what you mean is changing the current electricity structure, I don't think so it will happen in RP4. Yeah.
Next, we also have Noah again from Khazanah Nasional Berhad. This time he has two questions for a follow-up. The first is, given that there is a delay in the reflection of global fuel prices within the AFA rates and the predicted December AFA rate stands at $0.054 kW, does TNB foresee that this rate will continue in 2027? We believe that we have answered this question. The other question is, what is the criteria for CRESS to come in and cushion or support the impact of higher fuel prices, which is AFA?
If we look at the trend, government has been supporting to cushion the impact of AFA. Based on previous implementation, the cushioning is about MYR 345 million.
MYR 435 million.
MYR 435 million, sorry. We believe it is also to some extent up to the 10% threshold level, because beyond that 10% threshold level, there will be another process. This is good for TNB actually, because it helps us to automatically implement AFA pass-through to the customers.
Next, we have Stephanie Cheah from JP Morgan. Were there any consultations done with the government prior to this decision to absorb the subsidy? Was this the same process during COVID, or how does it differ?
Yes. Definitely there is a consultation with the government. Similar process with what happened during COVID for stimulus package, as well as during the major flood in Kuala Lumpur or Selangor previously.
Next, we have Colin from Macquarie. Just to understand, the AFA policy can be changed despite still being under the same RP? Or is it more of a change in how the components are calculated or weighted?
Based on our understanding, the AFA policy remains intact whereby this is not a cost that gives us TNB any margin. This is a pure cost pass-through. The only thing that might change is the mechanism on how this cost is being transferred to customers. As far as AFA recovery is concerned, it is intact.
So far, those are all the questions that we have received. Are there any more questions from the participants? We have received one more question from the participant. Neo from KAF Investment Funds. Sorry for the digression. May I know whether TNB's regulated WACC could be affected by the reduction in the corporate renewable energy supply scheme, which is CRESS system access charge, as announced by PETRONAS last Friday?
Short answer, no. No, it does not affect our WACC.
Those are all the questions that we have received from the chat. Are there any more questions that will be coming in from the participants? I believe we have received all the questions. All right. We have received another question. The question reads, for AFA threshold, kindly remind us, is the 600 kW fixed for the RP4 or is it reviewed annually?
It is fixed for RP4.
There is also another follow-up question from the previous one. Is there any possibility that the cost pass-through mechanism will be revised moving forward?
Cost pass-through may be revised?
Yes, may be revised moving forward, which TNB might need to bear some of it.
No. We will be able to recover our costs.
Any more questions from these participants? There seems to be a few questions on the way. A follow-up from Max from RHB. Just to clarify, will the 800 kW be maintained for 2027, or will it revert back to 600 kW ?
It will be revert back to 600 kW .
There seems to be another question on the way. Our team is currently getting the question. The question reads, follow-up from Joey Lam. Hi. Can clarify what you mean by you are bearing the 6% of AFA?
Okay. What we meant is that MYR 120-MYR 1 50 is 6% of the total expected AFA moving forward based on the high-case scenario. If based on the previous AFA pass-through, the cost range up to MYR 600 million per month, and for purpose of estimation for this new threshold, we estimate it can go up to more than MYR 800 million per month. This is where we get that 6%.
Okay. This will be the last question that we have gotten from the chat box. Can you share some idea on how the AFA can be tweaked in 2027? If the cost is not shared with other users group, isn't it natural for government, TNB, or public to bear the cost?
I think simple example would be the differentiated ICPT previously, but as far as TNB, we will be ensured of recovering the additional fuel costs that TNB will incur moving forward. The mechanism can be a bit subjective depending on the government policy moving forward.
Okay. With that, we will proceed with the second round of Q&A. There are some participants who have lined up to ask the questions verbally. We will unmute them. We will start with Rachel Tan.
Hi. Thanks for taking my question. I would just like to check, what was the differentiated ICPT previously? When you said that the mechanism is subjective depending on government policy going forward, how would it be subjective? What are the factors that are subject to government subjectivity?
Okay. Based on historical, for example, during the ICPT implementation, domestic customers, low voltage customers is paying less ICPT as compared to the other customer category because the government's policy is to protect this vulnerable group to ensure competitiveness of the SMEs and affordability of the domestic consumers or the rakyat. This is an example of how it can be passed through, because the current AFA is one flat rate for everybody using more than 600 kWh per month for domestic, and for the rest of the customers, there is no exemption. We foresee that this may be also similar approach being taken by the government moving forward. But one important thing is that TNB will remain neutral as far as additional fuel cost is concerned.
Okay. It will just be based on the low tension or low voltage user. That is one way it could be adjusted. Understand. But what do you mean by the subjective mechanism depending on government policy going forward?
What is meant is depend on the government policy, who they would like, to which segment the government feels that need protection. That would be the mechanism. For example, like ICPT, the focus is on supporting or assisting the domestic consumers and also the SMEs. I am not sure moving forward, what will be the government way forward on January 2027 onwards.
That is very clear. Thank you very much.
We now revert back to the chat group. We have a question coming in from Hafiz, Citigroup Global Markets. The question reads, would you mind explaining the procedure for implementing this type of CSR and whether it was the government or TNB that started it? If a similar situation arises in the future, is it likely that TNB will offer another group of CSR?
I think this is one question that based on the historical, that something as a GLC we probably cannot avoid. Should there is another war or another COVID, then we will come in to assist the rakyat. That is expected of a GLC, I think. Should there be no more war, I think we are okay. Thank you.
With that, we will move on to another question. There is a follow-up from Hazmi. He said, not sure if I missed this, but why was 800 kWh chosen specifically? Was this based on the actual consumption distribution or was it essentially a policy decision? Once the threshold has moved from 600 kWh- 800 kWh , what prevents it from moving again to 900 kWh or 1,000 kWh if bill remains elevated?
Okay, how does this come about? Because the previous threshold level of 600 kWh is able to protect domestic consumers, 85% of our domestic consumers. However, because of the super El Niño and other factors affecting the consumption pattern of our customers, that 85% is no longer there recently. I think we have shared earlier whereby the 85% is reduced to about 80% latest because of the higher consumption by the domestic consumers. This 800 kWh is being taken into account to ensure that the protection of about 85%- 90% of the customers remain intact, up at least until December 2026. That is the basis of 800 kWh .
We are still waiting if there are any more questions from the participants. Okay, so we have one more question for today's briefing. This will be the last question for today. The participant is Mohazzim Abu Hasan . Sorry for being blunt, but as mentioned, essentially, the one-off bill cost absorption, is TNB helping out the government to manage tariff? Is TNB getting anything in return in any form of incentive?
No, because this is a one-off support for our customers, not to claim back from the government. Thank you.
With that, ladies and gentlemen, thank you for your questions, and that is all the time we have for today's Q&A session. For any questions that remain unanswered, rest assured that we will promptly address them following this event. If you require further clarifications of inquiries, feel free to contact our investor relations officers or email us at tenaga_ird@tnb.com.my. On behalf of Tenaga Nasional Berhad, we thank you for your participation in today's briefing and have a wonderful day. Thank you.