Higher average coal price
~120 USD/MT equivalent to ~22 RM/mmBTU, based on exchange rate of ~4.03 RM/USD (prior conflict forecast price is ~113 USD/MT equivalent to ~20 RM/mmBTU, based on exchange rate of ~3.92 RM/USD)
What is AFA
AFA mechanism promotes more transparency, cost-reflective, cost-efficient and reduce the timing gap in fuel prices and foreign currency exchange.
When fuel price increase/decrease, AFA will reflect accordingly.
In summary, AFA mechanism helps to better manage the fuel price volatility.
Why AFA surcharge?
As published by TNB in its website, AFA for May 2026 is recorded as a surcharge of RM 236 million (equivalent to 2.24 sen/kWh) mainly due to higher fuel prices which then reflected higher generation cost during the period.
Note: Domestic customers with monthly consumption of 600 kWh and below will not be affected by AFA.
1.
Increase in fuel costs
In May 2026, fuel prices are higher than the baseline prices used in tariff setting, resulting in an overall increase in generation costs.
Coal
The coal price for May 2026 is recorded at 118.06 USD/MT (Base price: 97 USD/MT). Based on the exchange rate of 3.9341 RM/USD for May 2026, this translates to a coal price of 21.28 RM/mmBTU which is above the Base price of 19.14 RM/mmBTU.
Gas
The Tier 2 gas price for May 2026 is recorded higher than the Base price:
- Tier 1: 29.37 RM/mmBTU (Base price: 35 RM/mmBTU)
- Tier 2: 64.49 RM/mmBTU (Base price: 46 RM/mmBTU)
2.
Additional generation cost for February 2026
Following the least-cost dispatch principle, the system had fully utilised all available generation sources, including coal, gas, solar, and hydro. However, due to the unavailability of two (2) coal plants and lower lake levels at Temenggor and Kenyir, higher gas generation and the use of alternate fuels were required to meet electricity demand in February 2026.
Consequently, actual generation costs for February 2026 increased by 11%, driven by (i) higher gas consumption resulting in additional fuel costs, and (ii) the use of alternate fuels at an average price of ~RM76/mmBTU. This additional generation cost in February 2026 is reflected the May 2026 AFA.
Consequently, actual generation costs for February 2026 increased by 11%, driven by (i) higher gas consumption resulting in additional fuel costs, and (ii) the use of alternate fuels at an average price of ~RM76/mmBTU. This additional generation cost in February 2026 is reflected the May 2026 AFA.
AFA Outlook
As published by TNB in its website, AFA outlook from June to August 2026 is projected to range from +0.22 sen/kWh to +3.93 sen/kWh, mainly due to higher fuel prices which then reflected higher generation cost.
In the latest outlook, fuel prices are trending upward, reflecting the impact of the geopolitical event (US-Israel-Iran conflict).
In the latest outlook, fuel prices are trending upward, reflecting the impact of the geopolitical event (US-Israel-Iran conflict).
Note: Domestic customers with monthly consumption of 600 kWh and below will not be affected by AFA.
Higher average Tier 1 gas price
29 RM/mmBTU (prior conflict forecast price is 27 RM/mmBTU)
Higher average Tier 2 gas price
65 RM/mmBTU (prior conflict forecast price is 46 RM/mmBTU)
Global Fuel Prices & Forex Trends insights
Coal
Forex Trending
Gas
What is Automatic Fuel Adjustment (AFA)?
AFA is a mechanism under the Incentive-Based Regulation (IBR) framework that allows for automatic monthly adjustments to reflect the variation (either rebate or surcharge) in the variable component of the Energy Charge, where it is subjected to the (i) movement in the global fuel prices (e.g. coal & gas) and (ii) movement in the foreign currency (e.g. USD to RM).
Why was AFA introduced?
AFA mechanism promotes more transparency, cost-reflective, cost-efficient and reduce the timing gap in fuel price and foreign currency exchange.
The monthly AFA helps to:
1. Reflects current fuel prices
AFA stays aligned with current market conditions
2. Improves transparency
Customers can see that the increase or decrease of AFA is tied to fuel price movements
How is AFA different from ICPT?
AFA reflect monthly adjustment to electricity tariff based on the fuel cost changes driven by movements in the global fuel prices and foreign exchange rate.
The difference between Imbalance Cost Pass-Through (ICPT) and AFA are tabulated as below:
How is AFA calculated?
AFA is calculated by comparing the actual fuel cost used in electricity generation against the base fuel cost set in the tariff. If actual costs are higher, a surcharge is applied; if lower, a rebate is given.
What is the base fuel price used in AFA?
Coal
97 USD/MT equivalent to 19.14 RM/mmBTU (based on exchange rate of 4.307 RM/USD)
Gas
• Tier 1 (RMP for <800 mmscfd): 35 RM/mmBTU
• Tier 2 (13% Brent for >800 mmscfd): 46 RM/mmBTU
What factors influence AFA?
AFA is influenced by movements of fuel prices and exchange rate, system conditions (i.e. generators availability, weather conditions which will affect hydro lake levels and solar generation), as well as geopolitical events.
For instance, when coal and gas prices increase above their base prices, the cost of generating electricity rises, which contributes to a higher AFA rate.
How do global market conditions impact AFA?
Global factors such as supply-demand conditions, currency movements, and geopolitical developments can influence fuel prices, which in turn affect AFA as illustrated further below: