A system for lasting stability, instead of fleeting fixes

How Malaysia’s electricity tariffs work differently from its regional neighbours. 

The topic of electricity tariffs has been a hot-button issue in recent months, with many Malaysians raising concerns about rising costs.

Meanwhile, in Singapore and Thailand, recent announcements of tariff reductions for 2025 have sparked curiosity: Why aren’t we doing the same in Malaysia?

The answer lies in how electricity prices are structured across ASEAN.

While Singapore and Thailand may see temporary price cuts, Malaysia follows a different system—one that prioritizes long-term stability over short-term market reactions.

Let’s take a closer look at what this means for Malaysia and how it compares to our neighbours.

Not All Electricity Tariffs Are the Same

Electricity tariffs in Southeast Asia aren’t calculated the same way. Each country uses its own pricing mechanism based on market structure, fuel dependency, and government policies.

Take Singapore and the Philippines, for example. Both operate under liberalised electricity markets, where prices fluctuate frequently based on supply and demand.

• In Singapore, electricity tariffs are reviewed every three months, responding directly to global fuel price changes.
• In the Philippines, prices adjust monthly, leading to sharper increases or decreases depending on market conditions.

On the other hand, Malaysia follows a regulated framework known as the Incentive-Based Regulation (IBR) model. This system is designed to smooth out price changes and prevent sudden spikes or drops.

This difference became especially apparent in 2022, during the global energy crisis sparked by the Russia-Ukraine conflict.

While soaring gas and oil prices led to a significant energy crisis in Singapore–with tariffs rising approximately 10% in early 2022 and further increases throughout the year–Malaysia managed to shield its domestic consumers.

Thanks to the Imbalance Cost Pass-Through (ICPT) rebate of 2 sen per kilowatt-hour (kWh), residential users in Malaysia avoided tariff surges despite rising fuel costs.

How Malaysia’s Tariff System Works

Malaysia’s IBR model has two main components:

1. The Base Tariff – This is the core electricity rate, fixed for a three-year period. It provides stability for consumers by avoiding abrupt price changes.
2. ICPT – Every six months, the government reviews global fuel prices and adjusts tariffs accordingly. This ensures that changes in energy costs—whether up or down—are reflected gradually.

By spreading out price adjustments, Malaysia protects consumers from the kind of sharp fluctuations often seen in liberalized markets like Singapore and the Philippines.

Why Aren’t We Cutting Tariffs Like Thailand and Singapore?

It’s tempting to look at tariff reductions elsewhere and wonder why Malaysia isn’t following suit. But it’s important to remember that these countries operate very differently.

• Singapore’s tariff reduction comes after significant price hikes in previous years, driven by its heavy reliance on imported natural gas (94% of its energy mix). While recent drops in gas prices have allowed for a tariff cut, any future price increase could quickly reverse this trend.
• Thailand’s recent reduction is part of a government intervention to address affordability concerns. However, this move may be temporary and could change if global energy prices rise again.

In Malaysia, our system is structured for long-term stability. Instead of reacting to short-term market movements, tariffs here are adjusted gradually to ensure predictability for both consumers and businesses.

Fuel Mix: Why It Matters

Another key factor influencing tariffs is the type of fuel used for electricity generation.

• Malaysia relies on a mix of coal (54%) and natural gas (38%), with government-regulated gas prices helping to keep costs relatively stable.
• Singapore, in contrast, generates 94% of its electricity from imported natural gas, which is more expensive and highly volatile.
• Other ASEAN nations, such as Laos and Myanmar, depend largely on hydroelectric power, while countries like Indonesia rely heavily on coal.

This difference in fuel mix explains why electricity costs—and tariff adjustments—vary so much across the region.

What Does This Mean for Malaysia?

Malaysia’s tariff system isn’t designed to chase short-term price dips. Instead, it focuses on gradual, predictable adjustments that balance affordability with long-term energy security.

Even with the upcoming tariff adjustment, Malaysia’s electricity rates remain among the lowest in ASEAN.

The country’s regulated framework ensures that consumers are protected from sudden price shocks, while ongoing investments in renewable energy aim to reduce dependency on fossil fuels in the future.

So, all in all, while tariff reductions in Singapore and Thailand may seem appealing, they highlight the differences in how electricity pricing works across ASEAN.

Malaysia’s approach may not deliver immediate price cuts, but it prioritises long-term stability and predictability.