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Malaysia's RP4 electricity tariff, in effect since July 2025, replaced the Maximum Demand charge with separate Capacity and Network components, and swapped the six-monthly ICPT for a monthly AFA that has swung by more than 7 sen/kWh in a single year. If your team hasn't modelled what peak demand management could save under the new structure, are you certain you're not overpaying every month?
Malaysia's electricity tariff for commercial and industrial (C&I) customers underwent its most significant restructuring in over a decade when Regulatory Period 4 (RP4) took effect on 1 July 2025. Under the Incentive-Based Regulation (IBR) framework administered by the Energy Commission (Suruhanjaya Tenaga), the previously blended tariff was disaggregated into four distinct cost components, and the long-standing Imbalance Cost Pass-Through (ICPT) surcharge mechanism was replaced entirely.
Understanding this structure is now essential for any Malaysian business managing its electricity budget.
The RP4 tariff bill for C&I customers is made up of:
• Energy Charge: charged per kilowatt-hour (kWh) consumed. This reflects the cost of generating the electricity itself.
• Capacity Charge: charged per kilowatt (kW) of recorded peak demand per month. This replaces the former Maximum Demand (MD) single charge and reflects the grid capacity reserved exclusively for your premises.
• Network Charge: charged per kW for the use of TNB's transmission and distribution infrastructure.
• Retail Charge: charged per kW for TNB's retail service provision.
This cost-reflective unbundling is designed to signal the true cost of peak-time grid access and to incentivise businesses to reduce their demand spikes rather than simply their total energy consumption.
The applicable rates differ by tariff category.
Tariff C1 and C2 (low-voltage commercial premises)
Tariff C1/C2 applies to commercial premises such as office buildings, retail outlets, and hotels operating at low voltage. The current rates are:
• Energy Charge: 36.50 sen/kWh
• Capacity Charge: RM30.30/kW per month
Tariff E1 (medium-voltage industrial, flat rate)
Tariff E1 applies to medium-voltage industrial users who opt for a flat energy rate:
• Energy Charge: 36.00 sen/kWh
• Capacity Charge: RM45.10/kW per month
Tariff E2 (medium-voltage industrial, Time-of-Use)
Tariff E2 applies to medium-voltage industrial users on a Time-of-Use (ToU) structure:
• Peak Energy Charge: 52.00 sen/kWh (weekday business hours)
• Off-Peak Energy Charge: 28.60 sen/kWh (evenings, nights, weekends)
• Capacity Charge: RM89.27/kW per month
The capacity charge for an E2 user drawing 500 kW peak demand amounts to RM44,635 per month in capacity charges alone, before any energy consumption is counted.
Tariff E3 (high-voltage industrial)
Tariff E3 users benefit from a lower energy charge of 26.95 sen/kWh, reflecting the cost-efficiency of high-voltage supply.
The Automatic Fuel Adjustment (AFA) replaced the ICPT from July 2025 onward. Where the ICPT was revised every six months, the AFA is recalculated and published monthly by the Energy Commission, based on global fuel prices and exchange rate movements.
This monthly recalculation introduces new variability into electricity budgets. The AFA has moved materially month to month since its introduction:
• January 2026: -4.99 sen/kWh (a rebate for non-domestic customers)
• February 2026: -2.77 sen/kWh
• March 2026: -2.15 sen/kWh
• April 2026: -0.47 sen/kWh
• June 2026: +2.59 sen/kWh (a surcharge for non-domestic customers)
Businesses that previously built six-monthly ICPT assumptions into their energy budgets now face monthly fluctuations across a range that has exceeded 7.5 sen/kWh within a single calendar year.
The KWTBB (Kumpulan Wang Tenaga Boleh Baharu), or Renewable Energy Fund levy, is charged at 1.6% of the net electricity bill (after any applicable discounts). It applies to all tariff categories and funds SEDA Malaysia's renewable energy programmes. The rate has remained unchanged under RP4.
The power factor measures how efficiently a business converts electrical current into useful work. If the recorded power factor falls below 0.85, TNB applies a surcharge of 1.5% of the total bill for every 0.01 shortfall. If power factor falls below 0.75, the surcharge rate increases to 3% per 0.01 shortfall.
A business operating at a power factor of 0.80, five percentage points below the 0.85 threshold, incurs an additional 7.5% on its total electricity bill as a result.
Rooftop solar reduces both the energy units consumed from the grid and, when combined with smart demand management or battery storage, the recorded peak demand figure that determines the Capacity Charge. For E2 businesses with sharp demand spikes during shift changeovers or HVAC cycling, solar generation during peak hours directly offsets the costliest peak-period energy consumption at 52.00 sen/kWh.
The monthly AFA volatility adds further urgency: solar generation is priced at zero fuel cost, making it a partial hedge against AFA surcharges that cannot be forecast reliably beyond the current month.
Businesses looking to model their tariff exposure under the new RP4 structure and understand how solar and demand management can reduce their Capacity Charge and AFA risk can reach the i2 Energy team via the contact page.
What is the TNB capacity charge and how is it calculated?
The Capacity Charge is based on the highest 30-minute average electricity demand (in kW) recorded by your smart meter during the billing month. It is multiplied by the applicable rate for your tariff category, for example, RM89.27/kW per month under Tariff E2. A single demand spike can set your capacity charge for the entire month.
What replaced the ICPT surcharge on TNB bills in 2026?
The Automatic Fuel Adjustment (AFA) replaced the ICPT from July 2025. Unlike the ICPT, which was updated every six months, the AFA is recalculated monthly by the Energy Commission. It can be a surcharge or a rebate depending on fuel price and exchange rate movements.
How does the RP4 tariff affect my factory's electricity costs?
RP4 separates demand-related charges (Capacity Charge, Network Charge) from energy consumption charges. This means factories with sharp demand peaks, even brief ones, face higher identifiable costs than under the previous blended tariff. Businesses with flat, stable demand profiles are less affected.
What is the AFA in my TNB commercial bill?
The AFA (Automatic Fuel Adjustment) is a monthly per-kWh adjustment applied to all non-domestic customers, reflecting changes in fuel costs and exchange rates. For June 2026, the AFA was set at +2.59 sen/kWh; for January 2026, it was -4.99 sen/kWh. It appears as a separate line item on the bill.
How can solar panels reduce my TNB capacity charge?
Solar panels reduce the net energy drawn from the grid during daytime hours. When combined with a Battery Energy Storage System or demand controller that discharges during peak demand events, solar can reduce the maximum kW demand recorded by TNB's meter, directly reducing the Capacity Charge multiplied by RM89.27/kW/month for E2 users.
• Automatic Fuel Adjustment (AFA), Single Buyer, Single Buyer Malaysia, July 2025
• AFA rate for June 2026 set at +2.59 sen/kWh, Paul Tan, June 2026
• Charges & Penalties, Tenaga Nasional Berhad, TNB Malaysia, July 2025
• Business Bill Component, myTNB Portal, TNB Malaysia, July 2025
News
Malaysia's electricity tariff for commercial and industrial (C&I) customers underwent its most significant restructuring in over a decade when Regulatory Period 4 (RP4) took effect on 1 July 2025. Under the Incentive-Based Regulation (IBR) framework administered by the Energy Commission (Suruhanjaya Tenaga), the previously blended tariff was disaggregated into four distinct cost components, and the long-standing Imbalance Cost Pass-Through (ICPT) surcharge mechanism was replaced entirely.
Understanding this structure is now essential for any Malaysian business managing its electricity budget.
The RP4 tariff bill for C&I customers is made up of:
• Energy Charge: charged per kilowatt-hour (kWh) consumed. This reflects the cost of generating the electricity itself.
• Capacity Charge: charged per kilowatt (kW) of recorded peak demand per month. This replaces the former Maximum Demand (MD) single charge and reflects the grid capacity reserved exclusively for your premises.
• Network Charge: charged per kW for the use of TNB's transmission and distribution infrastructure.
• Retail Charge: charged per kW for TNB's retail service provision.
This cost-reflective unbundling is designed to signal the true cost of peak-time grid access and to incentivise businesses to reduce their demand spikes rather than simply their total energy consumption.
The applicable rates differ by tariff category.
Tariff C1 and C2 (low-voltage commercial premises)
Tariff C1/C2 applies to commercial premises such as office buildings, retail outlets, and hotels operating at low voltage. The current rates are:
• Energy Charge: 36.50 sen/kWh
• Capacity Charge: RM30.30/kW per month
Tariff E1 (medium-voltage industrial, flat rate)
Tariff E1 applies to medium-voltage industrial users who opt for a flat energy rate:
• Energy Charge: 36.00 sen/kWh
• Capacity Charge: RM45.10/kW per month
Tariff E2 (medium-voltage industrial, Time-of-Use)
Tariff E2 applies to medium-voltage industrial users on a Time-of-Use (ToU) structure:
• Peak Energy Charge: 52.00 sen/kWh (weekday business hours)
• Off-Peak Energy Charge: 28.60 sen/kWh (evenings, nights, weekends)
• Capacity Charge: RM89.27/kW per month
The capacity charge for an E2 user drawing 500 kW peak demand amounts to RM44,635 per month in capacity charges alone, before any energy consumption is counted.
Tariff E3 (high-voltage industrial)
Tariff E3 users benefit from a lower energy charge of 26.95 sen/kWh, reflecting the cost-efficiency of high-voltage supply.
The Automatic Fuel Adjustment (AFA) replaced the ICPT from July 2025 onward. Where the ICPT was revised every six months, the AFA is recalculated and published monthly by the Energy Commission, based on global fuel prices and exchange rate movements.
This monthly recalculation introduces new variability into electricity budgets. The AFA has moved materially month to month since its introduction:
• January 2026: -4.99 sen/kWh (a rebate for non-domestic customers)
• February 2026: -2.77 sen/kWh
• March 2026: -2.15 sen/kWh
• April 2026: -0.47 sen/kWh
• June 2026: +2.59 sen/kWh (a surcharge for non-domestic customers)
Businesses that previously built six-monthly ICPT assumptions into their energy budgets now face monthly fluctuations across a range that has exceeded 7.5 sen/kWh within a single calendar year.
The KWTBB (Kumpulan Wang Tenaga Boleh Baharu), or Renewable Energy Fund levy, is charged at 1.6% of the net electricity bill (after any applicable discounts). It applies to all tariff categories and funds SEDA Malaysia's renewable energy programmes. The rate has remained unchanged under RP4.
The power factor measures how efficiently a business converts electrical current into useful work. If the recorded power factor falls below 0.85, TNB applies a surcharge of 1.5% of the total bill for every 0.01 shortfall. If power factor falls below 0.75, the surcharge rate increases to 3% per 0.01 shortfall.
A business operating at a power factor of 0.80, five percentage points below the 0.85 threshold, incurs an additional 7.5% on its total electricity bill as a result.
Rooftop solar reduces both the energy units consumed from the grid and, when combined with smart demand management or battery storage, the recorded peak demand figure that determines the Capacity Charge. For E2 businesses with sharp demand spikes during shift changeovers or HVAC cycling, solar generation during peak hours directly offsets the costliest peak-period energy consumption at 52.00 sen/kWh.
The monthly AFA volatility adds further urgency: solar generation is priced at zero fuel cost, making it a partial hedge against AFA surcharges that cannot be forecast reliably beyond the current month.
Businesses looking to model their tariff exposure under the new RP4 structure and understand how solar and demand management can reduce their Capacity Charge and AFA risk can reach the i2 Energy team via the contact page.
What is the TNB capacity charge and how is it calculated?
The Capacity Charge is based on the highest 30-minute average electricity demand (in kW) recorded by your smart meter during the billing month. It is multiplied by the applicable rate for your tariff category, for example, RM89.27/kW per month under Tariff E2. A single demand spike can set your capacity charge for the entire month.
What replaced the ICPT surcharge on TNB bills in 2026?
The Automatic Fuel Adjustment (AFA) replaced the ICPT from July 2025. Unlike the ICPT, which was updated every six months, the AFA is recalculated monthly by the Energy Commission. It can be a surcharge or a rebate depending on fuel price and exchange rate movements.
How does the RP4 tariff affect my factory's electricity costs?
RP4 separates demand-related charges (Capacity Charge, Network Charge) from energy consumption charges. This means factories with sharp demand peaks, even brief ones, face higher identifiable costs than under the previous blended tariff. Businesses with flat, stable demand profiles are less affected.
What is the AFA in my TNB commercial bill?
The AFA (Automatic Fuel Adjustment) is a monthly per-kWh adjustment applied to all non-domestic customers, reflecting changes in fuel costs and exchange rates. For June 2026, the AFA was set at +2.59 sen/kWh; for January 2026, it was -4.99 sen/kWh. It appears as a separate line item on the bill.
How can solar panels reduce my TNB capacity charge?
Solar panels reduce the net energy drawn from the grid during daytime hours. When combined with a Battery Energy Storage System or demand controller that discharges during peak demand events, solar can reduce the maximum kW demand recorded by TNB's meter, directly reducing the Capacity Charge multiplied by RM89.27/kW/month for E2 users.
• Automatic Fuel Adjustment (AFA), Single Buyer, Single Buyer Malaysia, July 2025
• AFA rate for June 2026 set at +2.59 sen/kWh, Paul Tan, June 2026
• Charges & Penalties, Tenaga Nasional Berhad, TNB Malaysia, July 2025
• Business Bill Component, myTNB Portal, TNB Malaysia, July 2025
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