Note:
- ACP: Applicable Coal Price
- GCIN: globalCoal Newcastle
- Forecast as of 2 October 2026.
- Base case refers to emerging conflict, moderate case refers to escalating conflict, and high case refers to severe conflict.
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
The AFA for November 2026 recorded a surcharge of RM562 million (equivalent to 5.47 sen/kWh), primarily driven by higher fuel prices, which resulted in increased electricity generation costs during the period.
To cushion the impact of rising fuel costs on consumers, 34% of the AFA surcharge, amounting to RM192 million (equivalent to 1.87 sen/kWh), is mitigated through the utilisation of savings from the Energy Cost True-Up Adjustment (ECTUA) for July 2026. Therefore, as published by TNB in its website, the AFA surcharge to be implemented for November 2026 is reduced to 3.60 sen/kWh (equivalent to RM370 million).
In line with the recent announcement by the Government, domestic consumers with monthly electricity consumption of 800 kWh and below will continue to be exempted from the AFA surcharge until December 2026.
1.
Increase in fuel costs
In November 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 November 2026 is recorded at 136.81 USD/MT (Base price: 97 USD/MT). Based on the exchange rate of 4.0629 RM/USD for November 2026, this translates to a coal price of 25.47 RM/mmBTU (Base price: 19.14 RM/mmBTU at 4.307 RM/USD)
Gas
The Tier 2 gas price for November 2026 is recorded higher than the Base price:
- Tier 1: 35.00 RM/mmBTU (Base price: 35 RM/mmBTU)
- Tier 2: 68.68 RM/mmBTU (Base price: 46 RM/mmBTU)
AFA Outlook
As published by TNB in its website, AFA outlook from December 2026 to February 2027 is projected to range from +6.23 sen/kWh to +7.98 sen/kWh. This projection is based on the Base Case (Emerging Conflict) scenario, mainly driven by higher fuel prices resulting to higher energy cost.
In the latest outlook, fuel prices are trending upward, reflecting the impact of the geopolitical event (US-Israel-Iran conflict) and climate change due to El Niño.
1.
Higher average coal price
Average coal price of 141 USD/MT as compared to 137 USD/MT (equivalent to 26 RM/mmBTU as compared to 25 RM/mmBTU)
2.
Higher average Tier 2 gas price
Average Tier 2 gas price of 67 RM/mmBTU as compared to 59 RM/mmBTU
3.
Higher average exchange rate
Average exchange rate of 4.07 RM/USD as compared to 4.03 RM/USD
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: