Malaysia built part of its data centre boom on the promise of affordable, reliable power. The Gulf crisis is testing the affordable part. Tenaga Nasional's automatic fuel adjustment, the monthly charge that passes changes in fuel costs through to bills, is set at a surcharge of 3.61 sen per kWh for October, the sixth consecutive positive month, according to paultan.org's report of the Energy Commission decision. TNB's three-month outlook points higher: 4.27 sen in November, 4.46 sen in December and 7.59 sen in January 2027, which would be the largest surcharge since the mechanism began in July 2025.
The government has extended protection to most households. It has not extended it to the large commercial and industrial customers that include Johor's data centres.
How the surcharge works
The AFA replaced Malaysia's earlier imbalance cost pass-through. It is calculated monthly as a surcharge or rebate based on fuel prices and exchange rates, with changes of up to 3 sen per kWh applied automatically and larger moves requiring cabinet approval. Single Buyer put the October surcharge at RM391 million, up from RM375 million in September, spread over higher demand, paultan.org reported. The computed rate has exceeded the 3 sen automatic band for five months running.
The cause is fuel. Malay Mail explained in July that some plants burn imported oil, diesel or gas under contracts priced in foreign currency, and that geopolitical events such as the US-Iran conflict can tighten fuel supply, push up oil and LNG prices and weaken the ringgit. October's input prices show the pressure. Tier 2 gas rose to RM58.92 per mmBtu from RM57.87 in September, against a base price of RM46. Coal was US$123.76 per tonne against a base of US$97. The ringgit, at 4.0834 to the dollar, was slightly firmer than the 4.307 base, which helped at the margin.
Who is protected
On 17 September the government raised the household protection threshold from 600 kWh to 800 kWh a month. TNB says domestic customers using 800 kWh or less from September to 31 December are fully exempt from the AFA, the RM10 retail charge and the 8 per cent service tax. TNB has said it will absorb RM120 million to RM150 million in foregone surcharges over those four months for more than eight million domestic users in the 600 to 800 kWh band, paultan.org reported, citing the New Straits Times. The protection lapses at the end of December, the month before the January projection of 7.59 sen.
No comparable shield applies to data centres. They pay the surcharge on every kilowatt-hour.
What it costs a data centre
The arithmetic is simple and large. A facility drawing 100 MW continuously for a 30-day month uses 72 million kWh. At October's 3.61 sen, the AFA adds about RM2.6 million to that month's bill. At January's projected 7.59 sen, it would add about RM5.5 million. Over a year at an average of 5 sen, the surcharge on a 100 MW load would come to roughly RM44 million. These are illustrative figures based on a constant load; actual bills depend on utilisation and contract terms.
Johor's scale multiplies the effect. Wood Mackenzie estimated in June that data centre maximum demand in Johor had reached about 3.8 GW, nearly one and a half times the state's current electricity demand of about 2.6 GW. Data centre load in the state more than doubled between 2024 and 2025, and Johor accounts for an estimated 51 per cent of data centre maximum demand across Peninsular Malaysia. Data centres use about 24 per cent of Johor's end-user electricity today, a share Wood Mackenzie expects to reach about 40 per cent by 2035. The state has attracted RM165 billion, or US$42 billion, of cumulative investment from hyperscalers and technology firms.
Gas and coal behind the meter
Johor's generation fleet makes the fuel link direct. Wood Mackenzie says the state has about 6.8 GW of installed capacity, mainly gas and coal plants, with strong links to the wider Peninsular grid. Supply is adequate for now. The constraint it identifies is local: shortages of 132 kV main intake substations and limited grid connection points around clusters such as Sedenak Tech Park and Nusajaya Tech Park.
The longer-term answer is more gas. Wood Mackenzie notes that about 2.1 GW of coal capacity in Johor is expected to retire in the mid-2030s, that reserve margins across the Peninsula are set to tighten as gas plant contracts expire, and that the NewGen26 tender for 6 GW to 8 GW of new gas-fired capacity is critical for long-term reliability. Planned solar and storage in the Southern Johor Renewable Energy Corridor could add up to 4 GWp.
Every one of those gas plants will expose consumers, including data centres, to the same fuel price swings now visible in the AFA. The crisis in the Gulf has shown that LNG and oil-linked prices can move sharply and stay high for months.
The Singapore comparison
Johor's data centre industry grew partly as overflow from Singapore, which has tightly rationed new capacity. Singapore's tariffs are also linked to gas prices and have also risen this year. The difference is that Johor's boom is larger relative to its grid. A data centre load one and a half times the state's other demand means that the cost of fuel for data centres is now a significant part of the state's overall energy picture.
What to watch
The January figure is the key date. If TNB's projection of 7.59 sen holds, the surcharge will roughly double from October's level just as household protection steps back to 600 kWh, raising the political cost of the mechanism. The government could extend protection or seek to smooth the surcharge through the Electricity Industry Fund, which partly subsidised July's rate.
For data centre operators, the near-term question is contract structure. Operators with fixed-price arrangements or renewable supply agreements are partly insulated. Those buying on standard tariffs carry the full fuel pass-through. For hyperscalers comparing Southeast Asian locations, the AFA is a reminder that cheap power in a gas-dependent grid is cheap only while gas is.