Revised RP3 Gas Facility Base Tariff Doesn't Result In Higher Overall Gas Prices - FMM

KUALA LUMPUR, Dec 25 (Bernama) -- The revised gas facility base tariff for the Third Regulatory Period (RP3) from January 2026 to December 2028 does not translate into a higher overall gas price for end-users in the near term, says the Federation of Malaysian Manufacturing (FMM).

Its president, Jacob Lee Chor Kok, said FMM recognises that the determination of the base tariff for gas facility services, including transmission and distribution (T&D) pipelines, follows due regulatory process and considers the impact on stakeholders across both the power and non-power sectors. 

The revised gas facility base tariff for RP3 from January 2026 to December 2028 is likely to see a 16.7 per cent increase, particularly for T&D facilities, and the allowed tariff (revised annually) for January 2026 to December 2026 is expected to increase by 26.7 per cent.

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FMM also welcomed the transparent and structured mechanism under the Incentive-Based Regulation (IBR) framework for determining gas facility base tariffs, which are reviewed every three years by the Energy Commission and approved by the Government. 

“Based on current projections, the total gas price to be paid by end-users, including industrial customers, in the first quarter of 2026 (1Q 2026) is expected to be lower compared to 4Q 2025. This is because the regulated gas facility tariff accounts for approximately eight per cent of the total gas price paid by consumers. 

“In contrast, the gas molecule price constitutes more than 90 per cent of the end-user gas price and is benchmarked to the Malaysia Reference Price (MRP), which is influenced by international market conditions and supply-demand dynamics,” Lee said.

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The FMM president noted that with gas molecule prices forecasted to be lower in 1Q 2026, overall gas prices are expected to decline, resulting in estimated savings of about 1.97 per cent for end-users on the distribution pipeline (non-power sector) and 3.75 per cent for end-users on the transmission pipeline (power sector).

Lee said these savings for the power sector would also be aggregated and passed through to electricity users through the Automatic Fuel Adjustment (AFA) mechanism.

He added that looking ahead, gas prices for end users in 2027, inclusive of the facility tariff, are also projected to remain lower than 2025 levels, notwithstanding that more than 90 per cent of the price paid by consumers is determined on a willing buyer–willing seller basis. 

However, Lee also highlighted industry concerns over potential future volatility. 

He said that if gas molecule prices increase significantly due to global market developments, the overall cost impact on industries could be substantial, given the dominant share of molecule pricing in the total gas price structure.

“FMM also notes the Energy Commission’s clarification during the recent stakeholder engagement session that, despite a reduction in capital expenditure for the facility operator, the increase in the facility tariff is largely attributable to higher operating expenditure. 

“This includes costs associated with digitalisation initiatives such as metering upgrades, as well as reduced gas throughput arising from lower demand from certain sectors, including the rubber glove industry, which has resulted in underutilised pipeline capacity,” he said.

In this regard, Lee said FMM is hopeful that the Energy Commission will continue to ensure strong regulatory discipline, including avoiding any over-recovery of costs, and uphold the principle of fair and equitable cost distribution among all pipeline users, particularly through the annually adjusted allowed tariff. 

“FMM also emphasises the need for stakeholder engagement sessions to be held at a much earlier stage of the tariff determination process to enable meaningful consultation and informed stakeholder input. 

“Such assurances are crucial to maintaining industry confidence, cost competitiveness, and the long-term sustainability of Malaysia’s gas supply ecosystem,” he added.

-- BERNAMA