This article first appeared in The Edge Malaysia Weekly on March 17, 2025 - March 23, 2025

PLANS to increase the country’s water tariffs are underway. Consultations between the water operators, National Water Services Commission (SPAN) and the respective state governments are said to be commencing soon, with the aim of having the new tariffs implemented by July 1.

Meanwhile, the Ministry of Energy Transition and Water Transformation (Petra) has also agreed to introduce a new category of water tariff for data centres, at RM5.50 per m3. This means that data centre operators will no longer be charged as per other industrial facilities.

“What is happening is the consultation process among stakeholders has not started yet. The increase in tariffs has to be approved by the cabinet and announced by the [Petra] minister. It’s the minister’s power,” Charles Santiago, chairman of SPAN, tells The Edge, confirming the proposals.

The proposed hikes are, however, still under consideration by the respective state governments, according to sources privy to the matter. In Malaysia, land and water are considered state matters under the Federal Constitution.

As such, SPAN requires all of the water operators to get written approvals by March 31 from their respective state governments for the new tariff setting mechanism (TSM), the sources add. This is due to time constraints, as the plan is to implement the tariff hikes in July.

“After the water operators get their state approvals, SPAN will have to conduct public consultations. If [the water operators] do not get the approvals by the end of this month, time is running out for them to implement the plan by July,” one of the sources says.

According to the sources, Pengurusan Air Selangor Sdn Bhd has proposed tariff hikes at an average of 30% across the board for water usage in Selangor, Kuala Lumpur and Putrajaya — its second consecutive hikes in two years, following the earlier ones in January 2024.

At a 30% increase, the tariff for domestic users with individual meters for the first 20m3 of usage could increase to 68.4 sen per m3, from the current 57 sen per m3 in Selangor, Kuala Lumpur and Putrajaya.

This rate excludes electricity surcharges. Currently, electricity surcharge amounts to eight sen per m3.

The tariff for domestic usage between 20m3 and 35m3 stands at RM1.24 per m3 currently. An increase of 30% could mean that it would increase to RM1.61 per m3. For usage of more than 35m3, the tariff could rise to RM3.32 per m3, from the current RM2.55 per m3.

This means that a domestic user who uses 50m3 of water in a month could see their bill rise to RM87.63 from RM68.25. This excludes electricity surcharges.

Meanwhile, for non-domestic users, usage of 35m3 and less is currently charged RM2.62 per m3. If this rate is increased by 30%, non-domestic users could be looking at RM3.41 per m3 rate for the first 35m3 of usage.

Usage of more than 35m3 could be charged RM3.72 per m3, based on the current tariff of RM2.86 per m3.

This means that a non-domestic user who uses 100m3 of water a month could be looking at a water bill of RM361.15 under the new tariff, compared with about RM277.60 currently.

Other categories such as domestic users with bulk metres, houses of worship and charity organisations, and shipping are also expected to undergo hikes of around 30% in Selangor, Kuala Lumpur and Putrajaya.

The water sector has long been beset with under-investment, exacerbated by tariffs that fail to cover the cost of producing each m3 of water, resulting in sub-optimal services in many states.

For Air Selangor, specifically, it has long been calling for tariff rates that cover its production costs. In 2023, the company’s total cost stood at RM3.51 billion, while its total revenue was only RM2.82 billion.

Then there is the need for reinvestment or capital expenditure to maintain, upgrade or expand a company’s asset base to meet demand as the population and econmy grow. For example, Air Selangor is developing a 700 million litre per day (MLD) water treatment plant (WTP) in Rasau, which costs RM4 billion for the first stage.

Stage 2 of the Rasau WTP is estimated to cost around RM2.14 billion, which will double the plant’s capacity.

Meanwhile, the introduction of data centres as a water tariff category reflects the government’s commitment to ensure equitable access to water. In January, Minister of Natural Resources and Environmental Sustainability Nik Nazmi Nik Ahmad said he expected data centres to pay a premium for access to water and energy supplies.

The unchecked use of treated water for cooling and other operational needs by data centres threatens long-term water security, Santiago had warned in January, urging immediate action to reform the sector’s water consumption practices within the next three to five years.

SPAN had asked the federal government to establish comprehensive policies that mandate efficient water usage within the data centre sector, which should prioritise alternative water sources, have minimal environmental impact and promote sustainable development.

The federal agency had also called for a need for state governments to ensure raw water sufficiency before approving new data centre developments in areas where water demand is already high. 

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