Ministry rules out domestic water tariff increase to support data centre expansion

THE government has assured that domestic water tariffs will not be raised to accommodate the growing demands of data centres, the Senate was told on Monday.

Deputy Minister of Energy Transition and Water Transformation Akmal Nasrullah Mohd Nasir said the government has made it clear that the cost of upgrading both the electricity grid and water infrastructure to support incoming data centre developments must be borne by developers, not consumers.

He said enhancements to the grid are necessary for Regulatory Period 4 (RP4), which spans 1 January 2025 to 31 December 2027, following committed electricity demand exceeding 7,000 megawatts under Electricity Supply Agreements (ESA) between data centre operators and Tenaga Nasional Berhad (TNB), including projects scheduled for completion by September 2025.

“In this regard, the ‘user pays’ approach has been introduced under the new tariff schedule, whereby data centre users will shoulder the additional cost of strengthening the grid infrastructure to ensure that these costs are not transferred to other consumers,” he said during the Senate’s question time.

He was responding to Senator Datuk Rosni Sohar, who asked how the government is assessing the impact of rising data centre activity on national electricity and water usage and what guarantees exist to prevent tariff hikes that could burden the public and undermine domestic economic wellbeing.

Akmal Nasrullah added that a special Ultra High Voltage (UHV) tariff category has been created for data centres connected at high and ultra-high voltages to ensure a stable and sustainable electricity supply for the sector.

He also noted that water usage for cooling systems and server operations is rising in tandem with the expansion of large-scale data centres.

The government, he said, is implementing sustainable water management strategies to ensure that increased demand from the sector does not affect domestic consumers or other industries.

The National Water Services Commission (SPAN) has issued Water Supply Guidelines for Data Centre Developments, effective 1 September 2025, outlining technical requirements from planning to operational phases.

These include compliance with standards set by the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC).

“Operators are also encouraged to adopt green technologies such as efficient cooling systems, the use of reusable water, rainwater harvesting and water recycling within data centre operations to reduce reliance on treated water and to support the nation’s sustainability agenda,” he said. - December 8, 2025