In December 2014, the government ended subsidies for 95RON gasoline and diesel,
with their prices now set monthly to track movements in international markets (as is
also the case for 97RON gasoline). Prior to the changes, retail prices were meant to vary
based on an “automatic pricing mechanism” (APM), but in practice they had rarely
changed since 2009 and instead the APM determined the subsidy or sales tax
exemptions required to maintain fixed retail prices. Subsidies remain in place for LPG
and diesel for public transport and the fishing industry. Malaysia has also been
reforming electricity prices, while making sure that power remains affordable for low
income households on a targeted basis. In January 2014, a pass-through mechanism
was introduced that adjusts electricity tariffs every six months to reflect changes in fuel
costs and allow other fixed costs to be recovered. Prior to these reforms, utilities had
racked up big losses when shortages of domestically produced natural gas supplied at
regulated prices required them to switch to more expensive LNG imports, distillates or
fuel oil to run power plants. Even with the increases, electricity prices in Malaysia
remain low compared to many other parts of Southeast Asia.