KOTA KINABALU, SABAH, MALAYSIA Oct 11, 2025 – In a strong show of continued support, the Malaysian Federal Government has pledged RM1.2 billion in subsidies and RM765 million for grid infrastructure to address longstanding electricity instability in Sabah, as announced in the 2026 Federal Budget presented yesterday.
The allocations, part of a broader RM6.9 billion development envelope for Sabah, underscore the federal commitment to partnering with the state government on legacy issues of water and power supply, despite the state’s recent assumption of regulatory control over electricity in 2024. Water supply has long been a state responsibility, but both sectors require massive investments inherited from decades past, according to a statement from Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali.
“Although these are issues inherited over a long period and demand very substantial allocations, the Federal Government remains committed to working with the State Government to resolve both for the welfare of the people and the state’s development,” said Armizan..
The electricity-focused initiatives aim to enhance reliability across Sabah and the Federal Territory of Labuan, where integrated utility Sabah Electricity Sdn Bhd (SESB) – majority-owned by national utility Tenaga Nasional Bhd (TNB) – handles generation, transmission, and distribution.
Key highlights from the budget include:
– RM1.2 Billion Subsidy Package for Electricity Stability.: This breaks down into RM880 million for tariff support, fuel subsidies, and large-scale solar incentives – a 25% increase from the RM700 million allocated in 2025. An additional RM189.8 million targets Rural Electricity Supply (BELD) projects under the Ministry of Rural and Regional Development, while RM128 million funds new connection initiatives led by the Special Task Force for Sabah Electricity Supply (PPKBES) under the Ministry of Energy Transition and Water Transformation (PETRA).
– Southern Link Grid Project : Allocated RM765 million, this 330-kilometer, 275-kilovolt transmission line will connect Sabah’s east coast regions, including Sipitang, Tenom, Kalabakan, and Tawau. Phase I, spanning 60 kilometers, is already underway, with the new funding enabling Phase II to push forward. Planning for the full network dates back to the 1980s, with formal applications submitted over a decade ago under the federal Energy Commission (EC). The handover of regulatory powers from EC to the state-established Energy Commission of Sabah (ECoS) occurred earlier this year, yet federal backing persists to tackle persistent supply disruptions.
The minister emphasized that these measures reflect the federal government’s “concern to continue helping Sabah resolve the legacy issue of electricity supply instability,” even post-devolution.
On the water front, the government is channeling RM1 billion over 2024–2026 to upgrade infrastructure, including pipe installations in Tawau and replacements for aging lines in Kota Kinabalu, Penampang, and Putatan. These projects are in active implementation and are slated for completion in 2026.
Budget 2026, tabled by Prime Minister and Finance Minister Dato’ Seri Anwar Ibrahim on October 10, highlights Sabah’s pivotal role in national development, with the allocations poised to boost economic growth and improve living standards in rural and urban areas alike. State officials have welcomed the funding as a vital step toward self-sufficiency in essential services.