Back to Bangkok Post
Back to index page

Go to top

Go to business news updates
Back to Economic Review index page

 

The tariff structure was revised to more fairly reflect costs and user demand amid continuing efforts to ensure supply meets projected requirements in the years to come

 

ELECTRICITY

The lights go on again

BOONSONG KOSITCHOTETHANA

Demand for electricity returned to moderate growth in the past year, reflecting the gradual recovery from the economic meltdown.

The increase in demand is forecast to continue at current rates in 2001.

Power consumption in the fiscal year to last Sept 30 was 7% higher than in the previous year at 96,768 gigawatt hours (GWh), while peak energy demand increased by 8.79% or 1,200 megawatts to 14,918 MW on April 5, 2000, the highest level for three years.

Thienchai Chongpeepien, chairman of the Thailand load forecast sub-committee, said the increase in demand reflected the moderate economic recovery module projected earlier for this country at 4.5-5%. Electricity consumption is closely correlated to GDP growth.

Driving the growth was industrial demand, especially from sectors such as steel, cement and petrochemicals, which required 10% more electricity last fiscal year than in the previous year.

Demand for electricity in the commercial sector expanded by 8% while household electricity demand grew by 3%.

For the year that began last October, total electricity demand is expected to sustain growth of 7-8% with generation requirements surpassing 100,000 GWh and peak demand soaring to 16,200 MW, according to the chief of the government-appointed power planning body.

The electricity demand projection for 2001 is based largely on the assumption that Thailand, the cradle of the 1997 Asian financial crisis, would continue to achieve the same rate rate of economic growth as in 2000.

The increase in electricity consumption, at an annual rate 1,200-1,400 MW, indicates the need for Thailand to pay more attention to ensure it can increase generating capacity.

Although the country's expected generating reserve margin stands as high as 40-45% above projected demand over the next five years, there is a chance that that the reserve margin could fall to the normal level of 25% in 2005 if certain new power development projects do not come on line within the expected time frame.

The failure to complete the two coal-fired projects opposed by Prachuap Khiri Khan villagers on environmental grounds - Union Power Development Coûs 1,400-MW Hin Krut scheme and Gulf Power Generation's 700-MW Bor Nok plan - in the next four or five years could result in power shortages.

''It is therefore essential for us to look urgently for contingency plans, coming up with alternative schemes, in case the projects cannot meet the planned time frame,'' Mr Thienchai said.

Construction of new power generating plants in Thailand is becoming complicated and taking more time than previously as the projects are subject to opposition by some communities, environmentalists and non-government organisations.

Tariff revamp

Thailand has adopted a revamped national power tariff structure which sees the overall electricity charge reduced by 2.11%, in spite of the rising fuel prices which would otherwise have increased the tariffs.

The tariff reduction was largely achieved at the expense of the Electricity Generating Authority of Thailand (Egat) which was denied approval to pass on to consumers the substantial increase in fuel costs.

Egat officials said the state power utility had to shoulder 15 billion baht in fuel costs over the past seven years or so because of government policies to restrain power prices.

After last October, the average tariff declined to 2.2573 baht/kWh from 2.2097 baht/kWh under a new regime worked by the Thai energy authorities with assistance from PricewaterhouseCoopers, a UK consulting firm hired to help map out a new structure for tariffs.

The new structure was said to reflect most realistically the cost of production, trimming cross-subsidies among various consumer groups without requiring any party to pay more.

Re-classification of users was adopted, bringing medium-scale commercial users, who consume more than 250,000 kWh a month or demand more 1,000 kV, into the bracket of large-scale commercial and industrial users.

That means sectors such as hotels pay less, while small-scale residential users pay the same charge as under the previous structure as they continue to be subsidised.

There are significant changes under the new tariff structure which was revised from the pattern considered earlier in 2000 by the National Energy Policy Office and the UK consultant. The approved new regime has several new elements.

The first of these is to include the current fuel adjustment cost, a variable cost component in the power tariff pricing that is technically known as Ft, into the base tariff which represents the fixed costs.

In other words, the current Ft of 64.52 baht constitutes part of the base-tariff structure. Then, new Ft charges, largely the reflection of fuel costs and foreign exchange fluctuation, will be determined.

Factors used to calculate the Ft under the new structure will be the expenditure on fuel and power purchases, in other words the cost of fuel at Egat's own power stations and the price of power Egat purchases from private producers and neighbouring countries.

After next February, Egat must assume its own risks arising from foreign-exchange fluctuations and cannot pass on the impact into the Ft cost, which is adjusted every four-month period.

However, between now and then Egat is allowed to include the foreign-exchange impact in the Ft calculation, but only if the exchange rate is between 38 and 45 baht to the US dollar.

Benefits arising from the appreciation of the baht above 38 to the dollar must be passed on to consumers through the Ft calculation.

Egat was given six months to prepare for the changes.

Since August 1999, electricity tariffs have increased by about 15% through four different adjustments of the Ft tariff, though the base tariff remained largely intact for more than four years.

Among the other changes, the wholesale tariff structures under which the Electricity Generating of Thailand (Egat) sells to the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) have been made similar, based on generation costs and transmission charges. However, the differences are on the voltages and times of use as follows:

• evoking the MEAûs subsidy of the PEA, and now requiring the MEA to provide a lump-sum financial transfer to the PEA, amounting to 7.979 billion to 9.152 billion baht a year between 2001 and 2003. This will ensure that the two electricity distribution enterprises meet the financial criteria required.

• aking the costs of energy-saving campaigns and products out of the Ft cost calculation.

Senior Egat officials said that political interference was evident last August when the government allowed Egat to raise the Ft cost for the August-November period by only 3 satang/kWh against 6.5 satang/kWh proposed by Egat.

By the end of that period, the current Ft should have increased by 50 satang/kWh to reflect all the accumulated costs that had not been passed on for some years. That means Egat is shouldering costs totalling 47 satang for every kWh it generates.

Chalermchai Ratanarak, deputy Egat governor, said oil prices had risen 30% from August to October.

Other issues

• Tractebel, a Belgian energy group owned by France-based Suez Lyonnaise des Eaux, has acquired the entire power generation assets in Thailand of the US energy corporation Sithe Energies Inc for US$490 million.

The Nov 9 accord marks Tractebel's major expansion in the Thai and global energy industry and ends Sithe's presence in Thailand and in some other countries where it is selling power assets. The sale covers five co-generation plants in Thailand, mostly natural gas-fired, with generating capacities of 1,022 MW of electricity and 820 MW of thermal energy in the form of steam.

The sale included Sithe's 62% stake in Cogeneration Plc (Coco), the countryûs largest small power producer (SPP) that operates three cogeneration plants in Rayong. These plants have a combined electricity generating capacity of 770 MW and 930 tonnes per hour of steam.

The transaction also sees Tractebel acquiring the 100% interest held by Sithe in two other SPP projects in Thailand - Samut Prakan Cogeneration Co and Nong Khae Cogeneration Co. Both located in Greater Bangkok, the plants each have a capacity of 126 MW of power and 35 tonnes per hour (30 MW thermal) of steam.

• The Electricity Generating Plc (Egco), Thailand's first independent power producer, has acquired an additional 5% stake in Laos' largest hydro electric scheme - Nam Thuen 2 - from Transfield Pty Ltd of Australia.

The US$4.875m deal underlines Egco's strategy to build up its power-related portfolio, especially those overseas as new power opportunities in Thailand have become limited in the near to medium term due to excessive electricity supply.

The Thai independent power producer earlier this year bought a 40% stake in Conal Holdings Corp, an affiliate set up by Alsons Consolidated Resources Inc of the Philippines, to acquire, invest in and develop power businesses in the Philippines and abroad.

Egco is set to double its generating portfolio over the next three years to 5,000 MW from 2,105 MW recently being rendered from its two gas-fired power houses in Thailand, more specifically in Nakhon Si Thammarat and Rayong.

Back to Economic Review index page
Go to top of this page
Go to business news updates
Back to Bangkok Post front page