Sky-high summer surge
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Sky-high summer surge

Businesses are pleading for lower power bills as rising temperatures push up energy costs

Higher power tariffs have affected industries that are grappling with increased operational costs, especially during hot months.
Higher power tariffs have affected industries that are grappling with increased operational costs, especially during hot months.

Greater power usage during the summer months is heating up electricity prices as people crank up air conditioners.

A surge in power bills has again sparked calls for state help, which led to the revision of the four-month power tariff last week and sparked a debate over more effective solutions.

While authorities struggle to tame the tariff, with the latest effort cutting the rate to 4.70 baht per kilowatt-hour (unit), suggestions keep rolling in such as requests for an additional tariff cut, better control of electricity and more support for renewable energy.


The decision to trim the new power tariff of 4.77 baht a unit, scheduled to take effect from May to August, to 4.70 baht a unit may bring some relief, but what is deemed a suitable rate remains up for debate.

The Energy Regulatory Commission (ERC) insists the power tariff has been carefully calculated, based on the need to help the state-run Electricity Generating Authority of Thailand (Egat) ease its financial burdens.

The latest call for a tariff reduction came from a fuel tariff (Ft) calculation panel, which is expected to forward its resolution to the ERC board on April 26 for approval.

In addition to prices of imported liquefied natural gas (LNG), which is the primary determinant for the power tariff, the rate is also influenced by the decision on how much money from electricity bills will be paid to Egat, said Khomgrich Tantravanich, secretary-general of the ERC.

"Thais used electricity at prices lower than power generation costs for three years because of subsidies from state agencies, notably Egat," he said. "There is a need to adjust the power tariff in order to pay back money to Egat."

The power tariff, which comprises the base tariff and Ft, is used to calculate power bills.

The base tariff refers to the cost of power plants and distribution systems, while Ft varies with fuel costs.

The government previously provided subsidies and discounts on electricity bills to ease the impact of the pandemic, which first affected Thailand in early 2020, as well as the Russia-Ukraine war that erupted in February last year and led to a surge in global oil prices.

Egat, together with the Finance Ministry and state electricity distribution arms Metropolitan Electricity Authority (MEA) and Provincial Electricity Authority (PEA), jointly subsidised electricity prices.

From September 2021 to December 2022, Egat alone provided the subsidies, plunging the agency into a loss of 150 billion baht.

A tariff rate of 4.77 baht a unit, with a Ft of 0.98 baht per unit, could help Egat reduce its financial burden to around 114 billion baht, said the ERC.

The rate was reduced to 4.70 baht a unit, which means the Egat payback period is extended to two years and four months instead of two years, according to media reports.

The commission previously approved a 4.77-baht rate for both businesses and households.

The current power tariff rates, applicable from January until April 2023, are 5.33 baht per unit for businesses, up 13% from the previous record high of 4.72 baht per unit, and 4.72 baht per unit for households.

Despite the lower tariff rate for businesses, the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) has asked Prime Minister Prayut Chan-o-cha to consider a further power tariff cut.

Mr Khomgrich declined to comment on the JSCCIB's request, but warned of recurring high energy prices, which can make power bills more expensive.

A source at the Energy Ministry who requested anonymity accused the JSCCIB of not voicing its opinion on the 4.77-baht rate when the ERC offered three proposed rates -- 4.77, 4.84 or 6.72 baht per unit -- during public hearings from March 10-20.


The Federation of Thai Industries (FTI) is asking energy authorities to find ways to reduce the power tariff to 4.4 baht a unit, saying this rate would be good for the Thai economy.

A rate of 4.4 baht a unit would not only relieve people's financial burdens, but also allow businesses to reduce product prices and help Thailand attract more foreign investment, said Wiwat Hemmondharop, vice-chairman of the FTI.

Higher electricity bills have been blamed for forcing entrepreneurs to increase product prices since late last year, eventually increasing households' cost of living.

If electricity prices are reduced, Thailand would be more attractive as an investment destination, he said.

"Our electricity bills are much more expensive compared with Vietnam's. This problem affects both business and household sectors," said Mr Wiwat.

The Vietnamese government imposes a power tariff of 2.8 baht a unit, making the country more appealing to investors, he said. This makes Thailand less competitive in attracting foreign investors, said Mr Wiwat.

Kriengkrai Thiennukul, chairman of the FTI, said high energy prices may have caused foreigners to delay investment plans in Thailand. Some foreigners who signed investment agreements with Thai companies decided to cancel the deals because of this problem, he said.

In December 2022, the business sector asked the government to consider maintaining the power tariff at 4.72 baht a unit between January and April this year, extending the Egat repayment period, and redesigning the energy price structure to enable Thailand to better compete with neighbouring countries, according to a source at the JSCCIB.

Businesses knew at that time they would have to bear more expenses for electricity, but did not know the ERC would implement different rates for households.

The 4.72-baht rate was in place between September and December last year, an increase of 18% from 4 baht a unit applied between May and August 2022. In the first four months of 2022, the power tariff was 3.78 baht a unit.

Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said most entrepreneurs are greatly concerned about rising energy prices, which have led to increased operational costs and price hikes. This will eventually affect inflation and burden the population, he said.

According to Mr Sanan, the chamber also called on the energy regulator to help cap or reduce the power tariff rates to lower the public's financial burden as the ERC works to carefully manage energy prices.

He said lower natural gas prices offer room to reduce electricity bills and promote the country's economic recovery.

"The Chamber of Commerce recommended the government closely monitor the production costs of businesses, particularly energy prices, to ensure they remain at a reasonable level and do not increase the financial burden on operators," Mr Sanan said.

"As part of this proposal, the private sector has urged the National Energy Policy Council to review the power tariff rates in order to alleviate the financial strain on both households and businesses."

The government was requested to consider adjusting the estimation method for the cost of natural gas and LNG prices, which are used to calculate electricity costs, using prices that reflect the LNG import plan for May-August 2023 instead of using data for January 2023, which had higher prices. This method would help alleviate the impact of electricity prices on all sectors, according to the private sector.

The chamber also proposed the government establish a joint standing committee on energy to allow the private sector to participate in energy policy decisions and jointly implement various energy assistance measures to ease the impact of high prices on all sectors, he said.


Higher power bills are also driven by Thailand's huge surplus of power generation capacity in reserve, with additional electricity supply coming from power companies.

Egat is blamed for signing too many power purchase agreements with power companies to buy their electricity, according to analysts. Each deal, lasting 25 years, forces Egat to pay for electricity throughout the whole period. This is known as an availability payment (AP), though the actual usage may be lower during the agreed-upon time frame.

An AP ensures electricity is always available to avoid blackouts, but it increases the power tariff.

Total power generation capacity in Thailand is 53,425 megawatts, which is much greater than electricity consumption during the peak day of the hot season, which was recently 33,177MW, according to media reports.

Wattanapong Kurovat, director-general of the Energy Policy and Planning Office, said a high capacity reserve is important because only 70% of the 53,425MW can serve demand.

Part of the electricity supply comes from intermittent renewable energy sources, such as the sun and biomass. Solar panels generate electricity during the daytime, while some plants producing biomass fuel are only available in certain seasons.

Rosana Tositrakul, an energy advocate and former Bangkok senator, said earlier if more power generation was provided by Egat, authorities would not spend so much on APs to energy firms, most of which are listed on the stock exchange.

According to energy officials, Egat's generation proportion tallies 31% of the total, with 10% of electricity imported from Laos and the remainder supplied by power companies.

Solar panels installed on the roof of a car park can reduce a building's electricity bill. PATTANAPONG HIRUNARD


Analysts expect power plant operators' profits to rise by 40% this year to 53 billion baht, thanks to high electricity costs and Ft hikes. Gulf Energy Development is listed as the standout stock in the sector.

UOB Kay Hian Securities expects SET-listed power producers' earnings to recover from the first quarter of this year onwards, maintaining its overweight rating.

The share prices of power plant operators dropped for two years from 2021-22 because of the economic slowdown, but are now rebounding as the cost of natural gas has gradually decreased.

Last year, the market was concerned about a lower than expected Ft and a sharp rise in interest rates, resulting in a poor performance for power plant stocks in the fourth quarter. The sector's share price is down 11% since the beginning of 2023, significantly worse than the overall stock market index.

"Power plant share prices remain cheap. When electricity consumption increases, this group of stocks becomes attractive again," said the brokerage.

UOB Kay Hian projects 2023 net profits for the power plant sector to increase by 40% to 53 billion baht, driven by a low profit base last year and lower gas costs. In addition, demand has recovered strongly since Covid infections began to subside.

"We still have a positive view of this sector and are overweight on Thai power plants as the group's profits have bottomed out. Other positive factors are the likelihood interest rates are going to peak soon and fuel costs are lower in 2023," the brokerage noted.

The research department of Yuanta Securities said the higher Ft will continue to support net profit increases for power plant stocks in the first quarter this year. But that trend might change if the government decides to lower the Ft in the next update for the May-August period.

Analysts plan to watch the next government's policies to lower consumer living costs, which could include reducing the Ft. Such a move could affect the profitability of power plant stocks in the future.

Voraphat Vorachet, securities strategist at Krungsri Capital Securities, said Gulf's net profit growth in 2023-24 looked attractive. The company has won bids that have the highest total megawatts for state-sponsored renewable energy projects, which could add to its profit base in 2023-24 by an average of 37% per year.


One option to reduce electricity bills is increased domestic gas production, which would reduce dependence on imported LNG, which was very expensive last year.

More imports of LNG, following a drop in domestic gas supply, are blamed for driving up electricity prices, according to the ERC.

Gas makes up more than 57% of the total fuel used to generate electricity in Thailand.

PTT Exploration and Production Plc, which operates the Erawan gas block in the Gulf of Thailand, plans to gradually increase gas production, which is currently 210 million metric standard cubic feet per day (MMSCFD), a sharp drop from 800 MMSCFD.

The firm earlier set a production target of 800 MMSCFD by the end of 2024, but the ERC said the company rescheduled the date to early 2025.


Another option is more use of renewable energy, which would decrease Thailand's dependence on gas and help the government achieve its clean energy goal.

The ERC sees benefits in rooftop solar panels installed on people's houses as they can help reduce electricity bills, but it is unknown whether a new government will offer subsidies for installation costs after the general election on May 14, said Mr Khomgrich.

The FTI also supports factories shifting towards renewable energy as a way to better manage energy costs.

Many businesses invested in clean energy development even before the surge in electricity prices, but they still depend somewhat on fossil fuels, said Mr Wiwat.

The federation earlier asked authorities to shorten the process for gaining permission to install solar panels with an electricity generation capacity of 1MW at factory compounds.

It also wants the government to consider granting low-interest loans to encourage entrepreneurs to develop renewable energy systems.


Yoswaris Dulpinitpattana, managing director of Sena Solar Energy, a subsidiary of Sena Development Plc, said the government should allow for free trade of electricity amongst people.

"Allowing individuals to freely sell electricity to one another can have multiple benefits, including lower electricity bills and higher use of clean energy," he said.

"Such a rule could contribute to achieving the country's net-zero goal."

The current scheme that requires households to sell their excess solar electricity back to the MEA or PEA does not help the public, said Mr Yoswaris.

The rate residential electricity users receive from selling surplus solar electricity to state providers is only 2.2 baht per unit, while they have to pay 4 baht per unit to buy electricity.

He said there is also a restriction regarding the main transformer in locations where residential electricity users participate in the household solar scheme.

The main transformer limits the combined sale to a maximum of 15% of its capacity.

"This restriction does not promote the scheme on a wide scope as the number of households for each main transformer will be limited from joining the scheme," said Mr Yoswaris.

He said the reason state providers limit the volume of electricity being sold back to the grid for each main transformer is to control the electricity load. Yet they can control it now through virtual power plants, said Mr Yoswaris.

He suggested a Board of Investment promotion for the production of batteries to store electricity produced from solar so that battery prices would be reduced.

With cheaper batteries, people could store solar electricity and use it at night, said Mr Yoswaris.

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