The state plan to increase the cost of electricity later this year may affect foreign direct investment in Thailand, which is now grappling with a sluggish economy, says the Federation of Thai Industries (FTI).
The federation raised the warning after the Energy Regulatory Commission (ERC) announced on Friday that power bills for businesses and households are likely to increase.
The ERC has been asking businesses and households in a public hearing to choose from three alternative power tariff rates, with the increase ranging from 11-44%, up from the current rate of 4.18 baht per kilowatt-hour (unit), which will be applicable until the end of August.
The increase of the power tariff to 4.65, 4.92 or 6.01 baht per unit results from higher gas prices during the cool season and the need to pay part of the electricity bill to reimburse the Electricity Generating Authority of Thailand (Egat) and gas sellers, said the ERC.
Egat and gas sellers were asked to help the government curb the power tariff, which is used to calculate electricity bills, from September 2021 to April this year, leading to 15 billion baht in debt from gas purchases and causing Egat to run up a loss of 98 billion baht.
The new tariff rate will be imposed from September to December.
"The 4.18-baht rate is already high. Foreigners who plan to invest in Thailand may need to think carefully," said Kriengkrai Thiennukul, chairman of the FTI.
Thailand's power tariff is higher than some neighbouring countries, including Vietnam, which may be better placed to attract foreign investment, he said.
This may affect the state's attempts to encourage foreign firms to invest in Thailand as electricity prices are set to increase, eventually driving up their operating costs.
Entrepreneurs may decide to invest in other countries such as Vietnam which offers cheaper rates of electricity in addition to trade benefits such as more free trade agreements than Thailand, said Mr Kriengkrai.
Higher power bills could also force local manufacturers to raise product prices, but this would make them unable to compete with sellers who export low-cost products, he said.