Former premier Thaksin Shinawatra's proposal to reduce the power tariff to 3.70 from 4.15 baht per kilowatt-hour (unit) has sparked a debate on the future of electricity prices, which have remained high since 2022.
The tariff rates are used to calculate electricity bills. A lower power tariff means businesses and households pay less for their monthly electricity usage.
Thaksin, the de facto leader of the ruling Pheu Thai Party and father of Prime Minister Paetongtarn Shinawatra, floated the new tariff reduction on Jan 5 during the party's campaign for the election of the Provincial Administrative Organization chief in Chiang Rai slated for Feb 1.
He told voters in the northern province the government would trim the power tariff this year to as low as 3.70 baht per unit.
Reducing electricity prices does not necessarily require financial support from the government alone, said Thaksin.
Following her father's suggestion, Ms Paetongtarn said lowering the tariff to 3.70 baht a unit is possible as well as a government priority.
On Jan 16, the Energy Regulatory Commission (ERC) proposed a plan to reduce the power tariff by 0.17 baht per unit if the government cut its policy expenses to promote renewable energy investment.
Part of the 4.15-baht tariff rate is allocated to support this policy.
Entrepreneurs struggling with high energy costs and energy analysts who want more appropriate tariff rates have their own ideas on how to reduce electricity bills.
AP ISSUE
One way to reduce power bills is to adjust the availability payment, known as the AP, which is a core part of the government's power purchase agreement made with power companies, said Isares Rattanadilok Na Phuket, vice-chairman of the Federation of Thai Industries (FTI).
AP adjustment could reduce the cost of electricity generation and distribution, in addition to a proposal to reduce expenses incurred during the transport of natural gas and liquefied natural gas (LNG), which are fuels used for power generation in Thailand, he said.
Power purchase agreements, usually lasting 25 years, made between the state electricity agencies and power firms commit the government to paying for electricity throughout the whole period. This is the AP, although the actual usage may be less during the time frame.
An AP ensures electricity is always available to avoid blackouts, but it increases the power tariff.
"The government should hold negotiations with power companies on the AP because the national electricity supply currently exceeds demand," said Mr Isares.
More import of LNG is blamed for driving up power bills in Thailand. PTT Plc
COST BREAKDOWN
According to the ERC, the AP comprises 16% of the power tariff, while fuel costs account for 60%.
Roughly 4% is required to reimburse the Electricity Generating Authority of Thailand (Egat) for its huge financial burden caused by previous electricity price subsidies.
Egat ran a loss of 120 billion baht after being instructed by the government to subsidise electricity prices, which soared as a result of gas prices skyrocketing following Russia's invasion of Ukraine in February, 2022. Egat's loss decreased to 85.2 billion baht this month.
Another 10% of the power tariff is transmission costs, while 6% comprises distribution costs.
The remaining 4% is dubbed a policy expense, referring to spending on state policies, including promotion of renewable energy and support of the Energy Development Fund.
Echoing the FTI's proposal, WHA Utilities and Power Plc also believes AP adjustment would be a good start to wrangle electricity prices.
Chief executive Somkiat Masunthasuwan suggested the government consider reducing the AP and compensate power firms for their loss of revenue by extending the power purchase period.
"The government must hold talks with all power companies and investors on this proposal in a fair manner, not targeting certain companies," he said.
ENERGY DIVERSIFICATION
Authorities can also reduce power bills by using less gas, which accounts for 60% of total fuels used for power generation in Thailand, said Chalie Charoenlarpnopparut, an energy analyst with the Sirindhorn International Institute of Technology.
Thailand should diversify its energy usage by promoting greater use of renewable energy, he said.
A dwindling domestic gas supply caused Thailand to import more LNG, which is more expensive.
Prices of LNG, which are prone to fluctuation, shot up in 2022 following the outbreak of the Russia-Ukraine war.
The result was the power tariff surged to a record high of 4.72 baht a unit that year.
The rate continued to increase to 5.33 baht a unit for businesses between January and April 2023, while households paid 4.72 baht a unit for the period.
Mr Isares wants the government to promote the development of solar and wind power generation facilities because they require no fuel, helping power companies to save on expenses.