Pacific cash | Economic system | South East Asia
Many governments are confronted with the query of whether or not to soak up rising power costs or place the burden on customers.
PTT is the most important power firm in Thailand and the Ministry of Finance is the controlling proprietor with a 51 percent stake. Together with subsidiaries and joint ventures, the consolidated firm spans the power sector from oil and gasoline exploration and manufacturing to petrochemical manufacturing, refining operations, retail and world commerce. Due to the sky-high power costs, the previous few years have been excellent for the PTT.
Gross sales reached $96 billion in 2022, up 34 % compared to 2019. PTT paid greater than $1.2 billion in dividends final 12 months on $3.5 billion in after-tax income. These windfall good points are much like these of Petronas, the state-owned Malaysian power big that additionally had a vastly good 12 months in 2022. The pandemic dried up demand for oil and gasoline, however the rebounding financial system after the pandemic pushed up power costs. And whereas rising power costs are an excellent factor for PTT, they are not so nice for customers.
The Metropolitan Electricity Authority (MEA) is the first distributor of electrical energy for Bangkok and surrounding areas. Whereas MEA’s gross sales are recovering from their pandemic hunch, the utility nonetheless bought 3 % much less electrical energy in 2022 than in 2019. Regardless of promoting much less electrical energy, gross sales have been 9 % larger than 4 years in the past. The easy clarification is that the MEA expenses extra for electrical energy than earlier than the pandemic.
Electrical energy costs in Thailand embody a base fee plus one Automatic rate adjustment, which they name the Ft fee. The bottom quantity displays assumptions concerning the mounted prices of producing electrical energy. The Ft fee is a fee that may go up or down relying on adjustments in variable prices, akin to gas. If the value of pure gasoline rises, it should turn into costlier to generate electrical energy. A part of these larger prices can be handed on to the buyer through a better Ft fee. The speed is reviewed each few months by the Power Regulatory Fee.
Throughout 2021, as households have been ravaged by the pandemic, the Ft cost was -15.32 satang per kWh (a satang is 1/100 of a baht). In 2021 and 2022, the value of fuels akin to coal, oil and gasoline began to rise all over the world. To stop electrical energy turbines from absorbing all these value will increase, the Ft fee started to rise in January 2022, to 93.43 satang per kWh in September 2022. It’s at the moment nonetheless above 90. Which means typical MEA clients in Bangkok have been paying nearly a baht above the bottom fee for each kWh of electrical energy they eat because the finish of final 12 months utilization.
Thailand will not be alone right here. EVN, the Vietnamese state-owned electrical energy firm, tried to soak up larger power prices and shield customers so long as attainable earlier than just lately elevating costs. EVN most likely waited too lengthy, considerably depleting its money reserves, earlier than lastly asking customers to share within the burden. Indonesia elevated the value of gasoline in 2022, when consuming up the losses from excessive oil costs merely turned unsustainable for public funds. The Philippines makes use of an identical system to the Ft cost, and utilities usually move larger power prices on to customers.
This provides us a glimpse into one wider debate about who ought to pay and who ought to profit from larger costs in occasions of inflation. Ought to value will increase primarily be on the expense of customers, whereas firms larger up within the manufacturing chain make massive income? Ought to the ability vegetation or distributors like MEA take in the value will increase and settle for decrease revenue margins? And who ought to make these selections? The market? The state?
Thailand’s reply to those questions is a regulated market strategy. Firms such because the PTT can profit considerably in occasions of excessive world power costs. However the identical excessive costs make producing electrical energy costly, particularly should you import numerous gas, as Thailand does. Within the power sector, a few of these value will increase are handed on to customers by way of the Ft levy, topic to regulatory oversight by the ERC.
On this approach, Thailand has tried to strike a steadiness between state and market mechanisms and the pursuits of customers and producers. However it’s a steadiness that clearly requires and expects customers to soak up a few of the regulated value will increase in occasions of excessive inflation. Whether or not that steadiness is perfect or truthful, and the way it may change beneath future management situations, is one other and probably much more attention-grabbing query.
