Power Sector Reform In Thailand

Three different enterprises, owned by the government in Thailand have dominated the power sector in Thailand. The three enterprises are Provincial Electricity Authority or PEA, Electricity Generating Authority of Thailand or EGAT and Metropolitan Electricity Authority or MEA.
Defined roles of the enterprises:
The EGAT has been entrusted with the role of electricity generation and transmission whereas the MEA as well as PEA have been entrusted with the job of distribution of power and retailing for the entire country.

Need for power sector reform- Reasons:
Although, the enterprises ensured a fairly good supply of power but nevertheless, the power sector in Thailand had begun to show deformities due to which the government contemplated power sector reform in Thailand.

Inconveniences, which led to the privatization of the power sector in Thailand, as part of the power sector reform in Thailand included:
Structure of tariff was not fair and many a times, the consumers had to shell out more than they were entitled to pay. This was due to the fact that the power sector authorities failed to ascertain the cost of fuel and worked out erroneous bills pertaining to the cost of power generation.
The EGAT or the Electricity Generating Authority of Thailand, exercised its monopoly in the power sector. As a result there is not much of a competition in the power sector in Thailand.
There were many power plants, which sufficiently injured the ecology of the place.

As a result of the above, the Thai government took measures to privatize the sector. However, the idea of privatization was met with strong resistance from all quarters, particularly from the labor unions. The government privatized EGAT in the year 2005. Privatization of the other two enterprises were also on close heels.

Power sector reform in Thailand (privatization) can be spaced into three phases:

I) First Phase-1989 to 1997:
The first phase of reform began when the country was experiencing expansion in the economy.

Power sector reform in Thailand during this period included:
The investment cost of the state enterprises were decreased.
The private sector was encouraged to join the bandwagon of privatization.

The above reforms were in consonance with the recommendations put forward by the World Bank pertaining to that period.

The labor union of the Electricity Generating Authorities of Thailand strongly revolted these implementations due to which the reforms proved to be futile. However, things started looking up by the amendment of the EGAT Act. As a result of the amendment, producers were permitted to privately produce power and sell thereof in accordance to the policy of outsourcing to buy power from IPP or Independent Power Producers as well as SPP or Small Power producer.

Note:
The above efforts were implemented prior to the stage of economic crisis in Thailand.

II) Second Initiative of undertaking power sector reform in Thailand- 1997 to 2000: Events that took place-
In the year 1997, Thailand was subject to economic crisis. There was devaluation of the Baht, which led to its liberalization. There was decrease in demand for electricity. The country availed of financial assistance from the International Monetary Fund (IMF). The people had played an important role in the power sector reform in Thailand by-
Opposing the implementation of Power Pools
Opposing increasing Fuel Adjustment Tariff or Ft.

Reforms:
Despite all these hassles, Power Purchasing Agreements were arranged with IPP or Independent Power Producers even though the electricity need of the people had subsided. The Thai government made it a point to adequately compensate the IPP s for the consequences of currency devaluation. Under the leadership of the then Prime Minister Chuan Leekpai, restructured the state enterprises as well as the power system in the country as per Letter Of Intent submitted to the International Monetary Fund. This led to the formulation of the Electricity Sector Restructuring Plan.

This plan necessitated the following three changes:
That a Power Pool be created.
That the Energy Regulatory Act be drafted.
That the EGAT be divided into three companies producing power.

III) Power sector reform in Thailand during the reign of Thaksin-2001 to 2005:
The Prime Minister Thaksin Shinawatra, in the year 2001 recommended the registration of the state enterprises acting as public companies, who could sell shares on the stock market. The main aim of the new approach was to perk up stock market investment and simultaneously empower the companies to monopolize the power sector.

 

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Last Updated on : 26th June 2013

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