Egat's PEA subsidies soar B 1.85bn this year
Bangkok Post, October 6, 2004
Yuthana Praiwan
The Electricity Generating Authority of Thailand (Egat) has been forced to pay 1.85 billion baht more in subsidies this year to the Provincial Electricity Authority (PEA), as required by the country's national energy authority.
Of the 10.89 billion baht in total paid by Egat to the PEA this year, 9.04 billion baht covered the 2003 fiscal year that began in October of 2002. Another 350 million baht,was paid for the period from October to December 2003 and a further 1.5 billion baht for January to December of this year, said PEA governor Paichit Thienpaitoon.
Egat is required to subsidise the PEA's operating costs every year to offset the heavy cost of building and maintaining transmission lines and substations nationwide, in line with the government's policy of charging artificially low electricity rates in rural areas.
Mr. Paichit said the authority had been losing up to nine billion baht a year since the government required that power purchase rates set by the Metropolitan and Provincial electricity authorities are the same for all customers across the country.
The problem is that developing rural transmission grids is more expensive than in urban centres due to geographical factors and economies of scale. Consequently, PEA's investment costs exceed the price it is allowed to charge householders.
Egat is being forced by the government to improve efficiency after failing to move forward with privatisation because of strident opposition by the utility's labour union. The government recently announced that it would no longer provide guarantees for additional debts incurred by Egat. The utility plans to invest 400 billion baht over the next 10 years for new projects.
Normally, the PEA buys 14-15 billion baht per month worth of electricity from Egat at 2.15 baht per unit, lower than the rate Egat charges the Metropolitan Electricity Authority (MEA). Profits from Egat's sales to the MEA are then used to offset the higher operating costs of the PEA.
Mr. Paichit said the higher compensation this fiscal year was linked to the PEA's increased investment costs for transmission lines and solar cells in remote areas. The additional spending has made the PEA's operating performance look poorer when compared with that of Egat, which has improved significantly.
Currently, electricity distributed in Bangkok , Samut Prakan and Nonthaburi comes under MEA jurisdiction.
Energy Minister Prommin Lertsuridej said the operating performance of all three power utilities remained healthy, with enough profit left over for servicing their debts and expansion.
Meanwhile, PricewaterhouseCoopers, a consultancy, has been hired to study the country's new electricity tariff structure.
The study will suggest new spending projections for all three utilities in order to create a formula for revising tariffs.
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