Thaksin’s plan to reduce electricity rates challenging, expert says
Such measures would likely require greater subsidies borne by EGAT
Former prime minister Thaksin Shinawatra announced in Chiang Rai on Sunday a plan to reduce electricity rates to 3.70 baht per unit from the current rate of 4.15 baht per unit.
He revealed that discussions had been held with Deputy Prime Minister and Energy Minister Pirapan Salirathavibhaga to explore ways to lower costs. He said Prime Minister Paetongtarn Shinawatra has reviewed the proposal and plans to convene discussions with relevant agencies and private-sector representatives to ensure consensus on the proposed reductions.
Meanwhile, Professor Praipol Koomsup, former dean of the Faculty of Economics at Thammasat University and an independent energy expert, commented that significantly reducing energy prices would be challenging.
He noted that such measures would likely require subsidies, which currently take the form of liabilities borne by the Electricity Generating Authority of Thailand (EGAT), amounting to more than 100 billion baht.
Further reductions in electricity rates would necessitate additional subsidies, which would burden the state, including EGAT and PTT Pcl. Alternatively, direct government intervention would require budget allocations, and the government is already carrying a substantial financial burden.
Currently, all parties are contributing subsidies to maintain electricity rates at 4.15 baht per unit. Any significant reduction would require additional subsidies. Although fuel prices have decreased slightly, the global situation remains unstable, which impacts the cost of importing natural gas and LNG.
Based on current trends, these prices have not dropped substantially. Therefore, it is difficult to see how electricity rates could be lowered further without increasing subsidies.
One potential solution, though challenging, would involve renegotiating power purchase agreements with major private power producers with a capacity exceeding 90 megawatts (independent power producers, or IPPs). This would aim to reduce the "availability payment" (AP), a fixed cost included in the contracts. However, if the government were to withhold these payments, it would breach the agreements.
Moreover, even if private companies were willing to renegotiate, the resulting reduction in electricity rates would be minimal – estimated at only 0.05-0.10 baht per unit. Most of these companies are listed on the Stock Exchange of Thailand (SET), making contract adjustments complex due to the need to consider numerous shareholders.
"Given the current situation, it is difficult to identify areas where costs could be reduced unless there is a sharp drop in natural-gas prices or a 30-40% decrease in coal prices. Such significant changes would be necessary to achieve noticeable reductions in electricity rates in Thailand," Praipol said.
