Mr. Praiphon Koomsub, former Dean of the Faculty of Economics at Thammasat University, explained an increase in the Thai power bills recently.
He said the increase actually started at the end of 2022, but people did not acknowledge it until March to April when the weather became significantly hotter, leading to an increase in electricity consumption and thereby a surge in power bills.
Moreover, at the beginning of this year, the government adjusted the fuel tariff rate, which further increased the price.
The war between Russia and Ukraine also plays a part, as it causes fuel prices, especially crude oil and natural gas, to skyrocket. Thailand relies on natural gas for 60% of its electricity production, even though it can produce some gas from the Gulf of Thailand. However, the country still needs to import a significant amount of liquefied natural gas (LNG), which has increased by 20% currently due to the war.
There is also an issue with the cost of paying for excess reserve electricity.
Praiphon also said even though excess reserve power is not sold into the system, electricity consumers still have to bear the burden of paying for it to private power companies. This is another factor that contributes to the high cost of electricity, although not as much as the first causes mentioned, he said.
The surplus of backup electricity production is due to a planning error, according to Praiphon. Prior to the COVID-19 pandemic, electricity usage was predicted to increase in line with Thailand’s economic growth, so the government had decided to invest in more power plants through public-private partnerships (PPPs).
When private sector investors built more power plants according to the original plan, the COVID-19 pandemic occurred and the economy contracted for one year and barely grew for another year. As a result, actual electricity usage was lower than predicted before the pandemic. Therefore, the investment in power plants flopped, resulting in excess backup electricity production.
“It was a mistake that couldn’t be avoided because the COVID-19 pandemic was unforeseeable,” said Praiphon.
As for solutions, the government should find more money to subsidize electricity costs similar to when it launched a policy to control diesel prices. However, Praiphon said he did not want to see the authorities spend too much money on this issue, as the government budget is already in deficit.
Another way out is to adjust the way electricity prices are calculated, change the backup electricity production plan, and alter the fuel used in electricity production.
In the long term, the government should increase competition in the power industry and create an independent agency to oversee the country’s electricity generation and purchases, said Praiphon.
In the short run, however, due to Thai elections any changes are unlikely to happen until a new government is elected and settled in, which could take a few months.