Deregulation of ESI and privatization of state electric utilities in Thailand

In Thailand, electric supply services have all been taken over by the state and operated under state enterprises since 1968. Under a law empowering its monopoly, state utilities accumulated assets and built up their manpower to expand and operate the power system to serve the whole country. During the time of high growth in power demand in early the1990 s, the government initiated a move to privatize state electric utilities, the pace of which was firmed up after 1997, the year of the financial crash. Engagement of independent power producers (IPPs) through the use of long-term power purchase agreements (PPAs) for supply of electric power into the system operated by state electric utilities was also initiated from the mid 1990s. Total capacity of IPPs and Small Power Producers (SPPs) that sell excess power from cogeneration on to the system) rose and by the late 1990s started to create a constraint on system economic dispatch. In 1999 the National Energy Policy Council (NEPC) approved a recommendation of international consultants to transform the electric supply industry into a structure similar to the system in the United Kingdom. The transformation was proposed to precede corporatization and privatization of state electric utilities. The objectives of deregulation were to revoke the monopoly in ESI, to improve transparency in electricity pricing, to reduce debts of state enterprises, and to improve economic efficiency. Industry participants have voiced strong objection to the industry model proposed. With the change of market structure in UK to the New Electricity Trading Arrangement (NETA), the secretariat of NEPC also proposed a new structure similar to NETA. More acceptance from industry participants have been received for the new structure. However, it has been assumed that the proposed structure would bring improvement in system reliability, drawing investment into power generation in a manner that would be efficient. Tariff has also been expected to become lower because of the competition in power generation and retail trading. The authors argue that, for developing countries, issues of timely investment in new generation and delivery capacity, stable and reasonable price of electricity, reliability of power supply, fuel diversity and security, equitable access of supply and promotion of social equity are important. Maintaining a functioning ESI that meet the broad objectives of providing reliable power supply to serve social and economic development needs could be prioritized over introduction of complete competition in wholesale generation and retailing. The authors examine the present situation of the industry and propose a transitional model that would serve the broad objectives and introduce gradual competition in the industry. The proposed design would unbundle generation from transmission and retailing. It would aso eventually promote intra-regional interconnection and electricity trading.