Who Pays and Who Profits From High Energy Prices in Thailand? – The Diplomat

Pacific Cash | Financial system | Southeast Asia

PTT is the most important vitality firm in Thailand, and the Ministry of Finance is the controlling proprietor with a 51 % stake. Together with subsidiaries and joint ventures, the consolidated agency straddles the vitality sector from oil and gasoline exploration and extraction to petrochemical manufacturing, refining actions, retail gross sales, and international buying and selling. Due to skyrocketing vitality costs, the previous couple of years have been excellent for PTT.

Income hit $96 billion in 2022, a 34 % enhance in comparison with 2019. PTT paid over $1.2 billion in dividends on $3.5 billion in after-tax income final 12 months. These windfall income are much like these of Petronas, the Malaysian state-owned vitality big which additionally had a tremendously good 12 months in 2022. The pandemic dried up demand for oil and gasoline, however the revived post-pandemic economic system despatched vitality costs hovering. And whereas surging vitality costs are a great factor for PTT, they aren’t so nice for customers.

The Metropolitan Electrical energy Authority (MEA) is the first distributor of electrical energy for Bangkok and surrounding areas. Though MEA’s gross sales are recovering from their pandemic droop, the utility nonetheless offered 3 % much less electrical energy in 2022 than it did in 2019. Regardless of promoting much less electrical energy, income was 9 % greater than it was 4 years in the past. The straightforward clarification is that the MEA is charging extra for electrical energy than it did earlier than the pandemic.

Electrical energy costs in Thailand embrace a base charge plus an Computerized Tariff Adjustment, which they name the Ft charge. The bottom charge displays assumptions concerning the mounted prices of producing electrical energy. The Ft charge is a cost that may go up or down relying on modifications in variable prices, like gasoline. If the value of pure gasoline will increase, it turns into costlier to generate electrical energy. A few of this elevated value is handed onto customers by way of a better Ft charge. The speed is reviewed each few months by the Vitality Regulatory Fee.

All through 2021, when households had been being pummeled by the pandemic, the Ft cost was -15.32 satang per kWh (a satang is 1/100 of a baht). In 2021 and 2022, the value of fuels like coal, oil, and gasoline began spiking all over the world. To stop electrical energy turbines from absorbing everything of those value will increase, the Ft charge began rising in January 2022, reaching 93.43 satang per kWh in September 2022. It’s at the moment nonetheless above 90. This implies for the reason that finish of final 12 months, typical MEA clients in Bangkok have been paying almost one baht above the bottom charge for every kWh of electrical energy they use.

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Thailand shouldn’t be alone right here. EVN, Vietnam’s state-owned electrical utility, tried to soak up greater vitality prices and defend customers for so long as it may earlier than elevating costs lately. EVN arguably waited too lengthy, depleting its money reserves significantly earlier than lastly asking customers to share within the burden. Indonesia raised the value of gasoline in 2022, when consuming the losses from excessive oil costs merely turned untenable for public funds. The Philippines makes use of an analogous system to the Ft cost, and utilities typically move greater vitality prices onto customers.

This provides us a peek right into a broader debate about who ought to pay and who ought to revenue from greater costs throughout inflationary occasions. Ought to value will increase fall totally on customers, whereas companies greater up within the manufacturing chain reap massive income? Ought to or not it’s the facility crops, or distributors like MEA, who take up the value will increase and settle for decrease revenue margins? And who ought to be making these choices? The market? The state?

Thailand’s reply to those questions is a regulated market method. Corporations like PTT stand to revenue handsomely in occasions of excessive international vitality costs. However those self same excessive costs make producing electrical energy costly, significantly if you happen to import lots of gasoline as Thailand does. Within the energy sector, a few of these value will increase are handed onto customers by way of the Ft cost, topic to regulatory oversight from the ERC.

On this means, Thailand has tried to strike a stability between state and market mechanisms, in addition to the pursuits of customers and producers. However it’s a stability that clearly requires and expects customers to soak up a portion of regulated value will increase throughout occasions of excessive inflation. Whether or not that stability is perfect or truthful, and the way it would possibly change underneath future management situations, is a unique and presumably much more fascinating query.