Thailand has announced a 44 per cent increase in electricity rates in the coming months, which will significantly increase costs for residents and businesses
Thai residents and businesses will have to pay higher electricity bills as early as this year, according to information published in Thairath. The Energy Regulatory Commission said the electricity tariff could increase significantly from the current 4.18 baht per kilowatt hour.
Commission secretary Punpat Lisombatpiboon explained that the main reason for the tariff increase is to recover debts to creditors. From September 2021 to April 2023, the government asked the Electricity Generating Authority of Thailand and gas suppliers to help curb electricity price hikes. This resulted in a debt of 15 billion baht for gas purchases and the Authority incurred a loss of 98 billion baht.
The Energy Regulatory Commission is considering three options to raise tariffs:
- A 44 per cent increase to 6.01 baht per unit, which would pay off the debt by December this year.
- An 18% increase to 4.92 baht, with the debt repaid by the end of August next year.
- An 11% increase to 4.65 baht, stretching debt repayment to August 2026.
It is important to note that the electricity tariff consists of a base tariff, which covers the costs of power plants and distribution systems, and the so-called Ft, which reflects current fuel prices, exchange rates and other costs as a matter of government policy.
An additional factor influencing the tariff increase is the expected increase in the price of Pool Gas, a weighted average of gas from the Gulf of Thailand, the joint development area of Malaysia and Thailand, Myanmar and imported liquefied natural gas. The Pool Gas price is expected to rise 8 per cent to 323 baht per million British thermal units (MMBTU).
It is worth noting that gas accounts for 63 per cent of the fuel used to generate electricity in the country, making it a key factor in setting tariffs.
If the government decides to maintain the current tariff between September and December, it will need to allocate 28 billion baht for subsidies and extend the period for paying debts to the Electricity Generation Authority and gas suppliers.
This situation highlights the difficulty of balancing the affordability of electricity for the public with the financial stability of the power sector. The decision on the new tariff, which is due to take effect between September and December, will have significant implications for both consumers and the Thai economy as a whole.
Experts say the electricity tariff hike could also have broad economic implications. Higher electricity costs could lead to higher production costs for businesses, which in turn could affect the prices of goods and services for end consumers.
For households, higher tariffs mean higher monthly costs, which can be particularly burdensome for low- and middle-income families. This may lead to the need to review family budgets and possibly reduce spending in other areas.
However, it is worth noting that regular tariff reviews every four months allow for greater flexibility in responding to changes in the energy market. This can help to avoid price spikes in the future and ensure more stable pricing in the long term.
In the context of global trends towards a shift to renewable energy, Thailand also faces the challenge of diversifying its energy portfolio. While this may lead to additional costs in the short term, in the long term it can help stabilise electricity prices and reduce dependence on volatile fossil fuel prices.
The new tariff will be decided on the basis of many factors, including the economic situation in the country, the impact on businesses and households, and the need to ensure the financial sustainability of the energy sector. The final decision is expected to be announced shortly, allowing consumers and businesses to prepare for possible changes.
Thailand’s electricity tariff situation reflects the global challenges in the energy sector faced by many countries. Balancing energy affordability, the financial stability of power companies and the transition to more sustainable energy sources remains a challenge that requires careful planning and informed decisions.
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