Mekong Utility Watch

Privatization of Thailand’s Power Sector Squashes Competition, Protects Private Sector Cronies

Probe International Mekong Press Backgrounder #8

November 20, 1997

Privatization of Thailand’s Power Sector Squashes Competition, Protects Private Sector Cronies

A study released this week by Probe International, a division of Canada’s Energy Probe Research Foundation, says that privatization of Thailand’s electric utility (EGAT) is plagued by half-measures that protect EGAT’s monopoly and its private sector cronies at the expense of Thai consumers. Without effective reform, the study warns, consumers will have to pay more for electricity.

The main problem, according to Gràinne Ryder, author of the report, is that EGAT is privatizing the country’s electricity generation business without ensuring competition and regulatory oversight to protect consumers.

EGAT decides who can generate power, how much, and at what price. As a result, EGAT has guaranteed a large share of the electricity market to its new subsidiaries and private sector allies, while denying competitive power producers access to the national transmission grid and market.

EGAT favours expansion of massive-scale power plants despite a warning from its longtime financier, the World Bank, that such a move would limit competition, efficiency improvements, and consumer benefits.

EGAT is also guaranteeing private power producers’ revenues while the government guarantees EGAT’s investments, thereby transferring the financial risk associated with electricity investments from the private sector to the state. Contrary to one of the objectives of privatization, these guarantees are creating state debt and financial liability, the study notes.

The study recommends that the government take remedial action:

  • eliminate its conflict of interest by abandoning its role as an investor and construction company, and concentrate on becoming an effective regulator of the privatized industry;
  • set up a regulatory body, free from political interference and at arm’s length from the industry, to protect electricity consumers from monopoly pricing and other forms of abuse;
  • ensure that all power producers have non-discriminatory access to the state-owned transmission grid; allow power consumers their choice of electricity supplier.

The 19-page study is the first in a new series by Probe International on power sector reform and can be ordered from the author at GrainneRyder@nextcity.com or by Fax 416 964 8239 or Phone 416 964 9223 ext. 228 It is also available on Probe International’s web site at Mekong

Probe International, a division of Energy Probe Research Foundation, was formed in 1984 to investigate and expose the effects of Canadian aid on Third World citizens, environments and economies. The Energy Probe Research Foundation has recommended the breakup of electricity monopolies in Canada since the early 1980s and was the first to predict the financial collapse of Ontario Hydro, one of the world’s largest electric utilities.

Categories: Mekong Utility Watch

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