Vientiane is certain that the longawaited deal will be finalised because it received an assurance from Prime Minister Thaksin Shinawatra, who told his Lao counterpart last June that Thailand would buy 1,000 megawatts (MW) of electricity to be generated by the project.

Thaksin may want to show neighbourliness and a commitment to regional development, along with securing a supply of electricity for Thailand.

The problem is Thailand does not need more electricity.

The country currently has an oversupply of power generating capacity. For the fifth time in five years, the Electricity Generating Authority of Thailand (Egat) has announced that its forecast of demand for electricity is excessive.

The agency has to revise downward its power-demand projection in line with slower economic growth.

As of last April, Thailand had a total installed capacity of 21,995 MW while peak demand in the month of extreme high temperatures reached only 15,188 MW.

For the remainder of the year, the peak demand is usually less than 15,000 MW each month, while offpeak demand falls to 7,500 MW.

This means that for much of the time 7,000 to 14,000 MW, more than half of the installed capacity, worth billions of baht of investment, sit idle.

Common economic sense would dictate that Egat, already with a huge supply of generating capacity, should stop spending money to further increase supply.

But Egat is not a bastion of common sense.

The agency has committed to pay Bt2.52 trillion for the purchase con¬tracts it has signed with developers of 42 private power projects, both in Thailand and from neighbouring countries.

This is a burden that Egat must pay to the private companies over the 25year period of their contracts, whether or not Thailand needs the electricity generated by these power producers.

The 42 projects, which have been built, are in the process of being built or will be built in the next few years, will produce a total of 10,247 MW. Egat has thus committed to increase electricitygenerating supply on a takeorpay basis at least until the year 2032.

Takeorpay is a condition in most power purchase agreements that force buyers to pay for the power cost whether or not they need the power.

In the case of Egat, the buck from signing such contracts has been passed to consumers in their monthly power bills.

Apparently recognising the economic burden caused by the excess capacity, Egat is proposing to cut the minimum national electricitygener¬ation reserve capacity from the cur¬rent 25 per cent to as low as 15 per cent.

If approved by the government, the lowering of the minimum reserve would diminish the need to build new generating capacity for the next 11 years.

And yet Egat and Thaksin are prepared to commit Thailand to pur¬chasing electricity from the Nam Theun 2 dam on a takeorpay contract that would only add to this vicious cycle.

In the PPA for Nam Theun 2, currently being negotiated between Egat and the project developer, Egat is offering a price guarantee for seven years.

After that the project would be forced to bid against other power producers in a “power pool”, which Egat plans to introduce in the next few years.

The question is, why would Egat choose to sign a PPA that would guarantee a fixed price to the Nam Theun 2 project when in just a couple of years Egat should be expecting competitive bidding that should lead to cheaper prices for electricity for Thai consumers?

The people set to gain from the Nam Theun 2 deal are the owners of the power consortium: Electricity de France, the French state utility holding a 35 per cent stake in the project, ItalThai Co (15 per cent) and EGCO (25 per cent), which is 51 per cent owned by Egat. The Lao government owns the remaining 25 per cent of the shares.

The big losers, however, will be more than 4,200 people who would be forcibly resettled from the Nakai Plateau, which is to be inundated by the reservoir of the dam. Tens of thousands of people living downstream of the proposed dam and rely¬ing on fishing will also be affected.

The other losers are Thai consumers who will be forced to pay for electricity they don’t need.

In its 40year history, Egat has failed to manage electricity generation and distribution in Thailand responsibly.

The unused and unprofitable investments of Egat are already causing a huge economic burden and public debt to Thailand.

Committing now to purchasing 1,000 MW of electricity from the Nam Theun 2 dam would further increase the price paid for electricity by Thai consumers.