6 June 2024

Former Senator Rosana Tositrakul, a staunch advocate for reform of the energy pricing structure, has proposed a set of measures to cut electricity and fuel prices on a sustainable basis, instead of the short-term remedies expected to be rolled out by the government.

She identified the key areas which need to be addressed to bring the prices down, among them are excess electricity generated or to be generated by the independent power producers (IPPs), the availability payment charged by the IPPs under the “take-or-pay” clause in the contracts between IPPS and the Electricity Generating Authority of Thailand (EGAT), the cost of fuel sold to EGAT by a subsidiary of PTT Public Company for power generation and the excise tax charged on fuel oil.

Rosana explained that PTT has been supplying EGAT with natural gas from the Gulf of Thailand and Myanmar, as well as imported LNG, for electricity generation.

She said PTT has, however, been charging EGAT domestic prices for the energy supply, instead of the “pool price”, which means the average price of the fuel from three sources, namely natural gas from the Gulf and Myanmar and the imported LNG.

She also suggested that the government should not enter into contracts with the IPPS for renewable power from their new power plants, pointing out that current overall energy supply, estimated at about 50,000 megawatts, is exceeding total consumption, estimated at about 30,000 megawatts.

The former senator noted that, whether the IPPS are actually supplying power to EGAT or not, EGAT is bound by a clause in the contracts, called “take or pay”, under which EGAT is bound to pay the contractual IPPPS “availability payment”, even though it has not received power from them.

She claimed that about 84 billion baht in “availability payments” have been made annually to the IPPS for the past several years and this payment is translated into the fuel tariff (FT) on every unit of electricity used by households, businesses and industrial consumers.

As for the excise tax on fuel products, Rosana suggested that revenue from the tax on fuel collected by the Excise Department should not exceed 200 billion baht a year, which means that there will be less of a tax burden for each litre of fuel bought by consumers and the fuel prices will drop accordingly.

For instance, the excise tax for each litre of diesel is 5.99 baht and, if the tax is cut by 5 baht, the price of diesel will drop to 26.94 baht per litre, said Rosana.

The fuel prices in Thailand are high because of the pricing structure, which includes the cost of fuel plus excise tax, the contribution to the Oil Fuel Fund and marketing fees, said the former senator, as he suggested that the marketing fee should be controlled in such a way that the oil producers cannot take too much advantage of consumers.