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dam-l Re: Nam Theun 2
October 7, 1999
The Nation (Bangkok)
Editorial & Opinion
Power to the people could
cost
EVEN if the Electricity Generating Authority of
Thailand (Egat) needed the power, the massive
Nam Theun 2 hydro dam can't compete with
Thailand's new private power producers. The dam
developers' only hope is that Egat will defy its
customers and the nation's taxpayers, and take
one last monopoly splurge on Nam Theun 2
before Thailand's electricity market is opened for
competition.
From an economic perspective, the arguments
against Egat buying Nam Theun 2 power are
compelling.
A Nam Theun 2 power purchase deal would
impose financial risk on Thai consumers and
taxpayers, locking the utility into a fixed price,
25-year contract, regardless of electricity demand.
If Egat can't sell the power or if its customers opt
to generate their own power, or buy from cheaper
local producers, Egat would still have to pay for
the Nam Theun 2 power.
Ultimately, Egat's ratepayers and the nation's
taxpayers would be on the hook for billions of
dollars worth of electricity.
Egat has no customers or market for Nam Theun
2 power. By its own admission, Thailand's central
utility has a huge glut of generating capacity, more
than enough to meet the country's electricity
demand for at least the next five years. In Egat's
worst-case scenario, as much as half the country's
generating capacity could be idle by 2001. In a
study commissioned by Thailand's National
Energy Policy Office (Nepo),
PricewaterhouseCoopers found that about 60 per
cent of Egat's investments planned to 2006 may
be unnecessary -- and that doesn't include 681
MW from Nam Theun 2.
Egat cannot afford another long-term power
purchase obligation. The utility can barely afford
to pay its domestic suppliers and is having
difficulty servicing its debts. According to Nepo,
international financiers fear that Egat will be
unable to honour its existing power purchase
agreements. To improve the utility's financial
performance, the government and its international
creditors have ordered Egat to slash its
investment budget, delay a number of planned
private power purchases, and sell its more
profitable power plants, beginning with the
unfinished Ratchaburi plant. Adding Nam Theun 2
to Egat's liabilities would be economic madness.
Who knows how much power, and from what
source, Thai consumers will want five, 10 or 20
years from now? Egat has been wrong about
electricity demand for the last four years. Its
Ratchaburi plant was a huge investment mistake
and the utility is under public pressure to scrap its
planned power purchases from coal-fired
producers. Advances in generating technology
now make it economical to generate power on a
small-scale. Egat has already licensed 33 small
power producers (5 to 100 MW) and another 25
schemes are expected to come on-line within the
next few years. If these schemes prove
successful, more and more consumers will want
their electricity generated locally instead of relying
on Egat. Without Egat to force consumers to buy
Nam Theun 2 power, in other words, the Nam
Theun 2 dam may never have a buyer or market.
As it is, the price of Nam Theun 2 power is both
too high and too low. Too low, because no
negotiated price will reflect the project's real costs
to Laos in terms of lost resources and livelihoods.
Too high, because Thai consumers have far
better and cheaper generating options available at
home. According to World Bank consultants, Louis
Berger International, the dam's developers need at
least 5.7 US cents per kilowatt-hour to attract
commercial investors. Egat has offered to pay
4.178 US cents per kilowatt-hour, starting in 2006,
but the dam's developers rejected this, saying the
price was too low to make the scheme
economically viable.
Meanwhile in Thailand, Egat pays small power
producers an average price of 4.28 US cents
(Bt1.59) per kilowatt-hour, and the country's first
Independent Power Producer (a 700-MW
combined cycle plant owned by Independent
Power Thailand) 3.18 US cents (Bt1.18) per
kilowatt-hour.
Clearly, Nam Theun 2 is no bargain for Thai
consumers. But then the only prospective buyer in
the region, Egat, is a public monopoly,
accustomed to making decisions based more on
politics and central planning than consumer
demand. The National Energy Policy Office,
recognising this problem, wants new rules that
would put consumers' needs before power
producers. If Egat agrees to buy Nam Theun 2
power before that happens, consumers and
taxpayers have their government to blame for not
pulling the plug on Egat's monopoly soon enough.
BY GRAINNE RYDER
------------
Grainne Ryder worked in Thailand for eight years
and is currently a researcher with the
Toronto-based Probe International, a critic of
Canada's aid and trade policies. She can be
reached at GrainneRyder@nextcity.com.