Government Announces Urgent Policy to Reduce Energy Costs
The Prime Minister and Minister of Finance, Mr. Settha Thavisin, introduced a new government policy to Parliament on September 11. This policy aims to immediately alleviate the burden of high energy costs on the public.
One of the key focuses of this policy is to reduce electricity bills, which are still perceived as exorbitant by households across the country. Despite a slight decrease in electricity prices from September to December 2023 compared to the previous period, with rates falling from 4.70 baht per unit to 4.45 baht per unit, further reductions are now being considered.
At the upcoming Cabinet meeting, the government plans to propose measures that would enable the Electricity Generating Authority of Thailand (EGAT) to assume the debt resulting from fuel costs and electricity purchases on behalf of the public. This debt, amounting to approximately 111,869 million baht accrued between September 2021 and April 2025, would be repaid gradually, starting from May-August 2023. The full refund is expected to be completed by April 2025, with the repayment structured in the form of a cost reduction of 38.31 satang per unit. This installment plan would total about 23,428 million baht.
However, it should be noted that implementing a debt extension method may lead to additional burdens for EGAT, potentially resulting in prolonged indebtedness. Alternatively, delaying the collection of full-time fees would immediately reduce electricity costs by 38.31 satang per unit or around 5,857 million baht per month. However, this approach would also perpetuate EGAT’s existing debt problems.
Regardless of the chosen method, reducing electricity costs will inevitably impact EGAT’s financial stability. Over the years, EGAT has heavily relied on borrowing to maintain liquidity and settle substantial fuel-related debts exceeding 100 billion baht. Consequently, EGAT has communicated its concerns to the Energy Regulatory Commission (ERC) and requested a gradual reimbursement plan to ease the burden of fuel costs from September to December 2023, based on a rate of 38.31 satang per unit. EGAT can no longer bear this financial responsibility on behalf of the public.
Moreover, EGAT faces potential risks associated with escalating fuel costs, particularly due to the increased importation of expensive LNG gas. The actual LNG gas costs have exceeded previous predictions made by the Energy Regulatory Commission due to lower-than-expected electricity production from the Erawan field and reduced electricity supply from Lao PDR caused by low water levels in the dams. Additionally, the price of LNG gas tends to rise during the winter season, necessitating a recalculation of electricity generation costs. Consequently, EGAT may incur additional expenses.
If the government persists with a method that burdens EGAT until its liquidity becomes severely compromised, a domino effect will ensue. Loan repayments will be affected, outstanding fuel bills will remain unpaid, government profits will decrease, and EGAT’s debt-to-equity ratio will soar, negatively affecting its credit rating. This, in turn, would lead to higher interest rates on loans and potentially push the country’s public debt ceiling even higher.
To address these challenges, the Ministry of Finance must explore alternative solutions to assist EGAT in managing its liquidity problems. One option could involve involving other entities, such as PTT Public Company Limited, to shoulder the burden of delayed gas bill payments without interest. This measure would help bolster EGAT’s liquidity.
Alternatively, if this approach is not taken to reduce electricity costs, the government will need to allocate additional funds to mitigate the impact on electricity costs, focusing on supporting vulnerable groups. This mirrors previous government initiatives such as reducing electricity bills for consumers using less than 300 or 500 units per month.
Regardless of the path chosen, the ongoing financial strain on EGAT will weaken its financial position, potentially posing risks to the stability of the country’s electrical system. Additionally, the burden of increasing debts will inevitably be transferred to the public through their electricity bills in the long term.
The government policy of Mr Settha Thavisin, the Prime Minister and the Minister of Finance announced to Parliament on September 11, one of the urgent policies that will be implemented immediately It is a matter of reducing the burden of energy costs.
Especially the reduction in electricity bills, which every household sees as still at a high level. Although the electricity price for September-December 2023 has already decreased to 4.45 baht per unit from the period May-August 2023 at 4.70 baht per unit.
One of the approaches the government will consider is to reduce electricity costs immediately. At the first meeting of the Cabinet (Cabinet), it is likely that measures will be taken to allow the Electricity Generating Authority of Thailand (EGAT) to shoulder the debt burden arising from fuel costs and electricity purchase costs on behalf of the people between September 2021 and April 2025, approximately 111,869 million baht, by extending the outstanding debt. ■ Leave or stop paying a debt first. From the period May-August 2023, EGAT must be returned in the form of a FT cost of 38.31 satang per unit. Or the equivalent of approximately 23,428 million baht in each installment so that EGAT will receive the full refund within April 2025.
However, if the government chooses to use the debt extension method. By reducing the full time fee collection rate, it will mean that EGAT will have to take on additional debt burdens before getting all the money back. Or if methods are used to delay the collection of full-time fees Electricity costs will immediately decrease 38.31 satang per unit, or about 5,857 million baht per month, but this method will be EGAT is full of endless debt.
However, no matter what methods are used to reduce electricity costs It will seriously affect the financial liquidity of EGAT because in the past EGAT has had to borrow money to maintain liquidity and must pay debts due for more than 100 billion baht in fuel costs. and that is why EGAT has informed the Energy Regulatory Commission (ERC) of the need to request a gradual reimbursement of the burden of fuel costs in the period September-December 2023 at a rate of 38.31 satang per unit. Because they can no longer bear the burden of costs on behalf of the people.
In addition, EGAT faces risk factors of fuel costs which could increase due to the import of expensive LNG gas in larger quantities. or higher than what the Energy Regulatory Commission had predicted in advance when calculating the FT value for September-December 2023 because natural gas production from the Erawan field (G1/61) was unable to produce electricity as planned at 600 million cubic feet per day Including the reduction in electricity production from Lao PDR due to the problem of low water levels in the dams. In addition, the price of LNG gas is higher during the winter, causing the Energy Regulatory Commission to recalculate the cost of generating electricity. This part will cause EGAT to incur additional costs.
If the government still insists on the method of letting EGAT bear the burden until there is a problem of lack of liquidity. It will affect loan repayment. Payment of outstanding fuel bills The payment of profits to the government decreased. And if you have to borrow more money EGAT debt ratio is too high and affects credit rating EGAT affects higher interest rates on loans. And it also affects the country’s public debt ceiling to increase further.
Therefore, if the government chooses to use this method to reduce electricity costs, the Ministry of Finance must find other measures to help solve EGAT’s liquidity problem or have other agencies such as PTT Public Company Limited shoulder it’ the burden of delaying the payment of gas bills in each installment. Without interest, it is one way to help increase liquidity for EGAT.
Or if you do not choose this method of reducing your electricity bill. The government must allocate other budgets to help. Reduce the impact on electricity costs and help vulnerable groups only Just as the previous government has done to reduce the electricity bills of electricity consumers by no more than 300 units per month and 500 units per month, and so forth.
Using this method will make EGAT’s financial position progressively weaker. It will have an impact on creating stability in the country’s electrical system. And most importantly, having to borrow money It will be reflected in the electricity bill. Ultimately, it will be the people who bear the burden of electricity costs in the long term.
#Concerned #extending #EGAT #debt #reducing #electricity #prices #people #bear #burden
