Gov't criticised for double hike in electricity bills

[DagonKhan]

Gov't criticised for double hike in electricity bills Published on Wednesday, 30 October 2013 14:22

The government faces widespread criticisms after informing the public just two days in advance of a 40 percent rise in electricity prices on Tuesday.

Yangon City Electricity Supply Board, under the Ministry of Electricity, announced in the state-owned media that electricity prices will be raised as of November 1, raising fears that the hike will impact Myanmar's fragile economy as local businesses struggle to compete with international markets.

"Due to the increased power bill, businessmen may face difficulties in competition with the international businessmen... My factory is using about 270,000 units in a month. It may cost millions of Kyat. The government should inform the people of the increased power bill in advance," said U Tun Aye, the owner of Shwe Yamon Company.

Currently, a unit of electricity costs Ks 35 (US$ 0.35) for general consumption. The newly announced prices will charge Ks 50 per unit for households using over 100 units. Those who use less will pay the usual rate.

Most Myanmar families use well over 100 units a month, which brackets them within the new Ks 50 per unit price - a 43 percent rise in their standard electricity bill. Meanwhile, businesses will have to face a double rise in electricity costs.

For commercial entities, those using 1 to 5000 units will be required to pay Ks 100 per unit, while those using 5001 units and above will need to pay Ks 150 per unit. They are currently charged Ks 75 per unit.

The only reason the electricity board gave for the price rise is to cover the costs of production and purchase of electricity.

However, since large parts of the power supply have been outsourced to private companies, the government has little say as to how much it can purchase electricity for public consumption, regardless of the current cost of living.

Private vs public interests

The Ministry of Electric Power granted permission to over 20 private companies - including Gold Energy Co., Eden Energy and Natural Resources Development Company, Capital Development Ltd and Ruby Dragon - who currently supply 84 townships.

Golden Energy Co., owned by Tun Myint Naing who owns multiple enterprises, received a permit to supply power to 27 townships in Bago Region (East) through a Build Operate and Transfer agreement. Similarly, power supply permits were given to BKB company, Toyo-Thai company, UPP Holding, Myanmar Central Power and Myanmar Power Pte.

Such companies generate power for profit and not as a public service, therefore they are able to set the purchasing price of electricity that they sell to the government, who in turn distributes it to the public at a higher cost.

Gold Energy Co. is running Thaukyaykhet-2 Hydropower Project and the Ministry of Electric Power agreed to purchase electricity from them at Ks 70 per unit. The company will earn Ks 30 billion selling power to the government and make huge profits in the 10 years which it is entitled to operate the project.

Toyo-Thai company was given permission to run Ahlon Natural Gas-Fired Power Plant installed with a 120 Megawatt generator. The agreed bill for one unit was US$ 13.31 (nearly Ks 130 at an exchange rate of Ks 975 to the dollar).

When assessing the price of electricity, the interests and profits of private companies seems to be the only consideration. The government’s plan to increase power bills came only after such agreements had been signed. Not only does this affect private households, but also smaller companies struggling to meet production costs.

"People and businessmen will surely see possible difficulties due to the increased power bill. If the power bill is raised, the production costs will become higher. Our businessmen are now searching for markets. If we can’t compete with those from foreign countries, we will lag behind," said Win Kyaing, official of Myanmar Fisheries Federation.

Ministry spends more but power shortages continue

From 1989 to 2011, the Ministry of Electric Power spent over US$ 822 million (Ks 428 billion) for 14 power projects including Yenwe, Hsedawgyi, Yeywa and Shwegyin.

Despite spending a huge amount of state funds on power stations, power is still not accessible to the entire nation and power shortages are as frequent as ever. In the 2013-2014 fiscal year, the Ministry of Electric Power asked for an additional budget of Ks 204.5 billion. This is the second largest additional budget approved by parliament.

As Myanmar has opened its markets to foreign investment and competition, the cost of living has become increasingly higher yet incomes have stayed largely the same. The price hikes in electricity will effect the small and medium sized enterprises, the sort of businesses that Myanmar needs to support for it to grow as economic reforms take hold.

If people's incomes do not grow sufficiently to stay on par with the growing cost of living in Myanmar, such situations can lead to protests and more political unrest.

"The plan to increase power bill is a bomb in such a time when the people are concentrating on constitutional amendments and internal peace. Commodity prices are climbing up. Conflicts are hurting people's businesses. Foreign investments have not yet flowed into the country as expected. The people run into trouble in their basic needs. In such a situation, double increase of power bill is an unjust blow to the people. This impact is very huge. It will be the same as the fuel price rise in 2007," said Dr Than Htut Aung, CEO of Eleven Media Group.

I'm willing to bet that this increase is the first of several. I wouldn't be surprised at all if a kw/h costs more around Ks100/unit (for domestic use) by the end of next year, this is a conversation that was popular 6 months ago, it's certainly not a surprise. I also disagree that people can't afford the increase.