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The public interest, and the pursuit of profit
A survey of energy regulatory bodies in different countries offers Thailand lessons in why an independent regulatory agency is vital
The regulatory body plays a critical role in balancing the interests of key stakeholders such as investors and consumers.In addition to being a designated entity, it is essential that the regulatory body have sufficient ``teeth'' in terms of legal authority.
In the absence of sufficient legal basis for exercise of regulatory power, the regulatory body will lack the authority to force utilities and companies to comply with its orders/decisions, or to penalise defaulters.
The need for a credible independent regulator with sufficient authority is even more crucial when the energy industry undergoes privatisation.
The process of privatisation transforms formerly (partially) self-regulated state-owned utilities responsible for provision of electricity to serve the public, into commercial corporations oriented to maximise returns to shareholders.
The regulatory body will play a critical role in ensuring that the process of privatisation and day-to-day operations of the sector are conducted in ways that do not jeopardise the consumers' long-term interests.
A survey of energy regulatory bodies in different countries _ four developed countries and 19 developing countries, as depicted in the accompanying table _ shows that in almost every country there is a separate regulatory body established to oversee the regulation of electricity (and oftentimes gas or energy sectors as well).
The only exceptions are Indonesia and Thailand. In all the countries surveyed, regulatory bodies are established by (high-level) legislation before privatisation of the state-owned monopoly power utilities.
In Indonesia, there was a plan to establish an independent regulatory body by law as part of a power sector reform/privatisation package.
The plan was disrupted, however, when the law _ Electricity Law No. 20/2002 _ was deemed ``unconstitutional'' and revoked by the High Court because it provided a legal basis for privatising its state-owned electricity utility.
According to Indonesia's constitution, electricity is considered a public service that should remain under government control, so the law allowing the state utility responsible for provision of electricity services to be privatised was considered unconstitutional.
In Thailand, the government has an accelerated plan to privatise the Electricity Generating Authority of Thailand (Egat) Public Company Limited, the state-owned monopoly utility responsible for power generation and transmission, on the Stock Exchange of Thailand by the end of this year. But, to date, no separate regulatory body has been established yet.
Worse, the only promised regulator to be established prior to sale of Egat's shares was the problematic ``Interim Regulatory Commission''. Once established, the Interim Regulator is to draw its legal power from a mere regulation issued by the Prime Minister's Office. The low-level regulation stands in stark contrast to the high-level laws enacted in other countries to establish strong regulators.
The Interim Regulator's apparent lack of legal authority has already created a problem for the government. With no provision regarding sources of revenue for the regulatory body, the government has been struggling for months to somehow come up with a sufficient budget to pay and attract qualified people to accept the seven commissioner positions.
The chance of seeing the separate regulatory office set up and run effectively is even more remote.
There is also a serious concern about the Interim Regulator's lack of real ``teeth'' to force compliance or penalise/ punish defaulters. This means all the regulator can do in practice is to ask nicely for the Egat monopoly's kind cooperation to respect its orders and not seek excessive profits at the expense of the public.
The clear lesson for Thailand is: the government should not rush Egat's privatisation. If the government has the long-term benefits of the public in mind, it should pass an act to set up a strong, credible, independent regulatory body before the privatisation of Egat.
Such a draft law is already being prepared and finalised by a government committee. Given the ruling party's parliamentary majority, it should not take long before the draft act becomes law.
The Interim Regulator does not offer adequate protection of the public and consumers' interests against the pursuit of profits by the monopoly Egat Plc, and is merely a lip-service treatment to the public's demand for a credible independent regulator.
Chuenchom Sangarasri Greacen works for Palang Thai, a private group that monitors energy issues.
Thai Net Metering Project is a project of Palang Thai. Please direct energy questions to info@netmeter.org, and website comments to webmaster@netmeter.org.
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