Govt fear backlash over power price rise

An increase in electricity prices set to take affect this week has authorities worried about illegal payments, while industrialists say they are unwilling to pay and will soon appeal

A hefty rise in the price of electricity imposed by the government last week could drive companies to use illicit practices to cut costs, officials fear.

Faced with growing production costs, the Ministry of Electric Power announced last week that this month it would raise electricity rates for households by 43 percent, from K35 to K50 per unit, for every unit used over 100 kilowatt hours.

Commercial users, meanwhile, will find themselves paying 50pc more, or a total K150, for each unit consumed above 5000 units.

The move is intended to reduce public subsidies for electricity and to encourage private investment in the sector. But higher bills could drive more businesses into already rampant fraud, said U Khin Maung Win, deputy director general of the Department of Electric Power.

The use of bribery to achieve a more favourable meter reading is said to be widespread.

“We are taking action against illegal users, which is a constant problem,” said U Tun Kwei, chief engineer at the Ministry of Electric Power in Yangon Region. “The changes we’ve announced are quite fair and will not be a burden for the public. But businesspeople and industrial users will have to pay more, which we anticipate will result in more illegal users.”

“We need to crack down on illegal electricity use before private investors enter the electricity production and distribution sector,” said U Zeya Thura Mon, chief executive officer of the privately owned Myanmar Central Power Company.

Myanmar’s government-subsidised electricity prices are low compared to those of regional countries, and the government is hoping to reduce public spending as it waits for several energy plants to come online.

The average cost of producing one unit of electricity from hydropower dams, coal-fired power plants and natural gas-fired plants is K75, for which the government pays a total of K185 billion, or US$191 million, each year to cover both production and distribution, U Tun Kwei said.

“Including transmission costs, the ministry should be selling each unit for K125, which means they cannot make a profit even from the latest increase in price,” Zeya Thura Mon said.

With only 30pc of the country having access to electricity, the new rates are designed to discourage consumers from heavy power usage, though some experts believe the latest move is counterproductive.

“In some countries, heavy electricity users get a discounted rate, but here those users already have to pay more, even though we don’t get 24-hour supply,” said U Myint Zaw, vice president of the Myanmar Industrial Association. “Increasing the costs to manufacturers can limit how much the country can produce.”

The Ministry of Electric Power under the previous regime revised the electricity price in May 2006 before increasing it to today’s prices in January of last year.

The government rolled out an Independent Power Producer system in 2011 to encourage private investment in electricity production, especially in areas off the national grid, hoping to produce more power and alleviate shortages. However, take-up in the system has been slow as private producers are unable to sell power at a profit.

Industrialists in Mandalay are also contesting the rate increase.

U Aung Moe, secretary of the Lighting Team at Mandalay Industry Development Committee, told The Myanmar Times that the committee would submit a petition of protest to the union minister asking to delay enforcement of the new rates.

He said businesses needed more time “until we are ready to pay the new rate”.

The committee has asked the ministry either to delay the introduction of higher fees until early next year, or scrap the idea altogether.

The director general reportedly told committee members that the new rates were in line with ASEAN standards, stating that the ministry needed to guarantee a 90pc electricity supply to industries for the summer months, said an industrialist who attended the October 28 meeting.

“Many small enterprises are on hold because it’s too expensive to operate, so this new increase will create further losses for them, which only hurts employees in the end,” U Maung Maung Oo, secretary of the Mandalay Industry Development Committee told The Myanmar Times on October 29.

Committee statistics show there are more than 1300 companies active in the Mandalay Industrial Zone, 400 of which are considered to be large. The rest are small- and medium-sized enterprises.

Ministry statistics show that 224 of 396 of Myanmar’s biggest settlements have access to electricity, but more than 40,000 of the nation’s 60,000 villages do not have access to power.

source: The Myanmar Times
http://www.mmtimes.com/index.php/business/8652-govt-fear-backlash-over-power-price-rise.html