1. Competition law and sectoral regulation on Thai energy sector: A review and the forward development plan Pornchai Wisuttisak Admitted as a lecturer in law at Law faculty, Chiangmai University, Thailand PhD Candidate and casual tutor, School of Business Law and Taxation, University of New South Wales, Australia CUTS International conference on Reviewing the Global Experience with Economic Regulation: A Forward Looking Perspective- New Delhi on April 18-20, 2011

2. Thailand Country: Overview Region : South East Asia Region : South East Asia Population: 66.51 million Population: 66.51 million Area: 513,115 sq km ( India has territory at nearly 3.3 million sq km) Area: 513,115 sq km ( India has territory at nearly 3.3 million sq km) GDP per capita: approx US $8.2billion GDP per capita: approx US $8.2billion

3. Synopsis of the presentation 1. Thai energy sectors : Liberalisation and market reform 1. Thai energy sectors : Liberalisation and market reform 2. Problems on Thai Competition law and Energy sector regulation 2. Problems on Thai Competition law and Energy sector regulation 3. Plan for reform on competition law and sectoral regulation: the short and long term proposal 3. Plan for reform on competition law and sectoral regulation: the short and long term proposal

4. 1. Thai energy sectors: Liberalisation and market reform 1980s policy on liberalization of utilities, including energy 1980s policy on liberalization of utilities, including energy Establishment of National Energy Policy Office(NEPO) Establishment of National Energy Policy Office(NEPO) NEPO set up the plan on liberalization and corporatization of government owned utilities in energy sector NEPO set up the plan on liberalization and corporatization of government owned utilities in energy sector Electricity Electricity Oil and gas Oil and gas

5. Liberalisation on electricity sector Permitting private participant of SPP and IPP Permitting private participant of SPP and IPP Establishment of two large IPPs are Electricity Generating Company Limited (EGCO) and Ratchaburi Electricity Generating Holding Public Co., Ltd (RATCH) Establishment of two large IPPs are Electricity Generating Company Limited (EGCO) and Ratchaburi Electricity Generating Holding Public Co., Ltd (RATCH) The two IPPs still under control of Electricity Generation Authority of Thailand (EGAT) ( SOE) The two IPPs still under control of Electricity Generation Authority of Thailand (EGAT) ( SOE)

6. Master plan electricity liberalization I: Reform of Electricity Supply Industry (ESI) II: Using EGAT as the primary power purchaser (1998-2001) III: EGAT as the central supplier of power, with gradual introduction of competition. (2001- 2003) IV: Competitive wholesale power pool / introduction of retail competition (From 2003 onward)

7. Cancelation of the Master Plan Taksin’s government tried to liberalise electricity without a structural change Taksin’s government tried to liberalise electricity without a structural change The plan created uncompetitive electricity market and deriving state monopoly market power to privatised EGAT The plan created uncompetitive electricity market and deriving state monopoly market power to privatised EGAT The plan was then challenged by the Federation of Thai consumers in the Supreme Administrative court case The plan was then challenged by the Federation of Thai consumers in the Supreme Administrative court case

8. Liberalisation on oil and gas sector NEPO also proposed plans to liberalise gas by deregulation of the gas sectors and privatisation of the Petroleum Authority of Thailand (PTT) NEPO also proposed plans to liberalise gas by deregulation of the gas sectors and privatisation of the Petroleum Authority of Thailand (PTT) The set framework was mainly focus on the open and disintegration of gas pipeline and distribution The set framework was mainly focus on the open and disintegration of gas pipeline and distribution

9. Master Plan for Oil and Gas liberalization Step 1) Structural separation Adopting separation of transmission and supply & marketing businesses Step 2) Establishment of Access to essential facilities open the free and fair access to essential facilities of gas pipe line under PTT Step 3) Privatisation of PTT Listed the PTT in stock market and open market for more private paticipants

10. Inconsistency of implementation The government implemented the PTT corporatisation without, steps 1) and 2) The government implemented the PTT corporatisation without, steps 1) and 2) Implement only 3) by corporatisation PTT via IPO in Thai Stock market Implement only 3) by corporatisation PTT via IPO in Thai Stock market PTT monopoly of gas and oil market after the corporatisation PTT monopoly of gas and oil market after the corporatisation Challenged in the Supreme administrative court case Challenged in the Supreme administrative court case

11. Supreme Administrative Court decisions EGAT corporatisation case EGAT corporatisation case  Revocation of EGAT corporatisation  Reasons - there is the possibility on uncompetitive market condition after the EGAT corporatisation  Inequality on business competition PTT corporatisation case PTT corporatisation case  Not necessary to revoke the Royal decrees on corporatisation of PTT  Separation of state assets of land and gas pipelines from PTT Plc  Cancel transferring of the state authoritative power to PTT Plc

12. Current energy market structure EGAT –monopoly of power generator MEA- Metropolitan and suburban distributors and retailer PAE-Provincial distributor and retailer PTT–monopoly oil and gas Monopoly gas supply Gas is the major sources of electricity generation

13. 13 Thai Electricity generation in 2008 Gas 70.0 % 70.0 % Diesel 0.2 % Import from Malaysia 0.3 % Import from Laos 1.6% Hydro 4.7% Lignite 12.6% Oil 1.0% Import coal 8.2% Renewable energy 1.4% Source: Source: EPPO, 'Summary of the Conference Proceeding on the Thai electricity Development Plan' (Paper presented at the Thai Electricity Development Plan 2007-2020 (Translated from Thai language) 2007).

14. 14 National plan on sources of electricity generation Million4% 4%4%3%3%3%3%3%3%2%2%2%2% 73% 70%69%67% 69% 68% 69% 65%61% 62% 63%61% 60% 11% 11% 11% 10% 9% 9% 8%8% 7% 7% 7% 6% 6% 8% 8% 9% 10% 10% 11% 11% 15% 19% 18% 17% 16% 15% 10% 10% 9% 9% 8% 7% 7% 6% 6% 7% 6% 5% 5% 3% 2% 2% 2% 2% 2% 3% 3% 3% 2% 2% 2% ปี Source: Source: EPPO, 'Summary of the Conference Proceeding on the Thai electricity Development Plan' (Paper presented at the Thai Electricity Development Plan 2007-2020 (Translated from Thai language) 2007).

15. 15 Electricity generators’ market shares EGAT 15,021.0 MW 50.3% IPP 12,151.6 MW 40.7% SPP 2,079.1 MW 7.0% Import from Malaysia 300 MW 1.0% Import from Laos 340 MW 1.1% EGAT hold majority share of two largest IPP (Ratchaburi Electricity Generating Holding PCL and Electricity Generating Company Limited ) Source: Source: RATCH (2009) Ratchaburi Electricity Generating Holding Public Company Limited (RATCH) annual report 2008. RATCH p 60 and EGCO (2009) Corporate Presentation Quarterly Financial Results Ended 31 March 2009. EGCO p 5 Source: Source: EPPO, 'Summary of the Conference Proceeding on the Thai electricity Development Plan' (Paper presented at the Thai Electricity Development Plan 2007-2020 (Translated from Thai language) 2007).

16. 16 PTT Business chains in oil and Gas

17. 2. Problems on Thai Competition law and Energy sector regulation Thai competition law Thai competition law Thai Energy sector regulation

18. Problems on Thai competition law Institution problems on Thai competition law Institution problems on Thai competition law  Influence from government and business lobby  Financial constraint  Lack of expert  Lack of coordination with sectoral regulation

19. The Competition law exemption and limited role on energy sector The Competition law exemption and limited role on energy sector  EGAT, MEA, PEA, and PTT, Pcl are SOEs Problems on Thai competition law( cont)

20. Problems on Thai Energy regulation ERC institution ERC institution Energy regulation and the Conflict between supporting SOEs and promoting market competition Energy regulation and the Conflict between supporting SOEs and promoting market competition Lack of rule for open to access to essential facilities or third Party access on electricity infrastructure Lack of rule for open to access to essential facilities or third Party access on electricity infrastructure

21. ERC institution ERC institution ERC structure and research on energy sector mostly relies on private sector ERC structure and research on energy sector mostly relies on private sector Lack of regulatory capacity for monitoring electricity grid Lack of regulatory capacity for monitoring electricity grid No clear line of authorities in reviewing and setting tariffs No clear line of authorities in reviewing and setting tariffs Face with politically strong SOEs Face with politically strong SOEs Problems on Thai Energy regulation (cont) http://www.erc.or.th

22. Conflict between supporting SOEs and promoting market competition Conflict between supporting SOEs and promoting market competition section 7(3) of Energy Industry Act states that ERC has to promote competition in the energy industry and prevent abusive use of dominance in the energy industry section 7(3) of Energy Industry Act states that ERC has to promote competition in the energy industry and prevent abusive use of dominance in the energy industry section 8(5)states that ERC has to support and maintain SOEs as monopoly enterprises section 8(5)states that ERC has to support and maintain SOEs as monopoly enterprises Problems on Thai Energy regulation (cont)

23. No access to essential facilities in the Energy Act No access to essential facilities in the Energy Act Problems on Thai Energy regulation ( cont)

24. 3. Plan for reform on competition law and sectoral regulation Short term plans Short term plans  ERC action on market competition  Build public recognition on competition law  Advocacy between competition law and the sector regulation

25. Long term strategy Long term strategy  Establishment of National Competition Council  Reform on Thai Energy sectoral regulation  Reform on Thai competition law  Establish formal and effective work coordination between competition law and sectoral

26. Conclusion Inappropriate liberalization Inappropriate liberalization Current uncompetitive structure under SOEs monopoly Current uncompetitive structure under SOEs monopoly Problems on Thai competition law Problems on Thai competition law Problems on Energy regulation Problems on Energy regulation Short- term plan Short- term plan Long- term plan Long- term plan

27. धन्यवाद Thank you Kob Khun Krub Pornchai Wisuttisak Contact No. +61 433 223 618 Email p.wisuttisak@unsw.edu.au