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October 15, 2019

Raising Unit Prices of Electricity

An electricity substation. Photo: Phoe Khwar
An electricity substation. Photo: Phoe Khwar

Recently the announcement by the Electricity Supply authorities that Unit prices of electricity would be raised on a revised utilization scale depending on the number of units used, has been a topic of discussion on National Television. According to the explanation and ensuing discussion, the Unit price hikes were made after considering the financial “losses” that have been long incurred by the Electricity Supply undertaking body in providing electricity to all its users. The “losses” were due to the electricity supply being heavily “subsidized” by the State. Electricity Supply undertaking body being a State-owned agency, the “subsidies” may be justified to an extent as they are providing utility service to the people. In fact, the high subsidies made by the Electricity Supply undertaking body is a “legacy” from the Socialist era. However, in a democratic country with a free market economy, a more “market-oriented” outlook is needed. Hence the “reduction of the subsidy by increasing the rates”.
As it is, Myanmar’s need for electricity is increasing rapidly. If Myanmar is to aim for further industrialization by increasing the numbers of Industrial/Special Economic Zones and encouraging investment in more high value added industries, then providing adequate electricity is a top priority. But electricity generation, transmission and distribution over large areas need huge amounts of investment. The Government does not have the funds at present, to undertake such investments on its own. So it has to invite bids from the private sector electricity companies, whether local or foreign, to either on their own or a venture with the relevant Government and private entities, to make investments in the electric energy sector for the generation and distribution of electricity. The “sale” of electricity by the private electricity providers to the Electricity Supply body to feed into the national electric power grid would enable more stable electricity to be supplied to present and future users.
The investors, on their part, would wish to recoup their return on investment within a certain period of time and turn a profit as well. This could be possible only if the “rates” they sell the electricity is commercially viable. Hence lessening subsidy and increasing electricity rates is an “incentive” for private electricity providers, whether local or foreign to invest in Electricity Supply ventures.
The discussions were both lively and informative. In conclusion the consensus was that the hikes could be justified if the resulting increase in earnings by the Electricity Supply authorities would in return help them to improve service of supplying more stable electricity to the present users and at the same time enable Electricity Supply authorities to expand electricity supply gradually to over half the population, particularly in the rural areas, who do not as yet have access to electric energy, whether conventional or the renewable type.
The “public” Electricity Supply system has been the source of electricity in Myanmar since the acquiring of independence. The electricity generation, distribution and utilization entities of the Electricity Supply system has expanded to the nation wide electricity grid. It is being managed pretty well in spite of the budget constraints, the difficulties encountered and the criticism of those who just can’t seem to understand the complexity of managing satisfactorily the provision of electricity to all users nationwide.
Now to return to the “rationale” of the unit rate hikes. The writer would like to opine that the bigger the users, the more they should pay towards the generation, distribution and utilization of electricity – somewhat in the context of the saying “big polluters“ should pay more for cleaning up; “big users” should pay more for providing the of electricity.
The “big users” of electricity in the general public include private users who have air conditioners, electric stoves, electric heaters, microwave ovens, refrigerators, freezers, washing machines, and what not in their homes/apartments. These “big users” should, where possible, try to reduce the use of electricity or instead of electricity use other available sources of energy. For instance for cooking purposes, using gas stoves instead of electric stoves which are “guzzlers” of electricity. Maybe sometime in the future, piped gas (the proper gas of course) for cooking would be made available. Another alternative would be “kerosene stoves” which were popular some decades ago. Perhaps if they make a comeback it would reduce the need for electricity for cooking. Those users from rural areas particularly, who do not yet have access to electricity at present should consider the “kerosene stove” option instead of charcoal or wood both of which are more “environment unfriendly”.
As for “industry” ( meaning the generic term for all economic activities for the production of goods and services), they would accept the rate hikes because at present they will be provided, as far as possible, with a more stable supply of electricity and that in the future sufficient and stable electricity will be provided to them. In that case, many of the industrial undertakings that have to now install standby generators or voltage regulators will not need to do so in the future.
There seem to be protested by some quarters about the increased rates because they fear it will lead to general price rises of all commodities. For that matter, prices of commodities have been steadily rising anyhow over the years. Only in times of excessive “supply” for a specific commodity would the prices dip, and that too for a short period only. Hence anxieties of protesters should be assuaged through public information campaigns. It could also be explained to the public that the increases will not be too much for the low-end users. They need also to understand that by accepting the rate hikes, they are in effect enabling more fellow citizens to get access to electricity in the future.
One note of caution though about the “rate hikes”. Not counting the acceptable technical losses incurred in distribution, the rate hikes may increase “losses” due to “pilferage” which even now seems to be considerable. The Electricity Supply authorities, by taking measures to reduce this menace could “save” a lot of electric energy and enable the increasing supply of electricity to the authentic users, even at the present time.

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