1. The Ninth Meeting of the Experts Group on Power Interconnection and Trade (EGP-9), was held in Guangzhou, PRC, on 18 November 2003. The Meeting was co-organized by the China Southern Power Grid Co. (CSG) of the People’s Republic of China (PRC), the Asian Development Bank (ADB), and the World Bank.
I. Opening Session
5. Mr. Yin Lian, Director of International Cooperation Department, CSG, warmly welcomed the representatives of ADB, WB, GMS countries and PRC’s National Development and Reform Commission (NDRC). He described the business of CSG, which is one of two national power grid companies in PRC, and added that CSG’s power cooperation and development with GMS countries is one of CSG’s strategic missions. He enumerated CSG’s position on GMS power interconnection and trade. One was to speed up power development through joint efforts and providing power for regional economic growth. Another was to establish an ideal platform for communication and cooperation in the ASEAN and Asia Pacific region. A third was to deepen ADB’s study for the formulation of the Regional Power Trade Operating Agreement (PTOA). He provided suggestions to further enhance GMS power cooperation mechanism. One was to strengthen its function of plan and command, information exchange and progress supervision. Another was to enhance sharing of information, timely communication and expeditious solving of problems. He suggested pushing forward on soft aspects such as review/ sharing of each country’s policies, rules and regulations, and using these to push forward with hard-won projects such as PRC-Thailand and PRC-Lao projects. On PRC-Thailand cooperation, he said both sides expressed willingness to promote the project to transmit 3,000 MW of power from PRC to Thailand with the signing of the PPA by the two parties in December 1998. He expressed trust that the meeting would establish a platform for mutual communication and well-built friendship, and help seize every chance to cooperate and realize development together. He expressed sincere gratitude to the organizers and participants and wished the meeting great success.
6. Mr. Khalid I. Rahman, Director, Infrastructure Division, Mekong Department, ADB, welcomed participants to the EGP-9 meeting and noted that the CSG, which covers Yunnan power sector, is headquartered in the beautiful and historic city Guangzhou. He said the meeting would take stock of the progress of GMS members toward regional power trade, in terms of the policy/ institutional framework, and in terms of developing the grid interconnection infrastructure. He cited Myanmar, Viet Nam and Thailand for ratifying the Inter-Governmental Agreement on Regional Power Trade (IGA) and noted the call of GMS Ministers in Dali to start early in preparing the PTOA. He said that the country presentations would commence with the plan for PRC power restructuring followed by updates on major power sector policy and regulatory reforms by the other GMS countries. These he said would enable better understanding of long-term investment plans, financing needs and the tariff structure. He said the ADB, WB, and JBIC have started a joint flagship study “Infrastructure Service Provision and Financing,” which aims to review the role of infrastructure in economic growth and to develop a framework on financing and developing infrastructure services. He noted that Soluziona, the PTOA consultant would present the principles and practices of cross-border transactions in Europe and America to help understand financial issues associated with cross-border power exchange. He noted the progress made on the physical interconnection side, especially the Cambodian portion of the VIE-CAM transmission line. He said Mr. Kim would report on preparation work for the FS of Phase I of the GMS Interconnection project. He welcomed WB’s new team leader Mr. Barry Trembath and looked forward to continued collaboration and partnership with WB in the GMS energy sector. He concluded by thanking the CSG and Government of PRC for the excellent arrangements made for the meeting.
Objectives of the Meeting
7. Mr. Prutichai Chonglertvanichkul, Director, System Planning Division of EGAT (Thailand) and the Chairman of the EGP, thanked CSG and ADB for jointly organizing the meeting. He cited recent signing events that promote power interconnection and trade in the GMS. First was the signing of the IGA during the GMS Summit in November 2002. The second was the signing of the PPA of Nam Theun 2 project, which will benefit Lao PDR and Thailand, and later Viet Nam when the LAO-VIE interconnection is built. The third was the signing of the Joint Statements between Thailand and Lao PDR, and Thailand and Cambodia, for specific power cooperation projects during the Summit on Economic Cooperation Strategy (ECS) among Cambodia, Lao PDR, Myanmar and Thailand, held in Bagan, Myanmar in November 2003. He informed the meeting of the communication from WB confirming its support for power interconnection and trade, and expressed his appreciation to WB for their support. He said the EGP-9 meeting would cover several topics, as follows: progress and future plan for PRC power restructuring; latest developments and policy changes in the power sector of GMS countries; international experiences on cross-border trade; and briefing on GMS Power Interconnection Phase I project. He concluded by stating that the EGP is a reaffirmation of GMS countries’ commitment to power interconnection and trade, and expressed that the participants’ contributions and views would be beneficial to the GMS countries.
8. Mr. Prutichai noted that with ratification of IGA by three members, there would be election of officers of the RPTCC on the second day. He said consultations would be held with participants later in the day on this matter.
II. Country Presentations
Progress and Future Plan for Restructuring of the Power Sector in PRC
9. Mr. Qin Zhijun, Deputy Chief, National Development and Reform Commission, PRC, commenced with the importance of the power industry on national social and economic development. He provided the current situation and problems of the PRC power industry. Among the problems he noted are: insufficient installed generating capacity; weak power network structure, in terms of optimal resource allocation; need to enhance self-exploration and planning work; and need to deepen market principles. He noted the issuance of “The Reform Scheme of Electricity Industry System” in March 2002, which is the guiding principle for PRC’s power system reform. In 2002 the separation of generation from transmission system was preliminarily realized, with the state-owned capital divided into two parts, the generation part and transmission part, with assets, finance and personnel all deregulated. For 2003, the first year for carrying out the reforms, he said the main tasks include: perfecting deregulation of power enterprises; establishing power companies of various PRC provinces/ regions; separating auxiliary from main businesses; and experimenting on direct trade between generation and consuming firms. He said the environment and mission for the future includes promoting west to east transmission, deeper reform of the power industry and further opening up of the domestic area to the outside world. He said the rapid growth of the national economy necessitated the reform of the power industry so the latter better meets the demands of development.
10. On the development strategy and guidelines, Mr. Qin said the basic guidelines for development includes: deepening system reform; enhancing grid construction; developing hydropower; optimizing thermal power; promoting nuclear power development; developing natural gas; generating power from new sources; environmental protection; and improving energy efficiency. He provided the main target of the 15th 5-Year Plan, which aims, among others, to raise clean power sources (hydropower, nuclear, LNG, clean coal) to 40%. He then provided the perspective target for 2020, which includes forming the hydropower and coal base in certain provinces/ regions and raising equipment, savings, consumption and environmental protection to international standards. He concluded by stating that the rapid growth in demand, which has caused supply shortages, translates into motivation for power industry people to better support PRC’s industrial and economic development. He said basically the optimized allocation of energy resources within the whole nation has been realized.
11. Mr. Chavalit asked whether separation of generation and transmission were undertaken under the reform process. Mr. Qin said the two functions were separated in January 2002. Mr. Houmphone asked about the status of transmission line from Jinghong, Yunnan, PRC to Thailand via Lao PDR. Mr. Qin replied that PRC would be keen to develop said line. Dr. Thein Tun asked about provinces included in the CSG and Mr. Qin replied that there are 5 provinces/ regions covered by CSG, and added CSG manages the interconnection with Hongkong and Macau. CSG, he said, supplies 7% of Macau’s power needs. Mr. Rahman asked about the structure resulting from the reform process, and Mr. Qin referred to his earlier presentation in Yangon in 2002 on the said structure. Mr. Prutichai asked about PRC’s plan to connect with the natural gas (LNG) lines in former Soviet states. Mr. Qin said PRC also emphasizes utilization of LNG resources and is studying ways to make domestic LNG generation plants more competitive, while preserving the environment. Mr. Yin briefed on the expected additional lines for the next 5 and 10 years. Mr. Qin explained that west to east transmission will be developed to transfer power from resource-rich western provinces to more economically developed eastern provinces. Mr. Tran Minh Huan asked about the plan to shut down small coal generating units; Mr. Qin replied that this plan is correct, but explained CSG also plans is to construct bigger, more efficient plants that are more environmentally-friendly. U Aung Khaing asked about plans to privatize the transmission company; Mr. Qin said there is no plan yet to privatize and added that at present, there may be little private sector interest in low-profit (but stable) transmission investment. Mr. Jona asked about the power tariffs to consumers and whether this is affected by generation cost changes. Mr. Qin replied that consumer tariffs are now market-based although the transmission charges are still set by Central government.
Country Presentations: Latest Developments and Policy Changes in the Power Sector (Long Term Investment Plans, Financing Sources and Gaps, Tariff Structure)
Cambodia
12. Mr. Chulasa Praing, Deputy Director, Corporate Planning and Project, Electricity of Cambodia (EDC), presented on the current structure of the Cambodia power sector. He gave a general profile of the country’s energy sector, with lowest energy consumption and highest electricity prices in the GMS- tariff is from US$ .09 to 0.25 per kWh for grid connection and US$ 0.40 to 0.80 per kWh for off-grid supply in the rural area. He gave the current structure of the electricity sector, showing relationship of EDC with government ministries and other actors in the electricity industry (IPPs). He listed the power sector policies, mainly to supply adequate energy at reasonable/ affordable price, and encourage exploration of environmentally/ socially acceptable resources. He said EDC today manages 80% of production and distribution of power in the country. He then explained the proposed long-term structure of the power sector. He showed slides indicating: installed capacity and peak demand; production by type of fuel; actual/ future status of power sector; and development of transmission and distribution.
13. He explained the Cambodia Power Development Plan (2004-2008), highlighting the promotion of private participation where development is needed, and imports from Thailand and Viet Nam. He showed the required transmission lines of the Plan. He then explained the Cambodia PDP for 2009-2013 highlighting the commissioning of new combined cycle and hydro generating plants. For the PDP 2014- 2018, he showed the plan to connect southern with northern and western grids. For PDP 2019-2025, he focused on additional hydro plants and east-west interconnection allowing power exchange with THA and VIE. Mr. Praing showed the proposed power cooperation in the GMS, to source power from LAO via VIE. Mr. Praing showed the proposed power cooperation in the GMS to provide Cambodia the opportunity to obtain cheap power from Lao PDR via Viet Nam. This is the main objective for poverty reduction and strengthening the power system in Cambodia. He also showed the shortage of power supply before the arrival of transmission line from Viet Nam. He went through proposals for strengthening capacity, which includes energy economic planning.
14. Mr. Houmphone asked about the reason why two transmission projects from THA and VIE were delayed. Mr. Praing said the delay was mainly due to lack of financing. Mr. Houmphone also asked why Cambodia did not consider direct import from Southern Lao PDR to Northern Cambodia. Mr. Jona explained this was a matter of viability, since the load demand in Northern Cambodia is very low. Mr. Qin asked about the following: price indicated (whether consumer or generation price); the hydropower potential in Northern Cambodia; and policies on foreign investment in hydropower development. Mr. Praing clarified that the price indicated is the consumer price. He then gave the hydropower potential in Northern Cambodia. Mr. Praing also explained that Cambodia is open to foreign investment and gave examples of current investors in the sector. Dr. Tran Minh Huan informed that Viet Nam side is now offering to cooperate with Cambodian side to develop some hydropower projects in Se San and Srepok (Lower Se San II and Lower Srepok II) in order to supply power to both Cambodia and Viet Nam. The Chairman welcomed Viet Nam’s initiative to develop bilateral cooperation between Cambodia and Viet Nam.
Lao PDR
15. Mr. Daovong Phonekeo, Manager, Systems Planning Office, Electricite du Laos (EdL), gave the update on current developments in the power sector of Lao PDR. He showed the power sector structure for Lao PDR and explained the current situation with respect to EdL’s relationship with government ministries, EdL’s organizational structure (development, administration, generation, transmission, and services), load demand of geographic divisions (isolated grids), generation plants in 2002, energy balance, and EdL share of total installed capacity. He showed the share in electricity sales and consumption of the various sectors of Lao PDR (industry, entertainment, embassies, government, agriculture, enterprise and residential. He explained the projection of electrification ratio for villages and households. He then outlined the objectives of the power development policy, such as, among others, to generate foreign exchange for development, to expand the customer base through grid extensions, and to extend off-grid rural electrification. He then explained the average retail tariff and structure for various sectors (residential, industry, entertainment, etc.) and the billed average electricity tariff. He showed the energy demand forecast for various sectors up to 2010 and explained a map indicating the transmission network by 2012. He also showed the projected shares of total installed capacity from 2002 to 2010.
16. Mr. Daovong showed the site for the Nam Theun 2 project and explained the project structure of NT2 Power Company. He then indicated the transmission interconnections to link NT2 with its customers.
17. Mr. Yin asked whether Electricite de France (EDF) returned to support the project, and Mr. Daovong said EDF has joined the NT2 Power Company (NTPC) again and the PPA between EGAT and NTPC was signed on 8 November 2003. Mr. Chavalit asked about the prospects of WB support for NT2. Mr. Viraphonh said the WB is carrying out due diligence, but he expects no major adverse findings on the project’s social and environmental impacts.
Thailand
18. Mr. Prutichai Chonglertvanichkul, Director, System Planning, EGAT, presented the current ESI structure of Thailand and EGAT’s privatization road map from the present to March 2004. He showed installed capacity and demand for Thailand’s regions and the present status of generation and transmission facilities. Generation by type of fuel is dominated by natural gas, which is the cheapest source. He showed the total energy sales and energy consumption by sector. He presented EGAT’s forecast peak and energy generation from 2004 to 2016. He also presented the recommended plan for installed capacity and peak generation in 2003 to 2016. Forecast energy generation was presented by type of fuels. Finally, Mr. Prutichai showed the forecast minimum reserve margin from 2003 to 2011.
19. Mr. Chavalit Pichalai, Director, Energy System Analysis Bureau, presented on future directions for electricity supply industry (ESI) reform and privatization in Thailand. He enumerated the objectives of the power reform program, which includes promoting efficient energy use and reducing government investment burden. He showed he current structure of power supply and privatization targets for the three power utilities. He highlighted the recent developments, especially on nullification of Cabinet resolution (Sept. 2003) pertaining to ESI reform and establishment of power pool. He noted a study for development of Thailand’s energy sector which will address various aspects of ESI reform, including future ESI model, institutional structure of 3 power utilities, power tariff and cross subsidies, etc. He explained the short term ESI structure and enumerated the points of concern on the ESI reform. He gave the future directions for ESI reform and conclusions with respect to the future ESI structure.
20. Mr. Chavalit then explained the electricity tariff design objectives, and criteria for setting tariffs. He explained the load patterns of the system pre-1991, post-1994 and at present. He explained Thailand’s Power Development Plan in line with load forecasts, and the revenue requirement related to an estimated basic tariff. He explained that current power tariff structure (Oct. 2000) considering investment plans, operating efficiency, wholesale and retail tariff relative to marginal costs, and financial status of power utilities. He gave the new bulk supply tariff structure and explained the principle and process of tariff restructuring.
21. Dr. Thein Tun asked whether the principle of privatization of EGAT applies to MEA and PEA (the other utilities). Mr. Prutichai replied that MEA and PEA would be privatized according to the privatization targets set by the State Enterprise Policy Committee of Thailand in Q2 and Q4 of 2004, respectively. Mr. Rahman observed that the study of ESI reform could affect the privatization of the utilities. Mr. Houmphone asked about the plans for implementing the power pool. Mr. Chavalit said that the Cabinet decided to stop the power pool after the power crisis in the US. He said that the power pool system could be revised by segregating the short and long-term contracts. Mr. Tran Minh Huan asked about the plan for regulation and future plan for introducing nuclear power in Thailand. Mr. Chavalit explained that the policy function would be separated from the regulatory function. Mr. Prutichai added that Thailand has no plan to construct nuclear power plant. Mr. Yin asked the timetable for the power reform. Mr. Chavalit said the ESI structure would be finalized in December 2003. Mr. Yin asked about the mode of sale from the generation plant to the big consumer. Mr. Prutichai said EGAT currently has direct customers, but will not be allowed to have more direct customers in the future.
Myanmar
22. Dr. Thein Tun, Director General, Ministry of Electric Power (MOEP), recalled that the MOEP was established in November 1997 to promote effective operation of the power sector. He said the Myanma Electric Power Enterprise (MEPE) was put under MOEP while a newly established Department of Electric Power acted as policy-making body as well as Secretariat to the Ministry. In January 2002, he noted that a Department of Hydroelectric Power (DHP) was established to increase capability to implement hydropower projects. He gave a quick review of the policy and strategies of the MOEP and proceeded with the demand and supply situation of Myanmar’s power industry. He gave the demand forecast for the next 10 years. He stressed that to meet future power demand, MOEP laid down a 5-year short term and a 30-year long-term strategic plan. The first was to meet rapidly rising domestic demand, and consisted of plans to develop 14 hydropower stations and 1 coal fired thermal plant, and 28 transmission lines and substations. He enumerated the objectives of the 30-year plan, which is to consider power trade with GMS, ASEAN and the BIMSTEC region.
23. He then briefed on the estimated investment costs for the generation projects in the first five-year plan and financing status for these projects. He said out of estimated costs of $1,092.52 million, financing had been secured for about $777.52 million. For the transmission projects, out of estimated total cost of $423.92 million, $91.92 million had already been contracted. Financing came mostly from own funds, suppliers’ credit, and Chinese and Japanese grants. He noted that little or no direct foreign investment went into the power sector due to heavily subsidized power prices. He showed the current electricity tariffs, which the MOEP was tasked to propose but which needs government approval to become effective. He explained that for households, the rate is subsidized up to 200 kWh month, but they are charged 25 kyat/ kWh thereafter, which is the rate all throughout for industrial and commercial consumers. He then proceeded to discuss the export oriented projects which has interested foreign investors since they could get commercial tariffs for the power produced, such as the Tasang (7110 MW) and Hutgyi (400 MW) on the Salween, and Tamanthi (1,200 MW) on the Chindwin. He concluded by stating that incentives, with regard to electricity tariffs, were required to enable private investors supply power on commercial basis. Further power sector deregulation and establishment of institutional framework for IPPs were required to attract foreign investment and private participation in the power market.
24. Mr. Chavalit asked about the progress of MYA-THA power trade. Dr. Thein Tun replied that a MOU was signed between MYA and THA for the former to supply 1,500 MW to THA by 2010. He said the most advanced among the export hydropower projects is Tasang. Mr. Tran Minh Huan asked about the BOOT power projects and extent of local firms’ participation in these. Dr. Thein Tun replied that the lack of foreign exchange limits local firms’ involvement in the power sector.
PRC (Focusing on Yunnan and Introduction of CSG)
25. Mr. Han Rui, Division Chief, International Cooperation Department, CSG, provided a background of the reform process for the PRC’s power sector, where the generation sector was separated from the transmission and distribution. He said the power system consists of: State Development Planning Commission (SDPC) in charge of strategic development, grand policy and planning; State Electricity Regulatory Commission (SERC) in charge of regulation and monitoring of power industry; two power grid companies, in charge of construction, operation and power trade; and five generation companies in charge of investment, construction and operation of power generation plants. He then presented the situation and development plans of CSG in the context of the power system in PRC and energy resources distribution within the CSG’s region. He said CSG set its goals in three phases as an operator of the regional power grid and optimizer of energy distribution in Southern PRC. He gave a historical review of PRC’s cooperation with the other GMS countries (THA, LAO, MYA, VIE).
26. Mr. Han provided the characteristics of CSG, which will enable it to effectively promote subregional power cooperation. CSG, he said, has long distance and large capacity transmission experience, high degree of technological capacity, sufficient financial capacity and cross-border interconnection and trade experience. He cited the ADB Master Plan study, which found that since peak loads in GMS countries do not occur simultaneously, interconnections would save on investment in generating capacity. He cited the benefits of interconnection to the subregion with CSG’s 60 GW capacity, in terms of greater reliability of related grids, improved platform for energy exploitation, investment savings on generation construction and grid operation, and experience sharing and technical support. He put forward proposals and actions for GMS cooperation: strengthening cooperation/ exchange in planning; study of markets and pricing; research on power grid safety and stability; research on proper regional market; and emphasis on Master Plan guidance for pacing interconnection. He further suggested that GMS members open up their information channels so that the PTOA content is realistic and adhere to GMS members’ development. He concluded by stating that affordable and reliable electricity supply will greatly contribute to living and investment conditions and industries of nations.
Viet Nam
27. Mr. Nguyen Van Vy, Deputy Director, Institute for Industry Policy and Strategy, Ministry of Industry, presented on the power development program and interconnection with GMS countries. He commenced with a brief country profile and proceeded with the power demand and supply situation, showing the power sales by sector. He showed the capacity and energy generation by 2002 and pointed to the main power plants of Viet Nam. He explained the power network (500 kV, 220 kV, 110 kV and distribution network). He showed the technical parameters in terms of losses and thermal efficiency. He gave a status of rural electrification. On power development, he presented the power sector policy of Viet Nam, which includes completing legal framework for restructuring management and collaboration with neighbors.
28. Mr. Van Vy showed the power demand forecast up to 2010, with average growth of 14% (base case) and 15% (high case). He indicated the hydropower potentials and oil-gas-coal reserves. He explained the thrust of power generation development with the additions in capacity up to 2010 (for hydro, thermal, gas and oil, and imports). He showed the composition of primary fuels for power plants up to 2020 and the breakdown of capacity by power plants by 2010. On transmission development up to 2010, Mr. Van Vy enumerated the length of lines and capacity of substations to be developed for 500 kV, 220 kV, and 110 kV. He illustrated (via a map) the various interconnection projects with Cambodia, Lao PDR and PRC up to 2010, and after 2010. These future interconnections were shown in detail in individual maps focusing on VIE interconnections with CAM, LAO and PRC. On long-term investment plans, Mr. Van Vy quickly showed the challenges for development and detailed the generation, transmission and distribution investments required. He identified the various financing sources such as internal (over 30%), foreign and local loans, export/ suppliers’ credit, and private sector. He showed the tariff structure and indicated the trends in tariffs from 1990 to 2002.
29. Mr. Chavalit asked whether the power development resource requirements could be adequately financed by VIE. Mr. Van Vy explained that VIE has been exploring alternative financing arrangements to be able to fund its projects. Mr. Prutichai noted that tariffs could be adjusted to generate more internal funds. Mr. Houmphone inquired about losses in Viet Nam’s power system. Mr. Van Vy explained the transmission and generation losses and showed the slide indicating the trends. Mr. Jona asked whether Cambodia will be asked to participate in the environmental impact assessment (EIA) for Srepok and Se San hydropower, given that the Yali dam developed earlier had impact on Cambodia. Dr. Tran Minh Huan said that for both Se San and Srepok Rivers, Cambodian side has been invited to projects: Hydrodynamic Modeling of Riverflows; and EIA to Avoid Negative Impacts on Downstream. Mr. Prutichai noted the low efficiency of power plants and asked whether Viet Nam’s system has combined cycle plants. Mr. Van Vy said the introduction of hydropower and combined cycle plants raised efficiency of Viet Nam’s system. Mr. Prutichai asked about the timetable for development of a 6,180 MW hydropower plant along the Da River and Mr. Van Vy said this hydropower plant in the north would initially be developed with a capacity of 2,400 MW by 2015.
III. Cross Border Power Trade and Interconnection
International Experiences in Cross-Border Transactions: Europe and Latin America Cases
30. Mr. Jorge Karacsonyi, Consultant, Soluziona- Mercados Energeticos, presented on “Principles and Practices of Cross-Border Transmission Tariff in Europe and Latin America”. He commenced by providing the general principles on cross border transactions, covering among others, the unified electricity market and its common rules for international and internal trade. He described the main issues involving mainly basic principles for regional markets (symmetry, non discrimination, priorities), cross border transmission (CBT) access, use, tariffs and congestion management, and transaction modes (bilateral, short-term bilateral/ spot, unified operation, and rules on security). He proceeded with an overview of the characteristics of Latin American electricity market, detailing the power generation mix. He then explained the cases for Central and South America, and the European Union, adding specific examples of transactions for each region.
31. For Central America, Mr. Karacsonyi provided the regional resources (hydro, geothermal) and status of reforms, wholesale market and private distribution, trading, generation and transmission of the six member countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama). The Central American example showed it was possible to have a regional market with varying conditions in national electricity markets. He gave the history of the regional market, from the signing of the SIEPAC (Interconnection System for Central America) in 1996 to development of market and transmission codes and organization of CRIE (regional regulatory agency) and the EOR, the regional system operator (SO), in 2002-2003. He outlined the main issues of the regional market, which included superimposing the regional electricity market (MER) with those of six members, the regional institutions (CRIE, EOR), spot market, nodal prices, congestion rights, etc. He then discussed the objectives of the EOR, the organization of the EPR (grid owner company) which builds and owns SIEPAC transmission facilities and the challenges faced by the SIEPAC.
32. For South America, Mr. Karacsonyi listed the status of electricity sectors’ restructuring and gave the existing electricity connections, where most of the cross-border flow is based on bilateral transactions and where the rules were developed as a result of bilateral agreements. He then showed existing gas connections, whose main objective is power generation. He stressed the coordination made by the countries to coordinate gas connections with power generation. He gave the characteristics of CBT in South America, where there are no general rules, and only agreed case by case. He said transmission tariffs were for use in each country, and congestion management, by the SO, gave priority to bilateral contracts. He added that dispatch transactions were coordinated by the SO, that there was low level of coordination and transaction types were either spot (Colombia-Ecuador) or bilateral (Argentina-Brazil, Argentina- Chile).
33. Mr. Leonardo Benitez, Consultant, Soluziona, presented for the EU, a market he characterized, as relatively free but which had to address issues concerning charges for network use and occurrence of network congestion. These issues were addressed by the European Transmission System Operators (ETSO) and Council of European Energy Regulators (CEER), through inter- ETSO payment schemes, harmonized national tariffs, and congestion management schemes. He explained the CBT mechanism in EU and history, explaining the tariffs that were in place up to 2001 (including import, export and transit fees). He said the ETSO later proposed a cross-border tariff as first step to facilitate power exchange among European countries. He said that to implement the CBT scheme, a harmonized definition of elements is required, involving cost calculation, fee calculation and settlement. Mr. Benitez expounded on the new CBT mechanism adopted by ETSO members in October 2002 and which entered into force in January 2003. These consisted of three steps involving defining elements, then costs, of the horizontal network, and defining how the CBT fund is financed. In practice however each country applied its own transmission costing standards for the use of its network adopted to its own regulation, but considering that the total amount collected should be in line with the CBT mechanism. He described the current congestion management situation in Europe. He noted that the Florence Forum on congestion management agreed that this should be based on market based mechanisms and also on providing correct signals for efficient network and generation investment.
34. Mr. Rahman asked about the differences in the development of the regional interconnections in Central and South America. Mr. Karacsonyi said that Central America developed a more formal structure while that of South America proceeded gradually on a bilateral basis. Mr. Chavalit noted the zero reserve margin in the Latin America and asked how this is possible. Mr. Karacsonyi explained that what he meant is that cross-border connections frequently get congested because cross-border capacity is lower than internal capacity. Mr. Daovong asked about the concept/ principles of penalties among regional market players. Mr. Karacsonyi explained that the rules of the market are being developed to include penalties to ensure efficient functioning of markets. Mr. Qin asked Soluziona’s view on the interconnection of GMS countries. Mr. Karacsonyi said that for the GMS it is important to define the rules, move gradually, and be open to adjusting the rules in the initial operation of the market. Mr. Prutichai asked who owns the EPR; Mr. Karacsonyi said that the EPR is owned by the market players and added that the EPR could not own generating plants.
GMS Power Interconnection Project, Phase I
35. Mr. Jong-Inn Kim, ADB, described the captioned project which involves construction of a 500 kV line between Nam Theun 2 (LAO) and Ha Tinh (VIE) taking into account a planned 500 kV line between Roi Et (THA) and NT2 (LAO). He noted the key milestones of the PPTA, which includes: the 16-17 June 2002 consultation meeting to discuss issues, scope, and TOR; the 23 July- 7 August PPTA fact-finding mission; and December 2003 PPTA approval. He explained the preconditions to the project, which are the NT2 hydropower development and its associated transmission line (Roi ET and NT2), and the expected timetable of NT2 project (whose expected completion is 2009/ 2010). He enumerated the expected issues of the project. He said one is the estimation of quantity of power exchange, and how this would reduce peak load requirements. He noted the need for distributional analysis of costs and benefits, given differences in investments and benefits to each country. Another issue he raised is on the use of NT2 facilities and determination of wheeling charge and technical compatibility between three countries. He then provided the TA purpose and scope, which includes dealing with aforementioned issues as well as to undertake a detailed study of the best option, economic and financial evaluation for project, procurement packaging and procedures, development impact on poverty, and social and environmental impact assessment.
36. Mr. Kim then provided the expected international and domestic consulting inputs and the TA cost estimates and financing plan. He also explained the implementation arrangements for the TA and the tentative implementation schedule over the 12-month period.
IV. Closing Session
Consideration and Adoption of Proceedings
37. The EGP members reviewed the draft minutes and after incorporation of suggested changes, the body therefore approved the minutes of the EGP-9 meeting.
Closing Remarks
38. Mr. Prutichai expressed the hope that the participants’ expectations were fulfilled. He thanked the participants for their efforts to ensure the success of the meeting. He said the sharing of experiences and expertise and exchange of knowledge immensely benefited everyone. He expressed deepest appreciation to CSG and the ADB for jointly hosting the meeting, and for the support and warm hospitality.
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Appendix 1 |
Regions and Countries 
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