1. The Tenth Meeting of the Subregional Electric Power Forum (EPF-10) was held in Guangzhou, PRC, on 19 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. Khalid I. Rahman, Director, Infrastructure Division, Mekong Department, ADB, welcomed participants to the EPF-10 meeting and recalled that the signing of the IGA by all six GMS members during the First GMS Summit is seen as one of the GMS Program’s crowning achievements. This gained further momentum with IGA’s ratification by MYA, VIE and THA, and noted that the 12th GMS Ministerial Conference in Dali, PRC called for expediting the IGA’s ratification by the other GMS members. He noted that the EPF meeting is the first among GMS sector working groups to be held after the Dali GMS Conference. He mentioned that the GMS Ministers in Dali laid down three building blocks for attaining the GMS vision- connectivity, competitiveness and community. He said development of policy and institutional framework for power trade and building the grid infrastructure would improve connectivity and enhance competitiveness of the GMS, while a competitive GMS power market would be a strong manifestation of a GMS economic community. He explained that the RPTCC session would discuss the work plan for the IGA and membership to the RPTCC. He informed the meeting of the TA project to formulate the PTOA, for which a work plan would be presented by the TA consultant. He noted that the World Bank would present the findings of the study of options for the structure of the GMS power market, which could help achieve consensus on the GMS power trade market structure in the short, medium and long term. Lastly, he said the meeting would discuss details of training activities offered by PRC and Thailand during the Dali GMS Conference and hoped this would lead to a good training program for GMS members. He noted the active partnership with the WB and cited the joint flagship study of the WB, JBIC and ADB called “Infrastructure Service Provision and Financing” which aims to review the role of infrastructure in economic growth, addressing poverty, and developing a framework on financing/ delivering infrastructure. He expected important agreements on the RPTCC, future market options, and PTOA. He thanked the PRC government and CSG for graciously hosting the EPF meeting.
6. Mr. Zhou Jitai, Vice President, CSG, extended his warmest welcome to the participants from ADB, WB, the power experts from GMS countries, and the PRC’s National Development and Reform Commission (NDRC) and Ministry of Finance (MOF). He cited the GMS members’ efforts to strengthen cooperation in the power sector to optimize resource allocation. He expressed CSG’s honor to co-sponsor the EPF meeting, and gave a quick background of the CSG, which is one of the world’s large sized regional power grids possessed with long distance, extra high voltage and large capacity transmission lines. He said that to achieve CSG’s goals, it stresses economic and international cooperation and inter-communication. He said CSG aims to learn from overseas experiences in power grid planning, construction, management, advances in technology, and fair and open power trade market. He wished to work closely with GMS countries to develop further power economic cooperation at multi-level mode, and advanced proposals to build up new mechanism for GMS power cooperation building on previous EPF meetings. These he noted, are the following: to conceive mutually beneficial cooperative relations in the power sector; to provide high quality and clean energy for economic and social development; and to set up information exchange mechanism and implement cooperative plans for power security and stability, etc. He expressed his wish to extend and solidify GMS cooperative relations and friendship, and wished the conference a successful conclusion.
7. Mr. Christian Delvoie, Infrastructure Director, World Bank, thanked the CSG and ADB for organizing the meeting and acknowledged ADB and the GMS members’ leadership in this energy endeavor. He congratulated GMS on the completion of the Power Trade Work Program (1998-2003). He cited the World Bank sponsored workshops on power trade issues, and its work on the institutional framework for power trade, which culminated in the IGA signing. He said the EPF-10 meeting signals a new phase in developing power trade. He then explained the two new initiatives by World Bank to support development of physical infrastructure and institutional framework for power trade. The first is the Infrastructure Action Plan, which reflects WB’s revitalization of its support for infrastructure, given its role in achieving MDGs. The second is the IDA 13 Regional Project Top Up Fund, which is being piloted to spur trade and regional integration in addition to IDA country-specific resources. He cited the South African Power Pool (SAPP) as one of the first applicants to utilize the Fund. He then noted that WB strategy in the East Asia and Pacific (EAP) region stresses closer regional cooperation, economic growth and social stability. He noted the close coordination with ADB and JBIC, on the Flagship study “Infrastructure Service Provision and Financing: Key Challenges and Policy Implications” which will review the role that infrastructure plays to support growth, competitiveness and poverty reduction, including regional integration. He said the WB is developing a Work Program for the GMS, and first programs to go forward are those where the WB is already active. He took a quick look at WB involvement in regional power trade, from the Nam Ngum 1 Hydropower plant in Lao PDR for export of power to Thailand, to the development of Nam Theun 2 as well as collaboration with ADB on CAM and VIE interconnection. He welcomed new opportunities to support regional power trade using the IDA Top Up Funds. He said while WB will continue support institutional framework activities, it is also willing to support preparations for larger infrastructure projects, as well as smaller bilateral projects that in the short term will broaden cooperation between GMS members. He mentioned that coordinated approach among World Bank and development partners would be important in realizing our power trade goals and maximizing partners’ contributions. He wished productive discussions in the meeting.
II. RPTCC Session: IGA Ratification and Future Direction
8. Mr. Jong-Inn Kim, ADB, summarized the progress of the IGA ratification and RPTCC members’ nominations. He recalled that all six GMS members signed the IGA during the GMS Summit on 3 November 2002 in Phnom Penh. He listed the signatories to IGA for each GMS member. He updated on GMS members’ ratification/ acceptance of the IGA, noting that Myanmar ratified the IGA on 13 May 2003, and Thailand on 15 September 2003. He said Viet Nam has accepted the IGA. On appointment of RPTCC members and coordinator, he said that the PRC, Lao PDR, Myanmar, and Thailand have completed their nominations. Cambodia and Viet Nam have yet to nominate RPTCC members.
9. Mr. Kim asked GMS members to report on progress of IGA ratification and RPTCC nominations. Mr. Jona reported that Cambodia would complete RPTCC nominations by end November 2003, and IGA ratification by early next year. Mr. Yin said PRC would ratify IGA by end of 2003. Mr. Houmphone reported that for Lao PDR, the document for IGA ratification is now under consideration by the National Assembly, possibly for ratification by end of this year. Dr. Thein Tun said Myanmar has completed nominations to RPTCC and earlier provided ADB its Instrument of IGA Ratification. Mr. Chavalit noted that Thailand has already sent the ratification document to ADB. Mr. Huan said that Viet Nam would issue nomination to RPTCC by mid-December 2003; he said he would check status of the date of IGA acceptance of the Government. Mr. Kim presented the issues for the current meeting of the RPTCC. One issue was whether the current session is the first RPTCC session, and whether it is among those who ratified only. Another issue was whether the Chairperson and Vice Chairperson would be elected in accordance with the RPTCC guidelines. He presented the roles of the Chair and Vice Chair.
10. Mr. Kim then presented the consensus by the GMS members on Day 1. He said the GMS members recognize that: all members signed the IGA; GMS cooperation is based on consensus; process of IGA ratification and RPTCC nominations will be completed soon; the first RPTCC meeting can be held with attendance of all nominated members; the Chair and Vice Chair have to be elected by RPTCC members themselves; and the important role of the Vice Chair as a PTOA Project Manager. It was agreed that the current meeting is not the RPTCC inception meeting. It was also agreed that the inception meeting of RPTCC would be held when all RPTCC members’ nominations have been received, preferably by end of November 2003. It was agreed that all nominated members have to attend the inception meeting to elect the Chair and Vice Chair. Mr. Kim noted that the inception meeting of the RPTCC would be held at the appropriate time. He added that the first RPTCC meeting venue has not been decided yet. Mr. Rahman stressed the important role of the RPTCC in guiding the work of the PTOA consultants. He said the ADB and World Bank will continue providing the technical and financial support for drafting of the PTOA.
11. Mr. Kim summarized the consensus by the GMS members during the session, as follows:
- Completion of RPTCC nominations by remaining GMS members by mid- December 2003;
- Holding of the inception meeting of RPTCC at the appropriate time after completion of nominations;
- Election of Chair and Vice Chair by all nominated RPTCC members;
- Continued presence and support of ADB and WB in RPTCC meetings to provided guidance to RPTCC discussions.
12. Mr. Kim explained the expected tasks of the RPTCC (based on the functions of the RPTCC as provided in the RPTCC guidelines), which GMS members agreed on during the session as follows:
- Election of Chairperson and Vice Chairperson, and PTOA Manager
- Modifications of guidelines of RPTCC (preamble, footnote, others)
- Preparation of RPTCC work plan
- Need and creation of working groups
- Financing and other support by members for RPTCC
- Financing and other support by members for RPTCC
III. Regional Power Trade Operating Agreement (PTOA)
Preparation of Methodology and Work Plan for PTOA Study
13. Mr. Jorge Karacsonyi briefly introduced M/S Soluziona and Mercados and outlined the two companies’ experience on energy sector reform, power trade and cross-border transmission (CBT) projects. He introduced the members of the team and their expertise. He listed the existing studies and agreements to be used in the PTOA study, namely the Policy Statement on Regional Power Trade, IGA, proceedings of EGP/ EPF meetings, draft RPTCC guidelines and Indicative Master Plan Study.
14. He outlined the needs of the study, which included: working closely with client; understanding problems that must be solved, the constraints and initial conditions; designing tailored solutions to problems; and then defining the objectives of study and undertaking the steps to develop recommendations for the PTOA. He said these steps include the following:
- Consolidating/ reviewing existing studies/ agreements;
- Reviewing similar agreements in other markets;
- Developing desirable forms of power trade;
- Recommending rules and guidelines of technical coordination;
- Preparing the CBT pricing schemes;
- Recommending the necessary institutional framework;
- Drafting the PTOA;
- Finalizing the PTOA;
- Identifying training needs and initial basic infrastructure;
- Deliverables; and
- Work plan.
15. He provided the detailed activities for each of these steps for developing the PTOA. He showed a slide indicating the work relationship among organizations involved in the PTOA preparation (consultant, Steering Committee, RPTCC, PTOA Project Manager, Advisory Panel, counterpart staff, etc.) The deliverables included the inception report, the interim report, the final report and the draft of the PTOA, with tentative milestone dates. In the work plan he provided the time frame for each of the steps listed. He noted the main information needs for the study, which includes the regulatory framework (current and expected changes), physical power system, and structure of GMS electricity sectors, covering the structure, legal framework and cross border interconnections of GMS members. He specified the kind of inputs needed from each GMS member in terms of information, commitments, and participation, to accomplish work on the preparation of the PTOA.
16. Mr. Qin provided some corrections on descriptions of PRC’s power situation; Mr. Karacsonyi said these would be used to update information. Mr. Chavalit said he would send updated information on Thailand to Soluziona; he asked what the thinking is on the appropriate model for the GMS power market. Mr. Karacsonyi replied that the task at hand is to get information on the GMS situation, analyze the constraints and identify elements from other models that would be appropriate for the GMS. Mr. Prutichai noted that the PTOA design would have to be flexible to account for future changes in the power market situation. Mr. Karacsonyi said flexibility should be balanced with the desire to have stability, which investors would look for. Mr. Houmphone asked whether the study would cover the benefits of the use of transmission system of one country, by one country selling power to a third country. Mr. Karacsonyi said this is one of the conditions that would be studied. Dr. Thein Tun asked whether an existing model would be modified for the GMS, or whether a tailor made model would be designed for GMS. Mr. Karacsonyi said this would depend on the outcome of the analysis. Mr. Chavalit asked about the currency to be used to pay for bilateral power purchases; Mr. Karacsonyi replied that the market would succeed if it could easily accommodate bilateral transactions. Dr. Huan asked about the investment costs involved in developing the power market. Mr. Karacsonyi said the study would not deal with financing of individual projects, but would look at how to reduce risks to investors and attract financing for projects, in general. Mr. Prutichai asked if the PTOA study would identify who would perform dispatching functions. Mr. Rahman said the PTOA study would have to consider the findings of the market options study to come up with the proper recommendation on this. Mr. Viraphonh said the PTOA study should make a clear recommendation
Questionnaire for PTOA Study
17. Mr. Kim requested the GMS members to give the name and contact number of the focal person to assist in the PTOA study. On the questionnaire, he pointed to data requests by consultant but asked the GMS members to supply the information requested. Upon suggestion of Mr. Rahman, the GMS members were asked to supply the information needed within two months. Mr. Karacsonyi then enumerated the information needed from GMS members as indicated in the questionnaire, which covers power policy/ regulatory practices (including tariff setting), the national physical power systems, and other general information on power systems. Mr. Kim said PTOA consultant would be available to answer queries by GMS members on the questionnaire. He said the PTOA consultant is proposing a mission schedule, which should be agreed with the GMS members. Mr. Karacsonyi proposed the mission to GMS countries to commence 9 February 2004, which will run until early March 2004. The GMS participants confirmed the proposed mission schedule to their respective countries with the following schedule: 9-10 February, Thailand; 12-13 February, Myanmar; 16-17 February, Lao PDR; 19-20 February, Cambodia; 1-2 March, PRC; and 4-5 March, Viet Nam. Mr. Kim added that this means that the GMS members should supply the information to the consultant by 19 January 2004, to give time for the latter to review the information before the mission.
18. Mr. Delvoie stressed that the process of PTOA formulation should be fully owned by the countries. Ms. Junhui Wu added that the WB would consider participation in RPTCC meetings upon the invitation of the GMS members. She explained the WB’s program for the GMS power sector, and named the activities the WB is interested in supporting.
IV. Study of Options for the Structure of the GMS Power Market
Presentation of Study Findings and Recommendations Followed by Discussions
19. Mr. James Barker, World Bank consultant, presented the findings and recommendations of the Study of Options for the Structure of the GMS Power Trade Market. He noted the study’s objective, i.e., to identify options for expanding power trade in the GMS, within limits of differing stages of sector development among the GMS members. He explained the methodology of meeting with decision-makers to determine such issues as general investment climate, likely cross border projects and receptivity to uniform procedures and coordination processes. He enumerated the major findings, which include inadequacy of internal and regional transmission infrastructure, the desirability of step-by-step development of the regional market, and acceptability of the concept of regional regulation. He explained the various assumptions used for the recommendations, which include, among others: (i) each GMS member establishing a regulator for the domestic power industry; and (ii) GMS members agreeing to non-discriminatory open access, establishing a regional market administrator and regional regulator, and establishing a set of technical grid code. He described what the regional industry and market structures would look like over the years, from limited, to expanded and eventually full competition. He gave an indication of the timing of the intermediate market based on country consultations.
Mr. Barker then proceeded to explain the recommendations giving the possible options and requirements for the intermediate term. On transmission infrastructure, he suggested priorities be established for proposed transmission projects, that projects creating a regional network be identified, and pricing method be developed for third party access. He said that an institutional development study should identify entities to build new transmission and have right of access, and recommend uniform terms/ conditions for transmission. On regulations, he said the institutional development study should recommend, among others, division of authority between regional/ member country regulators, and staffing/ organization for regional regulator. Among market recommendations is the development of a set of principles for market design, such as flexibility (for which entities may trade), simplicity in market design, provision of a range of choices of kinds of transactions, and low cost of participation. On market participants, he suggested clearly identifying which entities are entitled to cross-border transactions within each GMS member.
21. Mr. Barker noted that in some markets, there is an obligation to install or contract for generating capacity. He suggested GMS members to agree on whether to have such obligation, and if so, develop the rules and procedures for meeting such requirement. On the Regional Market Administrator (RMA), he suggested that the RMA determine sufficiency in transmission capacity and that reliability criteria are met. He added that as the number of trading parties increases, the RMA may operate an energy broker. He noted one transition need is for a staging process during which market participants could build expertise to negotiate transactions. He then expounded on the recommended role of the RPTCC and illustrated the implementation organizational structure showing the relationships between the RPTCC and various actors in the regional power market (Regional Coordinator Subcommittee, Regional Regulator Subcommittee, Grid Code Working Group, Transmission Tariff WG, etc.).
Each Country’s Views and Comments on Recommendations
22. Ms. Diane Minogue, World Bank consultant, outlined the next steps for the study. She said that the GMS market structure options paper is being finalized taking into account comments/ clarifications and corrections received from the GMS members. She stressed that the vision of GMS power trade is to realize benefits through evolutionary development to intermediate market. She enumerated the strategy to create conditions for the intermediate market, which includes developing national/ regional infrastructure, assuring each country operates as single control area, and developing technical/ commercial rules and procedures. She recalled the 7 recommended activities from the report, which includes study of required regulatory/ institutional framework, development of pro forma PPAs and contract terms, and development of existing/ planned lines inventory to start small-scale trade. These 3 were all agreed in the Hanoi meeting in 2001. The remaining 4 recommended activities mentioned are: prioritize list of projects with high potential; establish new GMS power website; develop technical guidelines (PTOA process); and create the GMS power trade business/ investment forum.
23. Ms. Minogue showed the structure of recommended activities meant to address two stages- 1st stage (start up small-scale) and 2nd stage intermediate market. She provided the objectives (near-term and intermediate) and outputs for 5 of the activities earlier mentioned (para. 22) as follows:
- Pro forma PPA provisions and contract terms for GMS power trade;
- Regulatory and institutional study for power trade;
- GMS power trade knowledge management (website);
- Power trade investment forum or business association; and
- Project identification and prioritization.
24. Ms. Minogue provided the timing of the report’s recommended activities, and noted that project inventory, pro forma PPA contracts and regulatory/ institutional activities could commence now. The knowledge management and power trade business forum could follow. She noted the next steps to be achieved in the EPF-10 meeting, which are to agree: (i) on the finalization of market structure options report; (ii) on the process to move forward with vision, strategy and recommended activities; and (iii) on the coordination with PTOA process and RPTCC.
25. Comments. Ms. Minogue reiterated that recommended activities are designed to support the evolution to the intermediate market. U Aung Khaing asked for indication of the time frame for attaining the intermediate market. Mr. Barker said while this would still be far off in the future, he pointed out the benefit of developing guidelines for the regional market now, to avoid the problems of ad hoc development later. Mr. Barker noted the importance of having a strong domestic regulator for effective development of regional regulation. Mr. Rahman said the recommendations coming out of the study should be made clear, and asked Mr. Barker to run through the final recommendations. Mr. Barker clarified that for the short term the unified market is ruled out, leaving mostly bilateral trade, for which mechanisms are simple to start with. However, as the network grows, there would be need for a coordinating entity as well as rules and guidelines to govern the trade between trading countries. Mr. Delvoie asked about the concrete next steps that are recommended to develop the regional market. Mr. Trembath explained his appreciation of the requirements of the short-term work plan for power trade in the GMS. Ms. Minogue provided examples of priority activities for the short-term, such as developing pro-forma PPA and contracts, developing a GMS power trade website, making a priority project inventory, etc. She recalled the recommended activities for EPF-10 (shown in para. 23 above).
26. Mr. Yin noted that after PRC power sector reform and restructuring, it would be useful for PRC to do joint research with GMS countries on how to proceed with power trade development in the GMS. He suggested that research on market structure consider aspects of trade risks and the current structure of power systems of GMS countries. He hoped that the commercial forum on power trade be held similar to the EGP/ EPF set-up. He offered to share PRC’s experience in power trade and expressed willingness to join research on technical guidelines. Mr. Rahman appreciated PRC’s offer and suggested that a working group be created to look at 2 or 3 specific models, and modify these as would be appropriate for the GMS. Mr. Kim recalled that Ms. Minogue suggested 7 activities, 3 of which were earlier agreed in the EGP work plan (para. 22). He said 4 remaining activities (para. 22) would have to be discussed and decided on. Mr. Rahman suggested that the GMS participants provide feedback to ADB on these suggested activities to guide future GMS energy work program. He suggested that GMS members’ comments be taken up in the first RPTCC meeting. All GMS representatives concurred with Mr. Rahman’s suggestion.
V. Follow up of GMS Ministerial Conference
27. Mr. Rahman explained that the session would discuss the initiatives put forward by PRC and Thailand on the power sector during the 12th GMS Ministerial Conference in Dali in September 2003.
28. PRC. Mr. Yin presented the following PRC proposals for cooperation with GMS countries:
- Provide technical assistance to ensure the stability and safety of the power network in the GMS in the wake of North America power outages; and
- Training in the area of rural electrification- given PRC’s experience in rural power reform and rural power tariff system.
29. Mr. Rahman suggested that sharing of lessons from PRC’s experience could be included in the work program of EGP/ EPF.
30. Thailand. Ms. Pooltong explained Thailand’s proposal to provide technical assistance to GMS countries on power under the Economic Cooperation Strategy (ECS) made during the recent ECS Summit in Bagan, as follows:
- Thailand- Cambodia- joint conduct of feasibility studies on Stung Menam hydropower project and Establishment of Electricity Network Master Plan; collaboration in research and development and exchange of technical expertise in alternative energy/ energy preservation; setting up Thai-Cambodian Joint Committee on Energy Cooperation (JCE);
- Thailand- Lao PDR- acceleration of NT2 development; collaboration in research and development of alternative energy/ energy preservation; exchange of technical expertise, conduct of joint research and development in alternative energy/ energy preservation and development of information networks;
- Thailand- Myanmar- grant aid for Electric Power Cooperation Program, to train 6 persons for two weeks; technical assistance on power system study and training course for maintenance of power plants and transmission system
31. Mr. Kim asked whether Thailand could provide GMS assistance in addition to bilateral assistance. Mr. Prutichai said that Thailand supports regional activities through the ASEAN’s Initiative for ASEAN Integration (IAI).
VI. Closing Session
Consideration and Adoption of Proceedings
32. The EPF members reviewed the draft minutes and after incorporation of suggested changes, the body therefore approved the minutes of the EPF-10 meeting.
Closing Remarks
33. Mr. Qin Zhi Jun congratulated the Forum and thanked the governments and power companies for the support. He said the participants expressed their views openly and freely to create a power market that meets multinational interests. He said the Government of PRC pays great attention to economic cooperation and friendship with GMS countries. He believed that power trade and interconnection would provide affordable, reliable and stable power supply, contributing to the economy and living conditions of the nations. He expressed appreciation to ADB for its contributions to GMS economic cooperation, and said PRC intends to continue cooperation with other nations. He invited everyone to Guangzhou again, and wished everyone an enjoyable stay and a safe trip home.
34. Mr. Delvoie thanked CSG for the hospitality, and thanked all the participants for the useful discussions. He said the meeting was a good vehicle for assessing the commitment to power trade by GMS countries. He was impressed by the offers of assistance to the less advanced GMS countries by the more advanced countries. He said the next meeting, which is the Inception Meeting of the RPTCC, would be a turning point in terms of pursuing further development of the regional market. He said it is important for the GMS countries to look at the practical and pragmatic aspects of power market implementation. He reiterated the WB’s support for both the soft and hard aspects of GMS power market development. He stressed the need for the GMS countries to discuss the issue of public disclosure and how this would be approached in the future to attain greater transparency and accountability in the operation of power systems.
35. Mr. Rahman noted that it has been a productive day, and he mentioned that a number of important decisions have been made to operationalize the RPTCC and to take further steps in the development of the regional power market. He noted that the meeting highlighted the need for coordinating the work of the PTOA study and the RPTCC. He welcomed the offer of assistance to less developed GMS countries by PRC and Thailand. He said the meeting reaffirmed the support for the GMS energy program by both the ADB and WB. He expressed his appreciation to CSG and the Government of PRC for the excellent hosting of the meeting. He suggested a discussion of the venue of the next meeting.
36. Based on discussions of the venue of the next meeting, it was suggested that Thailand host the next meeting. The Thailand delegation agreed to host the next GMS energy meeting.
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