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Regions and Countries Regional Cooperation Greater Mekong Subregion Publications Proceedings of Ministerial, Forum, and Working Group Meetings Seventh Meeting of the Subregional Electric Power Forum (EPF-7)
Seventh Meeting of the Subregional Electric Power Forum (EPF-7)IntroductionThe Seventh Meeting of the Subregional Electric Power Forum (EPF-7), was held in Vientiane, Lao PDR on 6 December 2000. The Meeting was co-organized by the Ministry of Industry and Handicraft of the Government of Lao and the Asian Development Bank (ADB). The participants included delegations from Cambodia, the People's Republic of China (PRC), Lao People's Democratic Republic (Lao PDR), Thailand, and Viet Nam. Representatives from the World Bank, Tenaga Nasional Berhad of Malaysia, Ministry of Energy, Communications and Multimedia of Malaysia, World Commission on Dams, Norconsult, ASEAN Secretariat, JICA, JETRO, E7 Network of Expertise for the Global Environment, Ceylon Electricity Board and ADB also attended. The list of participants is attached as Appendix 1. The Meeting was co-chaired by Mr. Houmphone Bulyaphol, Director of Electricity Department, Ministry of Industry and Handicraft (MIH), Lao PDR, and Mr. Khalid Rahman, Manager, Energy Division (West), ADB. The Meeting was divided into six sessions as follows: Session I- Opening and Welcome Remarks; Session II- Energy Sector Liberalization and Privatization Policy in Thailand; Session III- Experience, Lessons, and Future Directions for Power Sector Restructuring in Malaysia; Session IV- Final Report by the World Commission on Dams and Development; Session V- Discussion on Work Plan and Consideration of Report of EGP-4; and Session VI- Conclusion/ Closing. The Agenda and Program of the Meeting is attached as Appendix 2. Opening SessionMr. Khalid Rahman, Manager of Energy Division (West), ADB, welcomed the participants and thanked the Government of Lao PDR for their warm hospitality. He gave a brief history of the EPF, and noted the significant developments in the regional power sector, such as the bilateral MOUs for power exchanges between the GMS countries, and the various studies on regional power development. He noted the global trends in power sector reforms, and the steps to introduce more competition, which could facilitate the setting up of the GMS power pool. This power pool will be an important factor in the power development/ investment plans of the GMS countries. He explained that the EPF meeting features power sector reform efforts in Thailand and Malaysia, and the findings from the report by the World Commission on Dams. He looked forward to interesting discussions and presentations during the meeting.
Mr. Rahman introduced H.E. Somboune Rasasombath, Vice Minister, Ministry of Industry and Handicraft, to give the opening remarks. H.E. Somboune Rasasombath, extended his warmest welcome to the participants. He recalled that the GMS Program for Economic Cooperation, launched with ADB support, is based on the concept of partnership among neighbors. He cited the big gains made towards cooperation in the development and utilization of the subregion's energy potential. He noted the topics of importance in the agenda of the EPF, such as energy sector liberalization in Thailand and power sector restructuring in Malaysia, as well as the World Commission on Dams report. He outlined the power sector policy of Lao PDR, which calls for small/ medium projects for domestic demand and medium/ large projects for export. Government's key power sector objectives were to give priority to power sector development to achieve macroeconomic and social goals of Lao PDR. He concluded by thanking the ADB and wishing the discussions a successful conclusion. Mr. Toru Tatara, Head, GMS Unit, thanked the participants for their strong support for the GMS program. He gave his observations on the deliberations during the EGP-4 meeting the previous day, namely, the impressive ongoing power sector reforms in the respective countries, and the close cooperation among the key players of the power sector. He noted that given mega hydro projects planned in Yunnan, there is a need for careful design of these projects since the subsequent impacts will affect everyone in the subregion. Mr. Tatara then gave a brief overview of the GMS Program, which now covers eight sectors and is now focused on poverty reduction, involving extension of benefits of infrastructure projects to remote and border areas in GMS. The power sector is no exception, as there will be need for more direct justification to link the regional power grid to poor areas. Finally, he then drew attention to the need for GMS to coordinate with the various ASEAN initiatives. Objectives of the MeetingMr. Rahman explained that the Meeting would discuss important developments that will significantly impact on future directions of GMS cooperation in the energy sector. These were the power sector restructuring in Thailand and Malaysia, and the final report of the World Commission on Dams. Energy Sector Liberalization and Privatization Policy in ThailandMr. Piromsakdi Laparojkit, Secretary General of the National Energy Policy Council, presented the objectives of energy liberalization and privatization. He also enumerated the principles used in the liberalization and privatization of the energy sector. He noted that the deregulation and privatization of the Electricity Supply Industry (ESI) involves separation of generation from transmission, encouraging private investment in generation, formation of power pool, introducing retail competition, etc. He explained the three stages of the reform plan, and presented charts showing the structure of the power sector at every stage. The new reform plan of ESI (long term plan) includes market reform and enterprise reforms. Market reform covers establishment/ operation of the power pool and introduction of retail competition. Enterprise reforms cover privatization of generation and distribution entities. The latest Cabinet-approved plan (25 July 2000) provides for detailed 5-year road map of reform. This includes privatization of Ratchaburi power plant (2000) and EGAT thermal plants (2003), restructuring of PEA and MEA (2003), and approval of Energy Industry Act. The latter will create the independent regulatory body (National Energy Regulatory Commission or NERC and National Energy Regulatory Office or NERO) and the Power Pool of Thailand which is an independent government institution consisting of independent system operator (ISO), market operator (MO), and settlement administrator (SA). DiscussionsMr. Houmphone Bulyaphol (Lao PDR) inquired about Thailand's policy with respect to existing PPAs. Mr. Piromsakdi replied that existing long-term contracts would be honored. Mr. Enrique Crousillat (WB) inquired about the people who will comprise the regulator. Mr. Piromsakdi said that the composition and qualification of the regulator were clearly stated in the Draft Energy Industry Act, and added that government officials will be excluded. Mr. JP Charpentier (WB) asked about the possibility of allowing the private sector in transmission, and Mr. Piromsakdi replied this would not be allowed in the short term, to avoid replacing public with private monopoly. Mr. Jong-Inn Kim (ADB) asked about composition of the power pool; Mr. Piromsakdi replied that the members are to be nominated by the Cabinet and approved by the Senate. H.E. Somboune Rasasombath asked about the meaning of privatization in Thailand's power sector. Mr. Piromsakdi replied that this involves a step-by-step increase in the share of the private sector, and greater commercialization of power operations. Mr. Somboune Manolom (Lao PDR) asked about ensuring impartiality in the dispatch of power by EGAT. Mr. Piromsakdi said in the initial period, most IPPs operate under existing long-term contracts, so fairness of the dispatch is not an issue; the independent regulator however, will be set up in 2003. Experience, Lessons, and Future Directions for Power Sector Restructuring in MalaysiaDatuk Ir. Mohd. Annas b. Mohd. Nor, Director General, Department of Electricity and Gas Supply, Ministry of Energy, Communications, and Multimedia of Malaysia, commenced his presentation by giving a history of power restructuring in Malaysia. This initially involved privatization of the National Electricity Board (NEB) into Tenaga Nasional Berhad (TNB), and introduction of IPPs in Pensinsular Malaysia and Sabah. He explained the alternative ways for supplying electricity under the new set up, such as cogeneration, central utility facility, and franchised retailing. He then showed a chart of the present industry structure in the Peninsula and states of Sabah and Sarawak. Datuk Annas presented the organization chart of the Department of Electricity Supply (DES), which was set up in September 1990 to regulate the privatized power industry. He then showed the relationships and functions of the policy formulating agencies and regulating bodies for the power sector. The Ministry of Energy, Communications and Multimedia (MECM) develops the policy, approves tariffs, and coordinated implementation of energy policies. The DES develops the legal and regulatory frameworks, advises MECM on policy, tariff and other matters, implements policy, and issues licenses, among others. The Economic Planning Unit under the Prime Minister's Department formulates privatization policy and energy policy, and chairs the Committee to select the IPP. The laws/ regulations comprising the regulatory framework for the power sector were presented, one of which is the Electricity Supply Act 1990. The present situation has indicated success of the restructuring efforts in terms comfortable power supply and reserves, and substantial private sector investments in power, among others. Future outlook will include such objectives as improving the sector's efficiency, meeting demand, and continued private sector investment. Efficiency improvements will be sought through periodic management/ engineering audits, cap on tariffs, regulatory intervention/ oversight, and more competition. DiscussionsMr. Charpentier asked about financing of IPPs, the need for very high reserve margins, and the handling of long term PPAs in terms of the move to power pooling. Datuk Annas said that Malaysia is still negotiating the next generation PPAs where the contracts may contain restructuring clause to account for future power pooling. This may pose more challenges for financing, however. One alternative being considered is to reduce the duration of the PPA. On high reserve margins, this was due to the need to assure that enough capacity is available to meet the growing demand. Mr. Piromsakdi asked about how to prevent political interference in the regulatory body. Datuk Annas said the key here is to build credibility and professionalism. Mr. Yvon Hotte (E7) asked whether Malaysia considers interconnection to reduce the need for high reserves. Datuk Annas said this will be more dictated by economic and commercial needs. Mr. Tomoyuri Kimura (ADB) asked whether existing tariff functions of agencies will change, once the regulatory body is operational. Datuk Annas explained that the existing mechanism will continue, but the regulatory body may assume some of the tariff and even awarding functions regarding IPPs in the longer term. On Mr. Charpentier's query on utilization of the Trust Fund, Datuk Annas replied that priority eligible areas are rural electrification, research, energy efficiency, training, etc. but the final decision rests with the Trust Fund Committee. Mr. Rahman asked about performance assessment of power companies, and whether privatization has improved efficiency. Datuk Annas said that benchmarking is done, by comparing performance of IPPs and TNB generating plants as well as with other available global benchmarks. He noted that Sarawak Electricity Supply Corp. (SESCO) has improved its performance after privatization. Findings of the Final Report by the World Commission on DamsMr. Lawrence J. M. Haas, WCD representative, presented a background on the WCD and its objectives, namely, to review development effectiveness of large dams and assess alternatives for water resources/ energy development, among others. He gave a brief on the WCD, its membership, its study approach, and the principles that guided its work. He cited the inclusive, transparent, and participatory manner used in its review of dams. He showed a video message from the WCD Chairman Prof. Kader Asmal of South Africa, which summarized the findings of the WCD as contained in its Report "Dams and Development: A New Framework for Decision Making". A major finding is that while dams have made significant contributions to development, there were too many cases of unnecessary social costs, and large inequities in the distribution of costs and benefits. Additional WCD findings include financial/ economic under-performance of large dams, their impacts on riverine/ downstream eco-systems, heavy toll on affected communities, and the presence of less costly alternatives. Mr. Haas then opened the floor to questions on the first part of his presentation. Mr. Tatara (ADB) asked about the manner of reconciling the views of conflicting parties represented in the Commission. On the guidelines for dam development, he asked how these differ from those adopted by lending institutions. He then asked how the WCD intends to follow through with its recommendations. Mr. Haas said that said that the commissioners were allowed to interact with each other and establish rapport, while building on a common database of knowledge. The WCD recommendation differs from the lending institutions' guidelines in terms of stricter social and environmental criteria. On follow through, Mr. Haas noted that countries are now slowly adopting some of the WCD recommendations. Mr. Piromsakdi asked whether alternatives are achievable for countries with poor energy resources. Mr. Haas said that indeed some countries like Nepal have no other alternative but hydro, but many soft alternatives such as grid extension and renewable sources (wind, bio mass) can be used in the rural setting. Mr. Chanaphun Krikadorn (Thailand) suggested that WCD select dams with good record of success. Mr. Rahman asked about the reasons for under-performance and cost overruns of dam projects. Mr. Haas replied that poor performance owes partly to difficulty of predicting outputs from multi-purpose uses. Mr. Haas noted that the analysis of reasons for cost overruns was weak. On the second part of his presentation, Mr. Haas presented the five core values which provide the essential tests to be applied to decisions relating to water and energy development, and these are: equity; efficiency; participatory decision making, sustainability, and accountability. He then presented the seven strategic priorities recommended by WCD that could be translated into criteria/ guidelines for key decision points. The first, gaining public acceptance, emerges from recognizing rights and addressing risks of affected groups. The second, comprehensive options assessment, requires that needs for water, food, and energy are assessed and objectives clearly defined. Third, addressing existing dams, involves transforming benefits and impacts by changes in water use priorities, physical/ land use changes in the river basin, and others. The fourth strategic priority, sustaining rivers and livelihoods, calls for avoidance of impacts and mitigation of harm to the river system. The fifth, recognizing entitlements and sharing of benefits, provides for successful mitigation, resettlement and development as commitments of the State and developer. The sixth, ensuring compliance, involves the use of incentives and sanctions to ensure effectiveness of various measures. Lastly, sharing rivers for peace, development and security provides that the use and management of resources is subject to agreement between States to promote mutual self-interest and collaboration. This is the most difficult for WCD to promote, since this deals with complex issues such as dispute resolution and determining good faith in negotiations. Mr. Haas presented the strategy for having the recommendations adopted. He cited the five key decision points such as needs assessment and selecting alternatives. For dams in the pipeline, WCD recommended establishing stakeholder forum, conducting distribution analysis, promoting development opportunities, and sharing risk, among others. WCD's framework will improve development outcomes by reducing cost, save time, and avoid conflicts by achieving more equitable outcomes. The five generic points of entry to adoption and adaptation include review of the report objectively, issuance of public statements, review of dams under development, ensuring evaluation, monitoring and learning, and promoting capacity building. Mr. Rahman asked about the early stage needs assessment for identified dam projects. Mr. Haas said that strategic environmental assessment is a useful screening device to scan potential impacts. Mr. Somboune asked that special consideration be given to countries like Lao PDR with narrow resource base. Mr. Haas' view is that it will be to Lao PDR's advantage to carefully assess its options, using principles espoused by WCD. Mr. Pipat Honglandarom (Thailand) asked about the basis for case study selection. Mr. Haas explained the process of selection and intricacies of getting government support. Datuk Annas asked about dealing with early opposition to dams, and Mr. Haas said NGOs should not oppose without considering the guidelines espoused by the WCD report. Mr. Wu (PRC) noted the differences in country situations, and suggested that the guidelines should consider such differences. Mr. Haas agreed on this point. Discussion on Work PlanMr. Jong-Inn Kim (ADB) presented the work plan of the EGP up to 2003. Details of the work plan are in Appendix 3. The EGP members were requested to think about the group's work plan for 2003 and beyond, which will be discussed in the next EGP meeting. Mr. Harald Lillifjaere of Norconsult presented the designated focal points in each country for the Regional Indicative Master Plan on Power Interconnection. Details are shown in Appendix 4. Mr. Lillefjaere also presented proposed consultant mission dates shown in Appendix 5. GMS representatives agreed to the proposed schedule. Consideration and Adoption of the Report of EGP-4/ EPF-7Mr. Prutichai Chonglertvanichkul, Assistant Director, Systems Planning Division of EGAT and Chairman of the EGP, gave a summary of the EGP-4 meeting held the previous day. On the country presentations on power sector developments and plans, the conclusion was that power demand has risen, and power reforms have been pursued broadly in the GMS. He noted this is good for the development of power interconnection and trade. A report on neighboring Malaysia also showed rapid power demand growth with huge potential for cooperation with GMS. Substantial progress was made towards the development of a regional power market, and the technical assistance by WB to the EGP will continue, with additional reference to be provided by the E7 Report on pooling of resources and interconnection of power systems. The inception report for the Regional Indicative Master Plan on Power Interconnection, covered the schedule, work plan and activity tasks. Mr. Prutichai formally submitted the summary of proceedings of EGP-4 to the Chairman for approval. The Meeting adopted the summary of proceedings of EGP-4. The Meeting reviewed and approved the summary of proceedings of EPF-7. Concluding SessionWrap Up and Closing RemarksMr. Rahman noted the very useful discussions concerning the power sector reform efforts in Malaysia and Thailand. On the WCD Report, he enjoined the participants to make their important concerns known to the WCD. He thanked the Government of Lao PDR for the warm hospitality. He also thanked the representatives from the GMS countries, international organizations and consulting teams for their active participation and for their thought provoking views and suggestions In his closing remarks, Mr. Houmphone Bulyaphol, thanked all the participants for their contribution to the day's discussions. He said that the EPF would pave the way for the regional power trade in GMS. He thanked the ADB for supporting the meeting and wished the participants stronger knowledge and success in promoting energy cooperation among GMS countries. He declared the Meeting closed.
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