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MANILA, PHILIPPINES (23 July 2003) - ADB is funding a study through a technical assistance (TA) grant approved for US$850,000 to help countries of the Greater Mekong subregion (GMS) prepare a regional power trade operating agreement (PTOA).

The study will review present agreements and arrangements on power trade in the Mekong area and elsewhere, and prepare a PTOA for the GMS.

The PTOA will contain detailed operating rules and guidelines for technical coordination and cross-border transmission pricing schemes among GMS members in order to implement the Inter-Governmental Agreement on Regional Power Trade (IGA) in the GMS. It will also specify the required institutional framework to advance power trade in the region.

The IGA was initialed by all six GMS members - Cambodia, Lao People's Democratic Republic, Myanmar, Thailand, Viet Nam, and Yunnan Province of the People's Republic of China - at the 11^th GMS Ministerial Conference last September. It was subsequently signed by all six GMS members at the first GMS summit meeting on 3 November 2002.

In the GMS, power has been traded on a bilateral basis, mainly either through a memorandum of understanding between governments or long-term power purchase agreements.

"Although bilateral trade brings some advantages, full potential will not be realized unless regional power transmission networks are formed," says Jong-Inn Kim, an ADB Project Engineer.

"The power grid needs to be developed in a coordinated manner through an operating agreement on power trade in order to move toward a competitive subregional electricity market for the GMS."

Greater subregional power trade should prove a source of significant economic and environmental benefits, at national level and subregional levels. It will enable GMS members to

• Reduce national investments in the power reserves maintained to meet peak demand
• Provide a more reliable supply of electricity
• Reduce operational costs in the power sector
• Cut down on greenhouse gas emissions and other pollutants
• Increase access for consumers to cheaper and more environmentally friendly sources of electricity.

The PTOA will provide harmonized rules of technical coordination and agree cross-border transmission tariff schemes, and will have an important role in providing the policy environment needed to attract the private sector to physical investments in the region.

The total cost of the TA is US$920,000, of which the participating countries will contribute $70,000 equivalent. Work will start in October 2003 and be completed by about December 2005.

Read the full TA report