Electricity Tariff Regulation in Thailand: Analyses and Applications of Incentive Regulation

Abstract

Under the enhanced single buyer model of electricity supply industry in Thailand, tariff regulation is needed to prevent unfair pricing for consumers. Retail electricity tariff, being separated into base tariff and automatic tariff adjustment mechanism, has been regulated by multiple regulatory bodies. Findings reveal that Thai electricity base tariff regulations tended to favor electric utilities rather than consumers, basing on rate of return regulatory approach. In addition, the automatic tariff adjustment mechanism attached greater importance to operators than to the consumers, enabling the former to fully pass the fuel and power purchase burdens through to the consumers. The results of adoption of current regulatory regime are excess capacity in electricity supply industry and excessive profits for electric utilities. This paper, thus, explores the tariff regulatory alternatives that could enhance efficiency of electricity operators while providing benefits to consumers. Under the price cap regulation, electricity tariffs are estimated with various X and Z factors. The results reveal that the simulated electricity tariffs under incentive regulatory approach are lower than the actual tariff. It implies that if Thailand adopted the price cap regulation, consumers would have benefited from the lower tariff whereas firms would have been incentivized to improve efficiency.