Privatisation, Restructuring and Regulation: Electricity Supply Industry in Thailand
Creators: name: Sirasoontorn, Puree
Publisher: name: The Australian National University
Year: 2004
Subjects: Privatisation, Privatization, Thailand, Electricity Supply Industry, Regulation, State Owned Enterprise, Reform, Efficiency, Competition, Energy, Utilities

description: After the 1997 financial crisis electricity supply industry (ESI) restructuring and privatisation of state owned enterprises (SOEs) in this industry were included in the Master Plan for State Enterprise Sector Reform. Considering the extent of debate over privatisation, restructuring and regulation of the ESI in Thailand in recent years there was a surprising lack of rigorous economic analyses and studies. This thesis aims to fill that gap. Part I of this thesis highlights the economic and political background material on: the SOE sector; reform and privatisation of SOEs; SOEs, restructuring and regulation in the ESI in Thailand. Then, in Part II, the theoretical and empirical literature on privatisation, natural monopoly and economic regulation along with regulation in practice, is drawn upon to create framework for analyses in Part III. In addition, characteristics of developing countries are discussed to explore an appropriate choice of regulatory regimes in Thailand. In Part III analyses of regulation and privatisation in ESI in Thailand are presented. Regulatory, efficiency and fiscal issues are examined. The major finding from the regulatory analysis is that, due to poor regulatory capacity, a specialised, separated and centralised form of regulatory body for ESI is recommended for Thailand. A high powered incentive regulatory regime, in the form of a revenue cap, is recommended for electricity transmission and distribution. In addition, this analysis demonstrates that the adoption of regulatory finance from developed countries with well developed capital and equity markets needs some modifications to fit with Thailand, which is characterised by poor accounting and auditing systems and weakly functioning capital and equity markets. The problem of lack of data and asymmetric information faced by the regulator in Thailand is more severe than in developed countries. Then this thesis examines the empirical analyses for the two widely claimed justifications for privatisation: efficiency improvement and fiscal benefit. In the efficiency analysis, measures of the technical efficiency of the electricity generation sector in Thailand are estimated by employing a comparative application of Data Envelopment Analysis and Stochastic Frontier Analysis approaches. Results show that the state owned, electricity generating company in Thailand is on the efficiency frontier, meaning that the expected efficiency improvement after it privatisation is unlikely to happen. Then a fiscal analysis is undertaken to evaluate fiscal net benefits of full privatisation in form of asset sales of all SOEs in ESI. This analysis employed a bottom-up valuation approach, taking issues in the public sector into account, to assess fiscal costs (retention of SOEs) and benefits (sale of SOEs) of privatisation. Full privatisation of Thai state owned, electricity generation company results in fiscal net benefits only when ESI restructuring and deregulation of wholesale electricity market are well established. Under revenue cap regulation, full privatisation of the regulated distribution monopolies is fiscally feasible only when they are privatised at very high sale price or privatised firms achieve very high annual costs reductions and operate much more efficiently than under public ownership. In summary, ESI restructuring and adoption of a regulatory regime, form and finance from developed countries has to be undertaken with care and modified in light of Thai characteristics and economy. ESI reform requires proper sequencing. Building up regulatory capacity and designing effective and practical regulatory regimes are required to achieve effective regulation in Thailand. ESI has to be restructured to introduce competition, and regulation has to be in place to ensure fair competition and to regulate natural monopoly activities before privatisation should be considered. In view of the limited benefits of privatisation, alternative policies that can achieve the objectives of privatisation without transfer of ownership should be considered.