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Move to overhaul natural gas tariffs

Aug 26. 2016
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By PICHAYA CHANGSORN

THE N

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A consulting team appointed by the Energy Regulatory Commission (ERC) has proposed a major review of natural-gas tariff formulas in a move that could affect hundreds of factories in the country using gas.

The study covers tariff structures for the whole supply chain of natural gas, from transmission and liquefied-natural-gas (LNG) terminals to wholesale and retailing. It is the first major review since 2007.

Panyawat Gomutbutra, director of the Energy Engineering Institute at Kasetsart University and the leader of the consultancy team, told The Nation that the net impact to PTT, the sole operator of transmission, wholesale, and LNG terminal businesses, from the proposed tariff formulas would be roughly negligible. For the transmission and LNG tariff formulas, a major change is the proposal for input values to be reset every five years, instead of the current ones that are established only once in the entire life span of gas pipelines.

For the wholesale tariff, the proposed formula follows a National Energy Policy Council (NEPC) resolution in February 2011 for PTT to separate gas prices into two parts – the costs and the risks associated with the guarantee of the quality and security of gas supplies and other areas.

Panyawat said the new formula could result in a narrowing of the gap between the prices of gas that PTT distributes to the Electricity Generating Authority of Thailand and independent power producers and prices for small power producers. For the retail tariff, the proposed formula is a shift from the current one that is pegged to fuel oil prices to one that is formulated on a cost-plus basis, which would allow gas retailers to pass wholesale gas prices on to consumers.

ERC spokesman Viraphol Jirapraditkul said the proposals would go through a public hearing and discussions with parties involved before being presented to the NEPC for approval around the end of this year and it would become effective early next year. The retail tariff proposal would help address the complaints of gas retailers who were suffering losses from the prolonged slump in oil prices as the current formula was pegged to fuel oil prices.Hundreds of factories that use natural gas would be affected by the proposed change.

Tienchai Chongpeerapieng, president of Bera Business and Economic Research Associates, said the proposed formulas were good since they would help tackle problems associated with the old formulas, which did not work well in the current environment where fuel prices had become much more volatile.

“The positive side of the shifting to the cost-based [formula] is that gas prices would become more stable and it would protect the margins of gas operators in every step. There would be a guarantee of no losses,” Tienchai said.

"The negative side is that the (gas) traders would shoulder no risk at all. All risks would be passed onto the consumers," he said.

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